Economic and Social Security

Much has happened since the Swedish social insurance and safety net began to take shape. The SNS research project “Economic and Social Security” provides a comprehensive overview of the social security systems for parenthood, illness, unemployment, old age, and economic assistance.

The aim is to contribute with new knowledge and information for further discussions. What problems should the systems address, and what are the prerequisites to do so? How should the responsibility be distributed among the public, employers, and individuals? And what are the consequences of different ways of allocating responsibility?

Lower Replacement Rate in Social Insurance and More Complements

The income loss principle in social insurance has weakened since the 1990s, as an increasing number of people today have incomes exceeding the limits set by the insurance. As a result, the average compensation rate has decreased over time. At the same time, the importance of supplementary and contractual insurances has increased, creating complementary systems to insure the same risks. What are the consequences for the effectiveness of the social insurance system, and the overall distribution profile, as a result of these developments?

Changes in the Age Structure and Composition of the Population

Life expectancy is increasing, and the proportion of individuals of retirement age relative to the working-age population is growing. This trend requires more people to work longer. However, the transition to a longer working life is progressing too slowly. How do the design and regulations of social security systems affect the incentives for a longer working life?

Today, nearly one-fifth of Sweden’s population is made up of foreign-born individuals. Many of them have come to Sweden in adulthood, contributing to lower contributions to the pension system. Employment rates are also lower among foreign-born individuals as a group compared to native-born individuals, which affects both benefit levels from, and qualification for, the economic security systems. What implications do demographic changes have for the functioning of security systems?

Trade-offs Between Security, Efficiency and other Goals

The balance between providing economic security while also maintaining strong incentives to work is a trade-off in all social security systems. Additionally, the design of these systems can lead to behavioral adjustments in various areas. For example, parental insurance can influence both birth rates and women’s opportunities for gainful employment, rules in health insurance can affect retirement decisions, the level of unemployment benefits can impact labor market transitions, and so on. What goal conflicts exist within and between the economic security systems? And what information do policymakers need to make well-balanced decisions when different goals are in conflict with each other?