Headlines 2013

New Report: Where Jobs are Created

2013-05-03

From left Lars Persson, Pehr-Johan Norbäck, Fredrik Heyman and Roland Bladh.

On June 4, IFN arranged a seminar on the ESO report "Job Dynamics in Swedish industry 1990-2009" (Expert Group on Public Economics). Economists Fredrik Heyman, Pehr-Johan Norbäck and Lars Persson, all IFN, presented the results of their study: What kinds of jobs have been lost or created? Do the employees have low or high education? How is the job dynamics between the service sector and manufacturing industry? Roland Bladh, European Commission's Directorate General for Employment and Social Affairs attended the workshop and gave his views on the subject.

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Per Skedinger, IFN, moderated the well-attended seminar.

 

In the report the researchers explain that "in the public policy debate is often claimed that it’s small businesses that have create new jobs in Sweden over the past decade. Still, it has been established that small businesses in Sweden, during the 1980- and 1990's, had a slower growth than small businesses in other developed countries. "

Despite the deep crisis that emerged in Sweden during the early 1990’s and the current financial crisis almost 190 000 new jobs were created in the business sector over the period 1990-2009. Behind this figure the researchers have found very extensive dynamics in employment. The 190,000 new jobs was the difference between about 3.42 million jobs created and 3,230,000 eliminated job .

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Professor Lars Persson and Associate Professors Pehr-Johan Norbäck and Fredrik Heyman presented the report in Stockholm.

The ESO-study shows that:
1. Small and medium-sized businesses created around 300,000 new jobs in the industry during the period 1990-2009. Most of these jobs were added in smaller mid-sized enterprises. The large companies reduced their total employment by about 120,000 jobs, mainly during the 1990’s crisis.
2. During the period 2000-2009, employment grew in companies of all sizes in the service sector. Employment in the manufacturing sector was mainly characterized by a decrease in the number of employees for the largest enterprises.
3. The share of employees with tertiary education increased from about 25 percent in the early 1990’s to about 40 percent in the late 2000’s, while employed with only lower secondary education fell sharply.
4. The largest increase in headcount was in the largest and medium-sized businesses increasing staff with tertiary education. The largest reduction during the period 1991-2009 was done by the largest companies reducing their staff with just compulsory education.

Read (in Swedish) the ESO report

 

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Lars Persson answering questions from de audience at the seminar June 4, 2013.

The three authors have expanded and further developed the study in the ESO report in a 'Policy Paper (No. 60, 2013, IFN). Here they show that "the Swedish industry has undergone a structural transformation where both small and medium enterprises as well as small and medium-sized workplaces in large firms have gained in significance. A development that has probably been driven by the rise of ICT, implying that small business has become more profitable as a result of the general deregulation of the economy and the increased globalization. It should be noted that the large companies are still dominant in terms of employment in the Swedish business sector. "

It turns out that all job creation during 1996-2009 derived from the service sector, where 400,000 jobs were created. During the same period, 40,000 jobs disappeared from the manufacturing industry.
Job turnover is particularly high in small young companies, the researchers state, adding that "Swedish industry has also undergone a structural transformation in regards to the level of education of employee. Employment of persons with tertiary education has risen sharply and employment for people with lower secondary education has decreased significantly. This has mainly taken place in large companies where the number of jobs with compulsory education has decreased and the number of jobs with higher education has increased. "

Are the job dynamics in the business sector effective?

The researchers argue inter alia that diversity in the business sector is essential for an economically efficient restructuring. This entails not only the relationship between small and large companies, but also between young and old firms and between small and large establishments. "Coupled with changes in technology and institutions, different types of companies and workplaces are more or less effective over time and amongst different industries. To develop an economically efficient and ongoing structural change a variety is needed among businesses."

The authors of the Policy Paper are demanding regulations and institutions that are neutral in terms of company size. "There may be labor laws that handicap small businesses and the growth of small businesses. This might indicate that less efficient large enterprises, through non-neutral regulations, can outcompete more efficient small business," writes the IFN researchers.

Read  (in Swedish) Policy Paper No. 60, 2013

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