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Blog: Global Work Watch
 

June 25th, 2009

Toward a Northern European Safety Net

The U.S. is taking small steps toward looking like Sweden and the Netherlands when it comes to the economic safety net. And those aren’t bad places to be, whether you’re an employer or an employee.

A recent report from the National Employment Law Project advocacy group shows many U.S. states are changing their laws on unemployment benefits to qualify for $7 billion in funding included in the stimulus package signed by President Obama earlier this year. Those state modifications amount to expanding the reach of unemployment insurance to cover more low-wage workers as well as other groups including part-time workers.

Over the past four months, 25 states have enacted unemployment insurance reforms that qualify for incentive funding, according to the National Employment Law Project.

In addition, according to the project, 21 states changed their laws to provide “extended benefits” when their unemployment rates reached 6.5 percent, helping about 1 million workers who are exhausting their state and federal benefits.

Apart from expanding the coverage and duration of jobless benefits, the stimulus package boosted weekly payments by $25. U.S. unemployment insurance checks have been paltry: The average weekly benefit in 2008 was $297, or just 35 percent of the average weekly wage.

Those payments have been part of a skimpy safety net overall in the United States. Other developed nations have had much more generous jobless benefits, with northern European countries such as Denmark, Sweden and the Netherlands among those providing the most assistance.

Such social welfare policies typically carry the price tag of higher taxes, either on corporations or individuals. Higher tax levels also have been accused of slowing economic growth. In the first quarter, both Sweden and the Netherlands saw their economies contract at a faster pace year-over-year than the U.S. economy did.

But those two nations outperformed the U.S. in another key measure of business strength earlier this year. Public relations firm Edelman’s annual trust survey found that while trust in business plunged in the U.S. and slipped worldwide last year, it rose in both the Netherlands and Sweden. (It also rose in fast-developing Brazil and China.) Just 38 percent of U.S. respondents to the survey said they trust business to do what is right, compared with 62 percent of respondents from the Netherlands and 51 percent of respondents from Sweden.

In addition, the survey found that the most trusted global companies are headquartered in Sweden. The Netherlands ranked fifth on that list, behind Germany, Canada and the U.K.

Given how important trust is among an organization’s employees and in the broader consumer population, those northern European countries and the businesses located there are well-positioned to climb out of the current global recession.

I would argue that part of the business trust in Sweden and the Netherlands has to do with the fact that citizens in those countries have a significant degree of economic security. If a firm goes out of business or someone loses a job, the ability to survive and provide for a family isn’t nearly as jeopardized as it is in the United States. In America, getting the ax hurts a lot more. And that pain likely translates into anger at companies.

If the U.S. is looking for guidance out of the current trouble, it could do worse than to follow Sweden and the Netherlands.


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