Sweden and India: A comparative assessment of balancing free markets and the welfare state

Abstract

In their economic development, economies are faced with the issue of how to take care of people in economic need. When addressing the problems associated with poverty, one way is for the government or some other entity to distribute income to people in need to balance the equity in the society. Different unemployment insurance systems and labour market programmes have evolved as a means to provide this safety net for the unprivileged that are left without a work and thus are victims of poverty. In Sweden as well as in most other modern economies, the unemployment insurance (UI) system constitutes a corner stone for welfare. The purpose is to secure an even income for individuals in the event of unemployment and to avoid poverty caused by it. By implementing an unemployment insurance the government can address issues as equity and at the same time rise the overall standards of living. However, a generous compensation risks to make people passive and to increase the dependency on government support, reducing their effort to find new jobs. Hence the UI may result in an increased duration of unemployment and a decrease in overall welfare.1 In India, unemployment and underemployment in the rural areas have been a major contributing factor to poverty for the entire economy. Therefore, the Government stressed the need for a sharper focus on programmes aimed at providing self-employment and wage-employment to poorer section of the community.2 A labour market programme called the National Rural Employment Guarantee Act (NREGA) was launched in 2006. The NREGA provides a guarantee for one hundred days of employment every year to adults in rural areas willing to do public workrelated unskilled work at the minimum wage. The Act has been widely discussed since its introduction because of implementation issues and because of the possibility that it increases peoples’ dependency on the Government and the risk of it acting in opposition to empowering the citizens. A comparison between Sweden’s and India’s approaches to provide income for the unemployed can give insights to which problems and benefits the countries might face when using their explicit procedures to deal with the poverty caused by unemployment. An assessment of dependency of the government as a result of an unemployment insurance system and labour market programme as well as a discussion about peoples’ right to work and women’s situation in society can provide a basis for assessing the welfare issues associated with unemployment.