Is the Unemployment Rate in Sweden Really 17 Percent?

Publication Date:

Publisher: Center for Economic and Policy Research

Author(s): John Schmitt

Research Area: Labor

Keywords: Incarceration; Earned Income Tax Credit (EITC); Underemployment

Type: Report

Coverage: United States

Abstract:

This report finds the U.S. unemployment rate would be 13 percent using a methodology frequently cited in critiques of Sweden’s “real” unemployment rate. The McKinsey Global Institute's calculations of Sweden’s "de-facto" unemployment rate as 17 percent — more than three times the official rate (2004) — has been cited in news publications such as the Financial Times and The Economist. http://www.mckinsey.com/mgi/publications/sweden/sep_current_priorities.asp.

Using McKinsey’s approach and unofficial definitions of the “unemployed,” CEPR’s report calculated that the U.S. unemployment rate for the same year would be 13.8 percent (more than double the official rate of 5.5 percent). If the U.S. prison and jail populations are also included, something that McKinsey did not do in their original study of Sweden, the U.S. unemployment rate would rise to 15.2 percent.

A better approach for making international unemployment comparisons is to use the OECD's standardized unemployment rates. For the first quarter of 2007, the OECD measure puts the U.S. unemployment rate at 4.5 percent and Sweden’s at 6.7 percent.