IFAU's research in 2014

Labour force participation, wages, unemployment and contacts with employment service offices

What determines whether we want to work or not? Some common explanations are that we are influenced by what wages that are offered, one’s own attitude to work and leisure, respectively, and that of society and how much of the wages that we get to keep. IFAU has published a number of reports in 2014 which show that both income and attitude to work play a role for labour supply.

The labour supply of older people is an important example of this. How much money the individuals get from work and pension, respectively, plays a certain role for retirement decisions, but does not explain the overall retirement patterns. For example, the fact that a considerably larger part of the group aged 60–64 was still active in working life in 2008 as compared to 2001 was not only due to the individuals’ economic considerations, but also to better health and changes in norms. Those with worse health and less education did increase their labour supply somewhat more when it became more economically favourable to work, but the effects were relatively small also for these groups.

There are differences between the labour supply of women and men. Women’s labour supply is generally smaller than that of men, they more often work part time and take out a larger part of the parental leave. The smaller contact with working life can, in turn, have consequences for women’s wage trend. Given that women take out most of the leave, a generous parental insurance can, from this perspective, become a problem for women’s situation on the labour market. If women have a long consecutive parental leave because they have children at short intervals, there is, for example, a negative effect on wage.

Labour force participation among women is large in Sweden as compared to other countries. Women are more often on sick leave than men, a pattern that we see in all countries with high female labour participation. IFAU has earlier shown that it is after the birth of the first child that women take out more sickness benefits and that there is a lasting effect of up to 15 years. Mothers also take out more temporary parental benefits than fathers. That fathers lose more from being at home might be an explanation, the lower is the wage of the mother in relation to that of the father, the larger is her share of care of sick children. But mothers do also take out more temporary care of sick children when due consideration is given to wage differences and differences between professions.

- The unequal care for sick children is probably more due to the norms and views of society on gender than the different incomes of men and women, according to Katarina Boye who has done research on the subject.

Wage formation affects labour supply and unemployment. The wage is of great importance for how much labour that employers demand and, to a certain extent, how much labour supply that is offered. As part of an assignment on wage formation in Sweden, (swe) we have studied negotiated minimum wages in five industries. We found that a higher minimum wage in certain industries led to a change in the composition of the labour force. Low-productivity individuals (new employees or employees with a temporary contract) were more likely to be forced to leave the work place after an increase in the minimum wage, while high-productivity individuals remained.

There is also reason to be particularly careful on pay day. The probability of dying on pay day was more than 23 per cent higher for employees in the government sector 1995–2000. This corresponds to 96 premature deaths per year in Sweden. Heart problems and stroke were the most common causes of death and the effect was largest for low-income earners and individuals aged below 35.

Unemployment entails a decrease in income and an increase in leisure time. This affects life on weekdays in different ways. The increase in leisure might mean less stress, more exercise, more time for the family and better health. But unemployment is more likely to lead to a worse economic situation and the change in the life situation to an increase in stress and anxiety which affects health and daily life negatively in different ways. We find that the consumption of alcohol increases with unemployment. Those who lost their jobs due to the closing down of work places in the 1990s drank more than other people and ran a larger risk of being affected by diseases related to alcohol and deaths. The risk was about as high for men and women, but the groups did partially get different diagnoses.

The whole family might be affected by a change in the work situation. Children of job seekers are admitted to hospital as much as 17 per cent more often than children of parents who work. However, the largest part of this difference cannot be explained by unemployment but by other issues that covary with unemployment – parents’ education, country of birth, age and sickness history. It does not seem to be unemployment in itself that is the cause of the figures for ill health.

The main task of the Employment Service Office is to connect employers and jobseekers, but it also provides support to individuals who are far from the labour market in different ways. Individuals who have a disability code at the Employment Service Office are able to get different kinds of support and subsidies such as a wage subsidy and sheltered employment. Support and subsidies have entailed that a larger number of disabled people work, but that less such people have non-subsidized employment. Disabled people that are made redundant do to a large extent transfer to early retirement. Vocational labour market programmes do seem to have been a good way of helping individuals with a disability that has led to a decreased work capacity to start working again. Those who participated in 1999–2006 started to work more quickly than (swe) comparable individuals who have not participated in a labour market programme.

Meetings with employment service office representatives are important. Sweden has a long history of an active labour market policy where meetings and contacts with employment service office representatives constitute an important part. Research on Danish data shows that such meetings might serve to decrease the period of unemployment. The probability that job seekers found a job increased by about 25 per cent during the week with meetings and remained in the following weeks. The effect increased with the number of meetings.

Vocational or general education as a way out of unemployment? Getting an education during the period of unemployment might be profitable to various extents in different time perspectives. In a study of individuals who have completed a labour market programme and a municipal adult education course within the Adult Education Initiative in 1997, respectively, we find that those who have completed a labour market programme have higher incomes in the short run, but after 5–7 years, there is a decrease in the differences between them and the participants in municipal adult education. The results varied between men and women and were dependent on the educational level. Municipal adult education within the Adult Education Initiative does also seem to have been a good way of making women with a (relatively) low education with small children return to working life. It seems to have worked best for those women who were outside the labour force when they started their studies. In the short run, participants in municipal adult education had a somewhat lower income than those who did not participate, but in the longer run, employment and wage incomes were higher than among comparable women.

Sickness absence – the rehabilitation guarantee

There is a great variation in the number of individuals who are on sick leave (are on sickness benefits) between different time periods. The fluctuations are too large for it to be possible to explain them with fluctuations in ill health. The variation might be due to changes in the regulations such as compensation level and time period for the compensation, the attitude to sickness benefits of the individual and surrounding society and what kind of controls that exist to ensure that the regulations of the sickness benefits are adhered to. There is also a business cycle pattern; more people are on sickness benefits in a business cycle upturn. This might be due to the fact that an increasing number of people abstain from sickness benefits in business cycle downturns due to a concern about losing one’s job, or that individuals that run a larger risk of being on sick leave exit from the labour force.

That the decision to stay home from work with sickness benefits depends on what choices are made by individuals in one’s surroundings is shown by a test in Gothenburg. In that municipality, the requirement for a doctor’s certificate for sickness absence was extended from one to two weeks for half of the citizens. This led to an increase in sickness absence, in particular among men. But both men and women who had colleagues who had been given a respite as concerns the doctor’s certificate did increase their sickness absence, probably because the decreased requirements for the colleagues were perceived to be unfair. However, it seems that women were only affected by their female colleagues and men only by their male colleagues.

Psychological ill health and neck- and back problems are the two major reasons for sick leave. In order to deal with these diagnoses, the rehabilitation guarantee was introduced in 2008. The guarantee provides help with cognitive behavioural therapy (CBT) or a combined pain- and psychological treatment (MMR). We find mixed results: CBT helped those who were not on sick leave when the treatment was carried out, but had very small effects on those who were on sick leave. Multimodal rehabilitation (MMR), including treatment of pain, did lead to an overall increase in the sickness absence. [kolla denna sista mening – blev det rätt? Jag fick den inte riktig att gå ihop då ovan så definierades MMR som smärt och psykologisk behandling och i sista meningen enbart som smärtbehandling].

Education from preschool to adult education

Education is a central part of the life of children, young people and many adults, from preschool to university education and adult education. The direct costs for education are staff and premises. For those who choose to continue their education after the years of compulsory education, the absence of work income constitutes the largest cost. The income appears later if the education provides knowledge and skills that are valued by society and on the labour market. During this year, IFAU has published research that spans the period from preschool to adult education.

Attending preschool before the age of three seems to have a beneficial effect on children with mothers with a low education and children of foreign-born parents. In a report that builds on German data, the authors find that children of parents with a low education that are foreign-born had a better linguistic development and were more often sufficiently mature to start school and more socially mature at the age of six than comparable children who had not attended pre-school at an early age. Those who had been in small groups of children (a maximum of ten children) with older, trained and full-time staff had a better outcome. Children of parents with a high-education were not affected by attending pre-school at an early age.

The school is responsible for the pupils acquiring and developing the knowledge that is necessary for the individual. Besides knowledge, the school should also foster critically thinking citizens who are responsible and democratic. There is a variation in what sides of the assignment of the school that are emphasized in school discussions. In the secondary school reform in 2009, many arguments for the needs of the employers were presented, while the arguments concerning democracy were more rare. When the nine-year more uniform comprehensive school was introduced in the 1960’s, it was instead very common to emphasize equalizing conditions and increased economic and social equality. The extended comprehensive school decreased the importance of social background when recruiting to political positions and increased the political participation among working class children.

A number of school reforms were introduced at the beginning of the 1990’s. The school was municipalised at the same time as criterion-referenced objectives and results were introduced. At approximately the same point in time, pupils got the possibility of a free choice of schools and independent schools were established. In the debate, the reforms have often served to explain the decline in Swedish pupils’ knowledge that has been registered in national surveys of knowledge. In a government commission, IFAU has provided a collected description of the trend in the results in schools until the year 2006. The authors of the report do, among other things, find that

• the results in Swedish schools began to fall already before the reforms can have affected the pupils. The downward trend continues throughout the entire reform period, however, and it cannot be excluded that the school reforms of the 1990’s had an impact on the declining results.
• the deterioration of the results occurs already in grades 1-6, but is further aggravated in the transition between comprehensive school and secondary school
• the results have deteriorated both among low- and high-performing pupils and the reason for this should be sought among something that has affected all children.

 Resources

• There was a strong decrease in school resources in connection with the municipalisation.
• The allocation of resources among schools has not become more compensatory due to the municipalisation. 
• The decline in the competency of the teaching profession that has taken place in the last 20 years started already before the studied reforms. However, it is difficult to see that they would have prevented the continued fall.
• The curricula of the municipalities are in many cases limited in how concrete they are and the relationship between objectives and measures. Metropolitan areas have had a more clear and active school policy than municipalities in the countryside.
• There is no evidence that changes and increased differences in the way that the municipalities run schools serve to explain the decline in results in Swedish schools.
• There is no relationship between changes in school resources and changes in school results in the reform period, but it is methodologically difficult to entirely take into consideration that resources are reallocated to low-performing groups of pupils.

 School choice and independent schools

• The increased school choice and the independent school reform seem to have affected the average results in a positive way, but the effects are small.
• The school choice reforms cannot explain the general decline in the results of Swedish pupils.

The extension of vocational secondary school

• The decrease in the share that does not complete secondary school can be related to extensions of the vocational programmes in secondary school and the new criterion-referenced grading system. Enlistment and labour market outcomes indicate that those who did not get complete grades still acquired knowledge.

Sorting

• There are larger differences between pupils’ results in different schools in the year 2006 than in the 1980’s. This is largely due to the fact that there has been an increase in the housing segregation, but also to the possibility of choosing schools.
• The increased sorting between schools has not had any impact on pupils’ results in comprehensive school. Family background plays as large a role in 2006 as in the mid 1980’s. There does not seem to have been any considerable change in the difference in school results for native and foreign-born pupils. There are signs that family background has had an increased importance for grades in secondary school in connection with the reforms of the 1990’s.

Independent schools and grading inflation

• Grading inflation is stronger in municipalities with a larger competition between schools. However, an increased share of independent schools can only serve to explain a smaller share of the grading inflation since the criterion-referenced and knowledge-referenced grading system was introduced. 
• The increased share of independent schools is related to increased school segregation.
• An increased share of independent schools does not contribute to increased differences between schools, in addition to increased pupil sorting.
• The choice of attending an independent school or a municipal school is affected by the pupil composition in the local municipal school. If pupils in the municipal school have good abilities, many seem to stay in the municipal school, while many pupils with less good abilities increase the likelihood that pupils with good abilities leave the municipal school.