The effect of the short-time work allowance on the Swedish labor market : A study on the Swedish private sectors during the years of the Covid-19 pandemic

Abstract: Short-time work is a policy tool which aims to reduce the welfare loss in an economy due to economic shocks affecting the labor market. This allows employees to reduce their working time temporarily. Prior to the pandemic, the policy was mainly used during the financial crisis in 2008-2009. The usage did however increase in several western countries during the pandemic. The policy has been untested in Sweden until the pandemic, therefore the actual effects on the Swedish labor markets must be investigated. To target this, the study examines the relationship between the employment change, the usage of the short-time allowance, and the economic changes in the private sectors in Sweden. The thesis shows that the short-time work allowance in Sweden saved jobs but did come with welfare loss to the society when used during the recovery of the economy. This result is in line with previous research on short-time work and adds further to the argument that the policy must be designed to act during recessions.