SNS Economic Policy Council 2014. How Do We Solve the Long-term Funding of Welfare?

Annika Sundén Torben M. Andersen Jesper Roine

Sweden faces considerable challenges for funding the scope and quality of medical care, schools and health care that citizens expect. In the Report from the SNS Economic Policy Council 2014 How Do We Solve the Long-term Funding of Welfare?, a group of researchers present a range of possible measures for meeting these challenges. Independent but general and compulsory insurances constitute one of the possible reform paths discussed in the report.

kr_2014.pdf 2.6 MB PDF

As the economy grows, Swedes expects an increase in the standard of welfare services. At the same time, it is considerably more difficult to increase productivity in these lines of business than it is in the goods producing sectors. This requires that Sweden tries out new models, both to fund welfare and to follow-up quality and productivity in the welfare sector.

How Sweden meets these challenges
The Report from the SNS Economic Policy Council 2014 presents the following range of possible reform areas and measures:

A reinforced insurability in the social insurances. Social insurances, in particular the sickness insurance, should be removed from the state budget, be made independent and be designed according to principles of insurability with a strong relationship between payments and benefits. This would make it possible to increase the remuneration levels with the general income trend. At the same time, the detrimental effects for the economy of tax increases are avoided.
Identify the possibility of introducing insurance solutions in other areas. Insurances can also be used to fund welfare services. One possibility is to introduce a compulsory insurance for elderly care, which has already been tried in Germany.
A more inclusive working life. When we live longer, we must also work longer. Sweden has implemented a number of reforms to make it more profitable to retire later, in particular the pension reform. But it is also necessary to adapt working life so that it really becomes possible for elderly people to increase their labour supply.
Challenging the suppliers of welfare services. Notwithstanding if the services are produced by private or public suppliers, the supplier must be challenged as concerns cost efficiency, quality and innovations. For this to occur, it is required that there exists a systematic evaluation in accordance with clear criteria for quality and efficiency.

It is urgent!
– Our conclusion is that with the right policy, it would be possible to sustain a welfare model where welfare services and social security systems are available to everyone and funded in a collective way. But work at solving the long-term challenges for funding of the welfare state must be started immediately since it takes time to implement the measures that we have suggested, according to Annika Sundén.

The report was presented at an SNS seminar on January 16 2014.

The Economic Policy Council 2014 consists of ANNIKA SUNDÉN, Associate Professor of Economics, employed at the Swedish Pensions Agency, TORBEN M ANDERSEN, Professor of Economics at the University of Aarhus, and JESPER ROINE, Associate Professor of Economics at SITE, Stockholm School of Economics.

The report from the Economic Policy Council was discussed by ANDERS BORG, Minister of Finance, JOAKIM PALME, Professor of Political Science at Uppsala Univeristy, ANN ÖBERG, Chief Economist at The Confederation of Swedish Enterprise and MAGNUS HENREKSON, Professor and Director at the Research Institute of Industrial Economics.

The meeting was chaired by MIA ODABAS, journalist specialising in economics.