Expenditure on unemployment

In the Nordic countries the payable cash benefits on unemployment is a major part of the total expenditure on this policy area, with at least twice the amount spent on cash benefits compared to expenditure on benefits in kind.

The available data on expenditure as percent of GDP indicate that the rate increased in some of the countries in the years of the financial crisis, reaching a high in 2010. After that, the rate has been decreasing or at par in all countries until the year of 2020 where the effects of changes in legislation due to the Covid-19 pandemic can be observed, but also the fact that GDP in 2020 was slightly reduced compared to years before.

Since 2010, the expenditure on cash benefits indicates that most of the Nordic countries have had continuous periods with slight decrease in expenditure leading up to 2019, except for Finland.

However, the most recent figures on expenditure on cash benefits show, that countries like Norway and Iceland have experienced very high increase by the year of 2020. This is most likely due to legislative changes caused by the Covid-19 pandemic.

Compared to expenditure on cash benefits, all countries have considerably lover expenditures on benefits in kind. Policies on labour market activation implemented as i.e., vocational training is in most cases the major reason for this expenditure.

Since 2010 the level of expenditure has decreased or been at par in all countries, and it does not seem to have been affected by the Covid-19 measures.

The data on expenditure consists also of sources of financing. The financing of social expenditure comes from several sources such as public authorities, employers, employees, and others.

Due to differences in national policies, there is quite a difference in the ways that expenditure on unemployment is financed in the Nordic countries.

Financing of unemployment by public authorities exists in all countries, however the level of financing is very low in Iceland. In countries like Denmark and Finland public financing of unemployment is the highest among the Nordic countries.

The financing of unemployment benefits that come from employers as contributions and premiums is non-existent in Denmark, whereas it is a significant contribution in other Nordic countries, especially in Iceland.

In countries like Sweden and Iceland, this source of financing is much higher than public financing, compared to Finland and Norway where the employer contribution is lower than the public financing.

The data on financing of unemployment in 2020 show a slight increase in the level of financing by employers in Norway, but a high increase in the level of financing in Iceland, much like the increase in the level of cash benefits.

If national policies allow for a structure of funding to secure a benefit, the sum of financing will often be higher than the total expenditure any given year.

In Nordic countries that rely on taxation to finance a benefit area, there is often no transfers to or from funding. On the other hand, the transfers to or from funding can be substantial in cases, where a country rely on funding to secure future expenditure.

The level of transfers is derived from the calculation of the sum of all financing subtracted the total expenditure. If the result is positive, it indicates a profit and therefore a transfer to funding purposes. However, if the transfer is negative, the deficit indicates that the expenditure has been supplemented by funding.

The levels of transfer show that countries like Norway and Denmark do not have any transfers on unemployment policies.

However, in countries like Iceland and Sweden there is a transfer to funding. In Iceland it looks like a recurring change between profit and deficit in funding, whereas Swedish figures show a build-up since 2010, which have declined remarkably in 2020.