Sweden: Plans to Rein in Sick Leave Spur Backlash

By all rights the Swedes should be just thrilled with their lot. A year ago they voted into office the first non-Socialist government since the early 1990s, and they promptly cut taxes and instituted more-flexible labor laws. Result: Swedes now have more money in their pockets than ever before, and official unemployment, at 4.8 percent, is at its lowest level in five years.

But now the government, led by Prime Minister Fredrik Reinfeldt, may have gone too far. This summer, it planned a law that would limit paid sick leave to three weeks for people suffering from an ailment known as mental burnout. When details leaked out in the newspapers, angry readers posted thousands of entries at major news sites to weigh in on the issue. Some accused the government of trying to kill off its weakest citizens. Newspaper opinion pages published testimonials from doctors and former burnout victims who warned that people would get even sicker under the new rules. "Do we want a health-care system based on cynical economics?" asked one prominent psychiatrist in a newspaper opinion piece. The plan was shelved.

The conflict over Swedish sick leave mirrors similar debates throughout Europe, where politicians and their constituents are gradually coming to the realization that competing against other Western nations, as well as emerging powerhouses like India and China, will be impossible without more-flexible labor laws and fewer expensive entitlements. But Sweden is unusual in that it is attempting to dramatically overhaul its laws despite some of the most robust economic growth in Europe. While polls show that Swedes generally understand that their lifestyle is unsustainable in the long term, the nation's economy is expected to grow 3.4 percent this year, compared with 2.5 percent in the euro region—a fact that makes it particularly difficult for politicians to argue that reform is urgently needed.

Swedish workers also enjoy some of the most liberal benefits in the world, including two months' paid time off and 16 months' paid parental leave. True, the French and the Finns work even less, but while most West European countries limit sick benefits to a year or so, Swedes, with a labor force of just 5.8 million, commonly take years off work at 80 percent compensation. Government-sponsored sickness and early-disability insurance eat up $15 billion annually, more than 11 percent of government expenditures, and on any given day, 13 percent of working-age Swedes collect sick benefits—a greater percentage than in any other Western nation.

The biggest reason for taking time off: stress, anxiety, depression and a condition called "dejection" made up 33 to 40 percent of all sick-leave cases in 2006. Anna-Maria Lindsten, a 42-year-old health-services worker, collected 80 percent of her salary in sick pay for more than six years after being diagnosed in 2000. The government's attempt to limit paid time off to just a few weeks left her alarmed. "You can't just force people to go back to the workplace that made them sick," she says. "They need to give people help to build themselves back up, and that can take time."

Some doctors suggest that the long, dark winter and a Lutheran work ethic conspire to make Swedes uniquely stressed out. Aleksander Perski, a stress expert in Stockholm, says that unlike middle-class Americans, Swedes can't afford to hire household help, "so they spend all their free time doing chores." Dick Kling, an economist at Timbro, a pro-business Stockholm think tank, argues that the high absentee rate is a function of unchecked sick leaves, plus "last in, first fired" labor rules that protect senior workers during layoffs and discourage them from switching jobs. The result, says Kling, is that Swedes "hang in at work, even if they're unhappy—until they can't take it anymore. Then they can exit through the back door, thanks to our sickness-insurance program."

The bitter debate over Sweden's bloated sick-benefits program shows just how hard it can be for welfare states to adjust to the global economy. Citizens addicted to entitlements will not give up costly safety nets without a fight—even when rewarded with tax breaks and new jobs. So for politicians like Sweden's Reinfeldt, attempts at getting people back to work could mean finding themselves out of a job.