Sweden: What Labour Market Exclusion Costs the State
The direct fiscal burden of keeping people outside the labour market — benefit expenditure, lost tax revenue, and the structural cost to public finances across Europe.
Country Profile
Direct benefit payments
Försäkringskassan Årsredovisning 2024 — sjukersättning, sjukpenning, aktivitetsersättning; OECD SOCX 2023 · 2024
→ Disability pension
Försäkringskassan Årsredovisning 2024 — sjukersättning · 2024
→ Sickness benefit
Försäkringskassan Årsredovisning 2024 — sjukpenning · 2024
→ ALMP spend
Arbetsförmedlingen Årsredovisning 2024 · 2024
Estimated lost tax revenueestimate
Estimate: ~420k excluded working-age persons × SEK 440k median earnings × 27% effective income tax rate / 11.4. Source: SCB inkomststatistik 2024.
Total estimated fiscal cost
Sum of direct benefit expenditure (Försäkringskassan 2024) and estimated lost income tax. Sweden's aggregate is lower than peers partly due to the 2008 reforms that tightened sjukersättning eligibility — the Tidö Agreement (2022–2024) continued this tightening.
Local currency: 100 SEK bn
Per working-age adult
€1,767
Context
Sweden's incapacity system covers sjukersättning (long-term disability benefit, permanent), aktivitetsersättning (younger persons with disability), and sjukpenning (time-limited sick pay). The 2008 'arbetslinjen' reform substantially reduced rolls; the 2022 Tidö Agreement tightened criteria further. IFAU evaluations (Johansson, Nordström Skans) are the benchmark for effectiveness assessment.
Methodology
Sum of direct benefit expenditure (Försäkringskassan 2024) and estimated lost income tax. Sweden's aggregate is lower than peers partly due to the 2008 reforms that tightened sjukersättning eligibility — the Tidö Agreement (2022–2024) continued this tightening.
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