The report, which was produced by the Organisation for Economic Co-operation and Development (OECD), focused on getting more people in work at all levels of the economy.
“Sweden cannot afford to have one of the world’s most generous welfare systems if labour supply is just average,” the organisation said.
“Avoiding any discouragement to work is crucial in order to preserve national income and to shore up public finances,” it said.
The government should concentrate particularly on sickness and disability absences and measures which give time off work.
On an average day nearly a fifth of the potential workforce is on sick leave or receiving a disability benefit, and the sick leave rate has soared since 1998, the OECD said. Tighter controls in the sick leave system are therefore required, it said.
The report urged policymakers to be vigilant in ensuring that the benefits are reserved for the needy.
“In this repsect,” said the OECD, “Sweden falls well short of international best practice.”
Sweden’s parental leave scheme may have become too generous, and study leave needs to be confined to those on job-related courses, it said.
And a system of paid sabbatical leave should be abolished altogether, the OECD said.
“Workers who want extra holidays can always negotiate them, but they should not be paid for by the taxpayer,” it said.
Employment rates could also be raised by encouraging younger people to finish their studies quicker and by incentivising older people to delay retirement.
Increasing labour supply will make an important contribution to meeting the government’s target of a fiscal surplus of 2% of GDP over the medium term, the OECD said. The OECD is forecasting a surplus of 0.7% of GDP this year and 0.8 pct next year, down from a surplus of 1.2% in 2004.
The organisation reiterated GDP growth forecasts included in its recent Economic Outlook publication. It sees Swedish growth remaining robust at 2.8% in 2005 and 3.3% in 2006.