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More on How government make polices – Youth unemployment in Sweden – Did expensive government policy helped create jobs for the youths?

Tuesday, 27 March 2012
As the Swedish youth continue to bask in persistent unemployment and with no sign that the situation will improve soon, the Swedish government has engage in various forms of reforms so as to ignite a means for them to get into employment. That reforms have been very costly but has it is questionable if these reforms have assisted youth into a form of jobs situation. Answer: Nope…

The government policy on youth employment drive has been described as costly and inefficient where over Skr 1billion has been spent on such reforms but which has not cause any measurable job creation.

As the drive to seek how to put the youth into work ware on, the Hotel and restaurant industry has earned the most from the reform, according to exclusive figures that the Swedish daily, Dagens Nyheter has produced.

The report in the paper holds that the same proportions of young people working during the time of the reform are just the same number that was working before and after the reform. This may indicate that most of the jobs that happen when the halving of the employer's contribution was effected would have still been there anyway.

Three years ago the government passed a policy to halve employer's contribution on National Insurance to young people under 26.This was a continuation of a cut made started in 2007. The idea was to encourage employers to hire more young people.

And the cost of reform has swelled. So far it has cost Skr51.5 billion, in the government's budget it has been calculated that it will bite out Skr48.9 billion. But there is no research to suggest that the reform has had the impact that the government had hoped for. Neither has there been any evidence from the various different industries which the paper examined has shown that an increase in employment among those under 26 has really happened.

“It is a bit naive if you think you can have rapid and substantial effects of only halving the payroll and changing starting salaries for young people, given the structure of the industry,” says Anders Weihe, chief negotiator for Engineering Industries, employers' organization for much of the Swedish industrial enterprises.

“Cutting the payroll tax is an expensive method with uncertain effects. A lot of evidence shows that it has no effect at all. In addition, it aims to combat a problem that is smaller than most people think,” says Lars Calmfors, professor of economics.

He points out that youth unemployment figures are inflated, partly because students who are not in the labour force, but registered as unemployed are looking for work as a complement to their studies.

The research is suggesting that reduced employer contributions are ultimately passed on in higher wages instead of leading to more jobs.

Small and medium-sized industrial companies, by contrast, would probably have been more willing to hire younger people as a result of the halving payroll tax, according to the assessment.
According to figures provided by the Swedish Tax Agency, the hospitality sector is the sector that has received the largest percentage reduction in employer contributions in relation to wage costs. This reduction amounted last year to 4.8 percent of total payroll.

Bjorn Arnek, industry economist at the Swedish Hotel and Restaurant Association, is convinced that lowered payroll will lead to more jobs.
“Between 2008 and 2009 Sweden underwent one of its worst economic crises. Now we see a turn up in the proportion of young people and I absolutely believe that reduced employer contributions works”, he says.

The high figure for the hospitality industry can be compared with 1.1 percent for manufacturing and mining and 0.9 percent for healthcare and social services.

All this happens as Sweden continues to have almost 50 percent of employees under 26. The question being asked is how does the reduced payroll already passed affecting them and why are they not being employed? Looking at the earning of the sector it is reported that that it is possible for profits to a large group of employers.
But the Swedish government insists that the decrease in employer contributions could have saved youth jobs that would otherwise have disappeared during the crisis in 2008 - 09.
By Team

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