Is the Unemployment Rate in Sweden Really 17 Percent?

Abstract

In 2006 the McKinsey Global Institute published an analysis of the Swedish economy, with the finding that the “de facto” unemployment rate in 2004 was 15 to 17 percent, about three times higher than the official unemployment rate of 5.4 percent. These estimates were cited in the media as part of critiques of recent Swedish economic performance. To arrive at the 15 to 17 percent “de facto” unemployment rate, McKinsey included “people who don't work, even though they should be able to” in the pool of the unemployed. The analysis reported here accepts the McKinsey methodology and applies it to the United States. The resulting “de facto” unemployment rate for the United States is 13.8 percent, compared with the 5.5 percent official U.S. unemployment rate, and the estimated 15.5 percent “de facto” Swedish unemployment rate. If the two countries' prison and jail populations are also included in the “de facto” unemployment rate, the U.S. rate rises to 15.2 percent, just 0.5 percentage points lower than what McKinsey's equivalent figure would be for Sweden—15.7 percent.