Download Min steps of the Budget Process

The New Government’s Economic Policy
Per Jansson
Ministry of Finance Sweden
Plan of talk
• Some personal data
• A few facts about the Government Offices, the Ministry of
Finance, and economic policy in general
• Facts about the Swedish economy
• The new economic policy
– Undertaken and planned policy measures
– Expected effects (forecasts from Budget Bill and evaluation done
by Lars Calmfors)
Ministry of Finance Sweden
Personal data
•
•
•
•
PhD 1994; Associate Professor 2000 (Uppsala University)
Mainly: general macro (empirical) and monetary policy
10 yrs at the Riksbank, 2 yrs at the NIER
Also: FIEF, the Economic Council of Sweden, SJ
Ministry of Finance Sweden
Ministry of Finance Sweden
Office for Administrative Affairs
Ministry of Industry, Employ-ment and
Communications
Ministry of Education
Research and Culture
Ministry of Finance
Ministry of Health
and Social Affairs
Ministry of Defence
Ministry for Foreign Affairs
Ministry of Justice
Prime Minister’s Office
The Government Offices
The Government
The Ministry of Finance
470 plus
employees
50 per cent are
women
65% have executive
responsibilities
10% have
managerial
responsibilities
Ministry of Finance Sweden
average age is
about 40
95% are nonpolitical staff
25% have
administrative
responsibilities
most common occupations:
economists, lawyers and
social scientists
Minister
Mats Odell
Minister for Finance
Anders Borg
Chief Political
Adviser
Political
Advisers
Press
Press
Political
Advisers
Legal
Secretariat
Information
Department
Departement for
Coordination and
Support
3 Divisions
Ministry of Finance Sweden
State Secretary
Hans Lindblad
State Secretary
State Secretary
Per Jansson
Ingemar Hansson
State Secretary
Department
Economic
Affairs
International
Department
Tax and
Customs
Financial
IA
Markets
7 Divisions
3 Divisions
3 Divisions
4 Divisions
5 Divisions
Budget
KLAPublic
Administration
5 Divisions
State Secretary for economic policy responsible for…
• Departments: International Department, Economics Affairs,
Division for Structural Policies at Budget Department
• In addition: issues related to statistics and government real
estates
• Government agencies: NIER, Statistics Sweden, the Economic
Council of Sweden, the Swedish National Financial Management
Authority (ESV), the National Property Board (SFV), the National
Fortification Administration
Ministry of Finance Sweden
Conducting economic policy means…
…undertaking measures to influence the national economy.
Divided into:
- stabilisation policy
- distribution policy
- structural policy
The Ministry of Finance
• monitors and analyses the Swedish economy
• makes short and long-term forecasts
• conducts studies at household and
individual level
• takes part in international economic work
Ministry of Finance Sweden
The goals of economic policy…
… are set by the Government and the Riksdag, and can broadly be
summarised as follows:
a stable economy
stable prices
full employment
Ministry of Finance Sweden
fair distribution
high growth
sound public finances
Economic policy is implemented through the budget process
Government commences
preparatory
budget work
Government submits Spring
Budget Bill including
proposals for expenditure
ceilings to
the Riksdag
Riksdag
approves
the budget
January • February • March • April • May • June • July • August • September • October • November • December
Government
agencies supply background
budget data
Ministry of Finance Sweden
The Riksdag approves
expenditure ceilings and
preliminary frames for the
expenditure areas
Government
submits
the Budget Bill
to the Riksdag
The Swedish economy: since the mid 1990s good
macro performance in many respects
• Growth higher than previously and higher than in many other
countries
• Inflation low and stable
• Public finances with surplus
• Reasonable real and nominal wage increases
Ministry of Finance Sweden
GDP level and growth rate
SEK billion
2800
Per cent
5.0
4. 5
2600
4. 3
4. 3
4.0
4. 1
3. 9 3. 9
3. 7
2400
2200
2. 8
2. 6
2. 9
2. 7
2. 0
1. 9
1. 7
1. 7
1. 1
1. 0
-0. 2
0.0
-1. 1 -1. 2
-1.0
-2. 0
1600
-2.0
80
85
90
Level, constant prices (left scale)
Annual change (right scale)
Ministry of Finance Sweden
1.0
1. 3
1800
1400
2.0
2. 3
2. 2
1. 2
2000
3.0
3. 4
95
00
05
-3.0
CPI inflation
14
12
10
8
6
4
2
0
-2
1981
Ministry of Finance Sweden
1986
1991
1996
2001
2006
Public savings (percent of GDP)
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
1990
1992
1994
1996
1998
Note: The dashed line is the forecast in the Budget Bill for 2007.
Ministry of Finance Sweden
2000
2002
2004
2006
2008
Nominal and real wage growth
10
8
6
4
2
-4
Nominal
Ministry of Finance Sweden
Re al
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
-2
1980
0
But there are also problems…
•
•
•
•
Weak labour market development with high absence
Equilibrium (un)employment too low (high)
It does not pay enough to work
Business climate for in particular small companies not as good as
it should be
• Too few want to employ and run a business
• Demographic challenges ahead
Ministry of Finance Sweden
GDP growth and unemployment
0
8
6
2
4
2
4
0
6
-2
8
-4
-6
80 82 84 86 88 90 92 94 96 98 00 02 04 06
BNP (vänster)
Öppen arbetslöshet, säsongrensad (höger)
Ministry of Finance Sweden
10
The Swedish population by labour force status, 2005
Population
9 047 700
19, 5 %
16, 7 %
Population, age<16
Population, age>64
1 762 900
1 515 000
63, 8 %
Population, age 16 —64
5 769 800
59, 0 %
41, 0 %
At work
Not at work
3 409 850
2 359 950
36, 1 %
Employed, absent from work
852 750
45, 4 %
vacation &
holidays
387 500
22, 0 %
Sick
187 750
11, 5 %
52, 4 %
Unemployed
Not in the labor force
270 400
1 236 800
32, 5 %
Else
277 500
Sickness - &
activitucompensation
77 000
383 800
Else
243 800
Ministry of Finance Sweden
Retired
Full-time students
532 200
Individuals supported by social transfers
Thousands of full-time equivalents
1 600
1 400
1 200
Sickness allowance
Disability pension
Unemployment
Labour market programs
Social assistance
1 000
800
600
400
200
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04
Source: SCB, Swedish Social Insurance Administration, National Labour Market Board
Ministry of Finance Sweden
The difference between going to work and being
sick-listed is too small
Ministry of Finance Sweden
Few new companies established
Ministry of Finance Sweden
Swedish population growth up to 2050 (change
compared to 2006)
1000
65 yearsandolder
800
20-64 years
19 yearsandyounger
600
400
200
0
-200
2005
2010
Ministry of Finance Sweden
2015
2020
2025
2030
2035
2040
2045
2050
Dependency ratios
0.45
0.45
0.40
0.40
0.35
0.35
0.30
0.30
0.25
0.25
2005
2010
2015
Äldrekvot
Ministry of Finance Sweden
2020
Yngrekvot
2025
2030
2035
2040
2045
2050
Population growth in the age 20-64 years (change
compared to 2006)
500
Bornabroad
400
BorninSweden
300
Total change
200
100
0
-100
-200
-300
2005
2010
Ministry of Finance Sweden
2015
2020
2025
2030
2035
2040
2045
2050
The labour market at different points in time
1990 1993 2005
Unemployment
1,5
8,3 5,4
Labor force participation
84,5
77,7 78,0
Employment
83,3
71,2 73,8
Benefit recipients
15,7
22,2 20,4
Ministry of Finance Sweden
Possible sources of unemployment persistence
Decreasing search activity
Calls for: measures that increase search activity and decrease locking-in effects
Generous benefits
Calls for: measures that make it worthwhile to work
The compressed wage structure
Calls for: measures that increase the availability of low-skilled jobs at an agreeable wage
Stigmatization
Calls for: measures that decrease the cost associated with employing jobseekers who have been out of
work for a long time
Employment protection legislation
Ministry of Finance Sweden
What is needed?
A combination of measures that
affect simultaneously:
The matching process
Labour supply
Labour demand
Ministry of Finance Sweden
Autumn Budget Bill 2007 affects
Matching
through:
Changes in the institutional set-up of labour market policies
Individual action plans and coaching
Changes in unemployment benefits
Lower volumes of labour market programmes
Ministry of Finance Sweden
Autumn Budget Bill 2007 affects
Labour supply
through:
Earned income tax credit that increase after-tax revenue
Changes in unemployment benefits
Changes in sick-leave benefits
Lower volumes of labour market programmes
Ministry of Finance Sweden
P
AS
AD
Y
Ministry of Finance Sweden
Autumn Budget Bill 2007 affects
Labour demand
through:
“New start jobs” targeted at benefit recipients, refuges, and older people
Decreased employers’ contributions for youth & older
Increased possibilities to time-limited hires
and also:
Tax reductions on household-related services (in 2007)
Tax reductions in various service sectors (in 2008)
Ministry of Finance Sweden
P
AS
AD
Ministry of Finance Sweden
Y
P
AS
AD
Y
Ministry of Finance Sweden
The Swedish labour market according to the Budget
Bill
2005
2006
2007
2008
2009
Employment,
percentage change
0,8
1,7
1,5
1,0
0,6
Labour force,
percentage change
0,8
1,3
1,8
0,1
0,0
Regular employment rate
(20-64)
77,4
77,7
79,0
79,8
80,2
Open unemployment rate
6,0
5,6
5,8
5,0
4,3
123 000
2,7
143 000
3,1
91 000
1,9
64 000
1,4
70 000
1,5
8,7
8,7
7,7
6,3
5,8
Labour market programmes
– participants
– per cent of labour force
Total unemployment rate
Ministry of Finance Sweden
Effects on income distribution (2007, percentage
change)
1,8
1,3
0,8
0,3
-0,2
Kvinnor
Stud
Socbid
Sjuk
Heltid
Lång deltid
Kort deltid
Arbetar ej
Ålderspens
Förtidspens
Företagare
Tjänstem hög
Tjänstem l/m
Arbetare
7565-74
55-64
45-54
35-44
25-34
18-24
-17
Ministry of Finance Sweden
Män
2,3
Kön
(20+)
Arbetslös
2,8
Bidrag/stud
Sysselsättn
Socio
Ålder
%
Effect on income distribution: Gini coefficient
0,30
0,29
B e f o re pro po s a l
0,28
A f t e r pro po s a l
0,27
0,26
0,25
0,24
0,23
0,22
0,21
0,20
1991
Ministry of Finance Sweden
1993
1995
1997
1999
2001
2003
2005
2007
Calculation of effects by Lars Calmfors
• Approach: use estimates (elasticities) of previous empirical studies (several)
to quantify the long-run effects of the different policy measures
• Studies considered:
– Bassanini & Duval (2006, OECD WP 486)
– Forslund, Gottfries & Westermark (2006, CESifo WP 1649)
– Forslund & Kolm (2000, IFAU WP 7)
– Nickell (2003, CESifo DICE Report 2)
Ministry of Finance Sweden
Bassanini & Duval (2006): lower unemployment
benefits and tax wedge
Category
Effect in percentage terms
Unemployment
-1.0 / -0.8
Employment rate,
males 25-54
+1.4 / +1.0
Employment rate,
females 25-54
+2.4 / +1.8
Employment rate,
youth 20-24
+3.2 / +2.7
Ministry of Finance Sweden
Forslund et al (2006): lower net replacement rate and
reduction of ALMPs
Category
Effect in percentage terms
Wage
-1.7 / 0
Open unemployment
-1.0 / -0.4
Total unemployment
-2.0 / -1.4
Ministry of Finance Sweden
Forslund & Kolm (2000) and Nickell (2003)
• FK about 1 percentage point larger unemployment effect
• Nickell:
Change in U = -0.42 – 1.24 x (net no. of ”employment-friendly”
reforms)
R2 = 0.51, N = 20
=> for Sweden this gives 3 x 1.24 = 3.7 percentage points lower
unemployment
Ministry of Finance Sweden