Sweden’s minimum wages ‘too high’: OECD

The OECD on Monday urged Sweden to do more for those excluded from the job market, saying high minimum wages and poorly targeted integration policies were leaving some groups mired in poverty.

Sweden's minimum wages 'too high': OECD

“Some groups such as youth with limited education, some immigrants, and those on sickness and disability benefits are not well integrated,” the Organization for Economic Cooperation and Development said in the report.

To boost employment in those groups it said Sweden should lower wages for entry-level jobs, improve vocational and academic training, and ensure active labour market policies were better targeted to individual needs.

Sweden, famous for its egalitarian policies, also needed to reduce the gap in job protection between temporary and permanent employment so that people were not trapped in temporary contracts, it said.

The Paris-based organization added that “relatively high minimum wages set through collective bargaining tend to push up labour costs”, noting that minimum wages in Sweden averaged around two thirds of the median salary.

Although the country’s wage setting has become more decentralized, that ratio was still the second highest in the OECD in 2010.

“The government should continue talks with social partners to find ways to improve job prospects for groups at risk,” it said.

The OECD also warned that Sweden’s large banking system “entails risks and potential costs”, singling out high household debt as a risk should housing prices fall or unemployment rise.

The Swedish unemployment rate stood at 7.6 percent last year, compared with an 8.2 percent average for the organization’s member countries.

However, youth unemployment was comparatively high at 22.9 percent, compared with 16.2 percent in the OECD.

The OECD also said it expects Swedish economic growth to drop to 1.2 percent this year, down from a growth rate of 3.9 percent in 2011.

Growth is expected to recover somewhat in 2013, rising to 1.9 percent before increasing to 3.0 percent in 2014, according to the OECD.

AFP/The Local/dl

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Reader question: When am I eligible for a Swedish pension?

A reader got in touch to ask how long he had to work in Sweden before he was eligible for a pension. Here are Sweden's pension rules, and how you can get your pension when the time comes.

Reader question: When am I eligible for a Swedish pension?

The Swedish pension is part of the country’s social insurance system, and it can seem like a confusing beast at times. The good news is that if you’re living and working here, you’ll almost certainly be earning towards a pension, and you’ll be able to get that money even if you move elsewhere before retirement.

You will start earning your Swedish general pension, or allmän pension, once you’ve earned over 20,431 kronor in a single year, and – for almost all kinds of pension in Sweden – there is no time limit on how long you must have lived in Sweden before you are eligible.

The exception is the minimum guarantee pension, or garantipension, which you can receive whether you’ve worked or not. To be eligible at all for this, you need to have lived in Sweden for a period of at least three years before you are 65 years old. 

“There’s a limit, but it’s a money limit,” Johan Andersson, press secretary at the Swedish Pension Agency told The Local about the general pension. “When you reach the point that you start paying tax, you start paying into your pension.”

“But you have to apply for your pension, make sure you get in touch with us when you want to start receiving it,” he said.

Here’s our in-depth guide on how you can maximise your Swedish pension, even if you’re only planning on staying in Sweden short-term.

Those who spend only a few years working in Sweden will earn a much smaller pension than people who work here for their whole lives, but they are still entitled to something – people who have worked in Sweden will keep their income pension, premium pension, supplementary pension and occupational pension that they have earned in Sweden, even if they move to another country. The pension is paid no matter where in the world you live, but must be applied for – it is not automatically paid out at retirement age.

If you retire in the EU/EEA, or another country with which Sweden has a pension agreement, you just need to apply to the pension authority in your country of residence in order to start drawing your Swedish pension. If you live in a different country, you should contact the Swedish Pensions Agency for advice on accessing your pension, which is done by filling out a form (look for the form called Ansök om allmän pension – om du är bosatt utanför Sverige).

The agency recommends beginning the application process at least three months before you plan to take the pension, and ideally six months beforehand if you live abroad. It’s possible to have the pension paid into either a Swedish bank account or an account outside Sweden.

A guarantee pension – for those who live on a low income or no income while in Sweden – can be paid to those living in Sweden, an EU/EEA country, Switzerland or, in some cases, Canada. This is the only Swedish pension which is affected by how long you’ve lived in Sweden – you can only receive it if you’ve lived in the country for at least three years before the age of 65.

“The guarantee pension is residence based,” Andersson said. “But it’s lower if you haven’t lived in Sweden for at least 40 years. You are eligible for it after living in Sweden for only three years, but it won’t be that much.”