Employment in Sweden - Essay Example

?Employment in Sweden Unemployment is in fact a universal problem that can be traced in almost all countries of the world. It is one of the problems that hinder the economic development of any country. Once diagnosed in any economy, unemployment should be confronted with a set of strategies and plans to minimize its destructive effects on the economy of a given country. In this research paper, the employment status in Sweden will be deeply investigated within the framework of the economic development in the country since the 1970s till the present day. In order for the economic analysis of Sweden to be valid and realistic, widely-agreed upon indicators, such as the HDI, HPI, the Gini coefficient, and the Lorenz curve, will be used. The United Nations Development Program has developed several indicators to assess and analyze the economic and employment status of the various countries of the world. The HDI and the HPI are examples of the human development indicators that are developed to give a notion about a country’s economic variables, such as poverty, human development, and unemployment. However, those indicators are not fully informative because they sometimes disregard some of the important criteria of development. For example, an HDI or an HPI of a certain country may not take into account the economic gap between the various sectors of the society of that country. In other words, there may be discrepancy between human development indicators and other indicators of poverty distribution, such as the Gini coefficient and the Lorenz curve. Thus, in this research paper, the development process in Sweden will be deeply analyzed, using the UNDP development indicators in addition to the other economic indicators. In order for the analysis of development in Sweden to be clear and objective, it will be compared to the development processes in other countries, from various continents. Therefore, in the following lines, a deep analysis will be conducted to expose any variation between the human development indicators and economic distribution indicators in some countries that belong to various geographical areas. The following are tables that indicate the measurements of the HDI and HPI of countries that represent the Arab region, Latin America, Africa, Central Europe and South Asia: Egypt Life expectancy at birth (years) (HDI), 2002 70.7 Adult literacy rate (% ages 15 and above) (HDI), 2002 91.0 GDP per capita (PPP US$) (HDI), 2002 3,580 Education index 0.85 Human development index (HDI) value, 2002 0.735 HDI Rank 120 Human poverty index (HPI-1) Rank 20 Human Poverty Index (HPI-1) Value (%) 12.0 Paraguay Life expectancy at birth (years) (HDI), 2002 70.7 Adult literacy rate (% ages 15 and above) (HDI), 2002 91.6 1 GDP per capita (PPP US$) (HDI), 2002 4,610 Education index 0.85 Human development index (HDI) value, 2002 0.751 HDI Rank 89 Human poverty index (HPI-1) Rank 15 Human Poverty Index (HPI-1) Value (%) 10.6 Mozambique Life expectancy at birth (years) (HDI), 2002 38.5 Adult literacy rate (% ages 15 and above) (HDI), 2002 46.5 GDP per capita (PPP US$) (HDI), 2002 1,050 Education index 0.45 Human development index (HDI) value, 2002 0.354 HDI Rank 171 Human poverty index (HPI-1) Rank 89 Human Poverty Index (HPI-1) Value (%) 49.8 Sweden : Life expectancy at birth (years) (HDI), 2002 80.0 Adult literacy rate (% ages 15 and above) (HDI), 2002 .. 1 GDP per capita (PPP US$) (HDI), 2002 26,050 Education index 0.99 Human development index (HDI) value, 2002 0.946 HDI Rank 2 Human poverty index (HPI-2) Rank 1 Human poverty index (HPI-2) Value (%) 6.5 Thailand Life expectancy at birth (years) (HDI), 2002 69.1 Adult literacy rate (% ages 15 and above) (HDI), 2002 92.6 GDP per capita (PPP US$) (HDI), 2002 7,010 Education index 0.86 Human development index (HDI) value, 2002 0.768 HDI Rank 76 Human poverty index (HPI-1) Rank 22 Human Poverty Index (HPI-1) Value (%) 13.1 Therefore, from the above tables, one can get an idea about some important development indicators, such as GDP, life expectance, and adult illiteracy. In that sense, the above tables with the values they contain are extremely informative about the development cases in Egypt, Paraguay, Mozambique, Sweden and Thailand. Reading those values can tell us a lot about human development and poverty in these countries. For example, one can easily get the fact that Sweden is the richest country and Mozambique is the poorest in the above five countries. This can be shown from both the HDI and the HPI of the five nations. However, certain aspects of the economic lives in some of the above nations cannot be reflected in the measurements and indicators in the tables. For example, Thailand, which was used to be referred to as one of the "Tiger" nations and a promising economy, has an HPI value of (13.1), which is slightly higher than Egypt's HPI value of (12.0). So, one of the defects of the development indicators is that they are sometimes unreflective of some developmental aspects. Egypt, for instance, suffers from severe economic conditions and serious cases of poverty, while Thailand's economic performance is improving through the heavy dependence on investment and industries. This should have been reflected in the values of the poverty indicators, but the current measurements do not clearly show this difference in the economic performance of both Egypt and Thailand. Also, the distribution of income within the same country is not reflected in the above tables. Gini coefficient and Lorenz curve are used as economic indicators to reflect any gaps in income distribution among the various sectors of the society in any given country. The Gini coefficient's is a well-known economic indicator and a measure of inequality, not a measure of average income or some other variable which is unrepresentative of most of the population, such as gross domestic product. So, this indicator is important to study any trends in the differences among sectors within the same country. In other words, Gini coefficients can be used to compare income distributions across different population sectors as well as countries. One of the clear cases, in which Gini coefficient can be used, is the differences in income distribution in urban and rural areas. On the other hand, the Lorenz curve is another economic indicator that was developed by Max O. Lorenz in 1905 as a graphical representation of income distribution. Similar to the Gini Coefficient, the Lorenz curve exposes any differences in income distribution within societies. "It portrays observed income distributions and compares this to a state of perfect income equality" ("Wikipedia"). Mathematically, the Lorenz curve is compared with the perfect equality line, which is a linear relationships that plots a distribution where each element has an equal value in its shares of X and Y. The perfect equality line forms an angle of 45 degrees with a slope of 100/N. On the contrary, the perfect inequality line represents a distribution where one element has the total cumulative percentage of Y while the others have none. A typical Lorenz curve looks like the following diagram: Consequently, Gini coefficient and Lorenz curve are more informative than the HDI and the HPI measures alone because the former two indicators give us a clear overview about income distribution within countries. Therefore, it can be easily said that the Gini coefficient and Lorenz curve are more reflective of economic distribution within countries more than the human development indicators. In addition, the Gini coefficient and Lorenz curve are also helpful in reflecting the economic distribution among various countries. In fact, economic globalization produces myriad and often highly divergent effects around the world. One of the most important issues it raises is the question of inequality—whether globalization and market reform processes are contributing to growing inequality around the world. The differences in income among citizens of the world are absolutely huge and far higher than conventional measures indicate. For example, the richest 1% of people in the world receive as much as the bottom 57%; in other words, less than 50 million richest people receive as much as 2.7 billion poor. In addition to being very high, global inequality is rising. For example, in a mere five-year period between 1988 and 1993, inequality increased by 5% with the real incomes of the poorest 5% of people in the world decreasing while the real incomes of the top 20% increased. World inequality rose at approximately the same speed at which UK inequality rose during the Thatcher years. And as the rich get richer and the poor poorer, the middle of the income distribution is disappearing. The notion of the world as a small village makes inequality among people in the world calculated as if they all belonged to the same 'nation' called the world. Household surveys, which are the source of information on incomes and inequality within each country, have been combined to derive the 'true' world income distribution. Such surveys were taken for 91 countries in the world, covering 85% of the world's population and 95% of world income. Previous studies have calculated world inequality as the difference between average incomes (GDP per capita) of the countries, disregarding inequality in distribution within each country. Implicitly, such studies assume that each Chinese person had the average income of China, each American the average income of the US. But if we go 'deeper' and use the actual survey results, the picture changes and becomes bleaker. Consequently, it can be said that the 'problem' with the world is that it lacks a middle class. If we define the poor as those with real income lower than the poverty line that makes people eligible for social assistance in Western Europe and the US, 78% of world citizens would qualify. If we then define the world 'middle class' as all those with incomes higher than the Western poverty lines but lower than the average income of Italy, there would be only 11% of such people in the world. The rest would be the rich. Ranked high in the 2004 Human Development Report, Sweden has one of the most developed and most stable economies in the world. Some of the distinguished features of the Swedish economy is that it has a high and sustainable real GDP growth, stable price (CPI), favorable balance of payment, and an equitable distribution of income. Accordingly, Sweden has a high rank in most of the human development indicators, as identified by the United Nations Development Program (UNDP), including the HDI, GDI, GEM, and HPI. Starting by the Gender Development Index (GDI), it is a variation of the Human Development Index (HDI), but taking into consideration the gender differences in assessing the overall development of a nation. In other words, the GDI “measures the average achievement of a country in basic human capabilities,” exposing the difference between men and women in this achievement. (Ramji, Shiraz) According to the UNDP (1995), Sweden has the highest score of the GDI in the world, followed by Canada, Norway, USA, and Finland. (Ramji, Shiraz) On the other hand, the Gender Empowerment Measure (GEM) focuses on three main areas, in which it measures overall women achievement. These three areas are political decision-making, access to professional opportunities, and earnings power. So, the GEM exposes gender inequality in the world by assessing women participation in areas, such as parliamentary seats, managerial passions, professionals jobs, and high-income opportunities. So, the pattern that is resulted from the GEM is as follows: “the lower the GEM, the greater the gender disparity” (Ramji, Shiraz) According to the 1996 report of the UNDP, Norway and Sweden have the highest score of the GEM in the world, followed by Denmark, Finland, and New Zealand (Ramji, Shiraz). The following two tables give some economic and human development values for Sweden. Table "One" shows the various values of the HDI for Sweden, and table "Two" reflects the unemployment ratio in Sweden in comparison to other OECD countries. Sweden HDI Rank : 2 I. Human development index: Life expectancy at birth (years) (HDI), 2002 80.0 Adult literacy rate (% ages 15 and above) (HDI), 2002 .. 1 Combined gross enrolment ratio for primary, secondary and tertiary schools (%), 2001/02 114 2 3 GDP per capita (PPP US$) (HDI), 2002 26,050 Life expectancy index 0.92 Education index 0.99 GDP index 0.93 Human development index (HDI) value, 2002 0.946 GDP per capita (PPP US$) rank minus HDI rank 19 II. Human and income poverty: Human poverty index (HPI-2) Rank 1 Human poverty index (HPI-2) Value (%) 6.5 Probability at birth of not surviving to age 60 (% of cohort), 2000-05 7.3 People lacking functional literacy skills (% ages 16-65), 1994-98 7.5 Long-term unemployment (% of labour force), 2002 1.1 Population living below 50% of median income (%), 1990-2000 6.5 Population living below $11 a day (1994 PPP US$), 1994-95 6.3 Population living below $4 a day (1990 PPP US$), 1996-99 .. HPI-2 rank minus income poverty rank Table "One" Unemployment in OECD countries Average annual Unemployment rate (% of labour force) HDI rank   1991-2001 High human development   1 Norway 3.9 2 Iceland 2.8 3 Sweden 4.0 4 Australia 6.3 5 Netherlands 2.7 6 Belgium 6.9 7 United States 5.8 8 Canada 7.6 9 Japan 5.5 10 Switzerland 2.7 11 Denmark 4.3 12 Ireland 4.4 13 United Kingdom 5.2 14 Finland 9.3 15 Luxembourg 3.0 16 Austria 5.6 17 France 9.0 18 Germany 7.8 19 Spain 11.2 20 New Zealand 5.1 21 Italy 9.2 23 Portugal 4.7 24 Greece 10.1 30 Korea, Rep. of 2.9 32 Czech Republic 7.4 35 Poland 19.7 38 Hungary 5.5 39 Slovakia 19.0 55 Mexico 2.8 Medium human development   96 Turkey 8.5       OECD 6.6 Source: OECD (Organisation for Economic Co-operation and Development). 2002. Economic Outlook. 2 (72). Paris. Table "Two" On the other hand, the economy of Sweden may be assessed within the framework of the European Union, in which Sweden is a member. The EU has witnessed a clear change since the Post-Barcelona framework. Europe became aware of its role and responsibilities towards its neighbor countries, guided by the principle of “Wider Europe-Neighborhood.” One of its identified roles is to ensure continuing social cohesion and economic dynamism. In order to achieve this goal, both the EU and its neighbor countries should cooperate together in the fullest sense. Therefore, one of the main interests of the EU is the close cooperation with its Eastern and southern neighborhood. Unlike the period prior to the Post-Barcelona, Europe became so much interested in establishing many forms of cooperation and integration with its neighbors. This desire for cooperation stemmed from a European awareness of the benefits and advantages of widening the space of cooperation with its neighbors. This concept is expressed clearly by Willem Molle, who states that “the progress in terms of widening (extension of the geographical area) is determined to a large extent by the net advantages cited under deepening” (Molle, p.39). Therefore, one of the important changes came about from the Post-Barcelona framework is Europe’s interest to widen its economic and political relationships with its Eastern and Southern neighbors. In this context, the European Union exerts extreme efforts to minimize trade barriers with foreign countries. On the 0international level, the EU aims at bolstering Europe's trade position in the world and its political and economic power. Because of the great differences in per capita income among the European countries, which range from $15,000 to $56,000, the European Community faces difficulties in devising and enforcing common policies in politics and economics. However, the bottom line is the establishment of strong trade relations with various countries, especially the United States ("The World Fact Book"). Therefore, it is important to note that the EU has established strong ties and partnerships with the United States in an attempt to adjust the trade balance and increase the exports to the United States. In fact, partnership is an important field of economics in both the macro and micro levels. That is, economic partnership can exist between companies, such as the big multinational corporations, and between countries, such as the partnerships among some regional agencies and organizations. Such economic partnership would be very beneficial for all the parts, especially in our age of globalization. The clearest example of economic partnership among regions can be found between the European Union and other regions in the world, such as the United States. Actually, the EU and the US are one another's main trading partners. Those world’s two largest economies account for a combined total of 57% of world GDP approximately. This strong trade relations lead to many gains from more trade and investment and less barriers between them. Statistically, the EU and US together are responsible for about two fifths of the world trade. Trade flows from the EU to the US and vise versa are running at around €1.7 billion a day. On a yearly basis, we can take the year 2003 as an example. In this year, the total amount of investment to and from the United States was over €1.5 trillion. This sum was composed of €731 billion of EU Foreign Direct Investment (FDI) in the US and around €772 billion of US FDI in Europe. Moving to the year 2005, exports of EU products to the US reached €250 billion, while imports from the US to the EU were about €234 billion. In addition to trade in goods between the EU and US, there was also trade in services. In fact, EU service exports to the US amounted to €108.6 billion in 2004 while EU service imports from the US reached to €93.0 billion approximately ("Bilateral Trade Relations"). Therefore, it can be concluded that trade in goods and services between the EU and US is rising during the last five years, accounting for about fifth of the world trade. However, despite this promising status of economic integration between the EU and US, there is still a number of trade disputes between the two partners. Examples of these trade disputes include "trade issues like the banana conflict or the steel dispute which have been solved or the ongoing dispute over the US legislation on Foreign Sales Corporations, where the EU has started to impose sanctions for non-compliance of the US with the rulings of the World Trade Organization" ("Bilateral Trade and Investment"). One of the main reasons why these trade disputes emerge is because the EU and the US are partners and at the same time competitors on the global arena. Another main reason for the trade conflicts and disputes is because of different regulatory laws and measures, reflecting cultural differences and societal choices. A clear example of such differences can be found in "the EU ban of hormone treated beef, where the WTO authorized the US to take measures against the EU, and the different perception of risks associated with genetically modified organisms (GMO’s) on both sides of the Atlantic, where the US has brought a case at the WTO" ("Bilateral Trade and Investment"). Accordingly, it can be said that the trade relations between the EU and US is characterized by both integration and competition at the same time. Nevertheless, it should not be understood that the competition and economic disputes between the EU and US hinder the trade flow among the two partners. Actually, "the economic impact of these disputes constitutes only a small proportion of less than 2% of the overall trade volume," which shows that those disputes are relatively trivial in comparison to the overall volume of trade between the EU and US. Also, in an attempt to solve any existing disputes, both the EU and US exert every effort to address any obstacles to trade and investment through appropriate channels, either bilaterally or through the WTO dispute settlement mechanism ("Bilateral Trade and Investment"). Therefore, it can be assumed that the United States and the European Union are bound by shared values and responsibilities in trade and investment. This makes many economies to conclude that the European Union and the United States enjoy the world's largest economic relationship. The huge volume of trade and investment between the two partners lead to positive economic statuses, such as the creation of jobs and the boosting of growth on both sides of the Atlantic. One of the characteristics of the EU-US trade stability and growth is the recurrent holding of meetings and summits between them in an attempt to elevate any obstacle and explore new opportunities in trade and investment. An example of a recent summit between both partners was held at June 25, 2003 at Doha "to launch a new WTO trade round to provide continued momentum for free trade and increased global prosperity" ("United States - European Union Relations: Fact Sheet"). As declared by the officials of both the EU and US, "we are cooperating on the development of a hydrogen economy to enhance the security of energy supply, increase diversity of energy sources, and improve environmental quality. We consult closely on a broad range of energy issues" ("United States - European Union Relations: Fact Sheet"). This shows that economists and officials in both the EU and US care about developing and advancing their trade relations and investment opportunities for the welfare of American and European citizens. In addition, a major characteristic in the trade and business relationship between the EU and US is that they are not satisfied with their economic status. They usually hold bilateral talks and negotiations in order to accelerate development and cooperation between them. For example, in May 2004, the United States and the European Union (EU) signed a bilateral trade agreement after the EU expanded from 15 to 25 members. The agreement "reduces several agricultural and industrial tariffs to offset tariff increases that the EU implemented as a result of EU enlargement.  It also gives the United States access to expanded tariff-rate quotas for a broad range of agricultural products" ("United States and European Union Sign…") Ambassador Peter Allgeier, U.S. Permanent Representative to the World Trade Organization and Ambassador Carlo Trojan, EU Permanent Representative to the World Trade Organization expressed their satisfaction with this agreement as it will benefit both the United States and the European countries, when it goes into effect in July 1, 2006. As a result, Ambassador Peter Allgeier, U.S. Permanent Representative to the World Trade Organization declares, “this is a good package that helps to enhance U.S. access to the EU’s agriculture market for pork, corn gluten meal, processed products, and to key growth markets for our exports to the EU, such as fish." said US Trade Representative Rob Portman. "The agreement upholds our rights under WTO rules.  We worked closely with U.S. industries affected by the enlargement of the EU to secure the appropriate compensation” ("United States and European Union Sign…"). The agreement includes many key elements, such as that "the EU will open new country-specific tariff-rate quotas for U.S., " "the EU will expand existing global tariff rate quotas for food preparations, fructose, pork, rice, barley, wheat, maize, preserved fruits, fruit juices, pasta, chocolate, petfood, beef, poultry, live bovine animals and sheep, and various cheeses and vegetables," and that "the EU will permanently reduce tariffs on protein concentrates and fish" ("United States and European Union Sign…"). In addition, the United States will also benefit greatly from this agreement, as "the Most-Favored Nation concessions that third countries such as China, Japan, Brazil, Canada, and Australia are negotiating with the EU" ("United States and European Union Sign…"). From the above analysis, it can be clearly shown that the government of Sweden is adopting successful and efficient economic policies in order to continuously improve and develop the Swedish economy. According to the Swedish Ministry of Finance, Sweden's gross domestic product (GDP) is "forecast to increase by 3.2 per cent in 2005 and 2.7 per cent in 2006. Open unemployment is expected to fall to 5.0 per cent this year and 4.4 per cent next year. General government net lending is estimated to amount to 0.7 per cent of GDP in 2005 and 0.6 per cent in 2006" (Ministry of Finance). Actually, the successful economic performance in Sweden can be attributed to a variety of efficient policies adopted by the government of Sweden. These policies include the decrease in government expenditure, increase in export, intensive investment in domestic business, and the lowering of taxes. All these policies help the Swedish government reach its economic goals. "The upswing in investment that began last year is continuing. Investment in industry and the energy sector is expected to grow strongly, and residential construction is expected to continue to increase" (Ministry of Finance). As realized by most Swedish economists, "the growth of domestic demand is becoming more rapid as private consumption benefits from stronger employment growth, the completion of the fiscal consolidation and wealth effects induced by higher house prices and stock market gains. Lower interest rates should also stimulate residential investment, albeit slowly" ("Sweden - economic development"). Therefore, the development process in Sweden clearly reflects the success and efficiency of the fiscal policies of the Swedish government. Works Cited "Bilateral Trade and Investment." 14 Jun. 2006. 01 Jan. 2012. "Bilateral Trade Relations." 30 May 2006. 01 Jan. 2012. "European Commission: Manuscript for Information Brochure." Dec. 2002. 01 Jan. 2012. Molle, Willem. “External Relations,” pp. 429-458, in Willem Molle (2001): The Economic of European Integration: Theory, Practice, and Policy, 4th edition, Ashgate, Hants, England. Ramji, Shiraz. “Globalization and Gender Inequality.” 14 Jul. 1997. 01 Jan. 2012. "Sweden's Economy." Ministry of Finance. Press Release. 14 Apr. 2005. 01 Jan. 2012. "Sweden - Economic Development - Developments in Individual OECD Countries." OECD Economic Outlook.  Jun. 1998. 01 Jan. 2012. "The World Fact Book." 15 Jun. 2006. 01 Jan. 2012. "United States - European Union Relations: Fact Sheet." US Department of State. Office of the Spokesman. Washington, DC. 25 Jun. 2003. 01 Jan. 2012. "United States and European Union Sign Enlargement Compensation Agreement." 23 Mar. 2006. 01 Jan. 2012. Read More