When inclusive measures expose cracks: The Nordic Social Protection in times of crisis

By Trine P. Larsen and Anna Ilsøe

The Nordic economies were – similar to the rest of Europe – hit hard by the Corona pandemic with historical drops in GDP and rising unemployment in the first two quarters of 2020. Non-standard workers were particularly hard hit. Many worked in the most crisis-ridden sectors such as tourism, hotel and restaurant. To help companies and workers, including non-standard workers, to cope with the COVID-19 crisis, the Nordic governments launched more than 130 ad hoc relief packages and amendments in their social protection schemes, often in close collaboration with social partners and with broad support of other political parties. However, certain groups, notably temporary employed, entrepreneurs, freelancers and part-time workers with few hours continued to fall through the cracks in the system despite the ongoing adjustments of the unprecedented policy responses, and more so in some Nordic countries than others.

Nordic COVID 19 relief packages – examples of innovative and inclusive policy measures

The first Nordic relief packages range from financial aid to keep businesses afloat, tax deferrals, social protection packages, job protection packages to specific measures aimed to stimulate innovation employability and the economy. In many respects, these policy responses differ from the kind of stimuli seen after and during the financial crisis in 2008, not least because they cover much broader groups of workers and companies, like freelancers, entrepreneurs and start-up companies, and offer innovative solutions to protect them.

Temporary suspension and lowering of eligibility criteria for income security

Besides their various wage compensation and temporary lay-off/furlough schemes, the Nordic governments have also in other ways expanded the coverage of their social protection schemes to enable groups that often are unable to qualify for income support to be covered in case of sickness or job loss. In Iceland, the government extended their furlough schemes to cover all workers, including temporarily employed, part-time workers, students, freelancers and solo self-employed to top up lost earnings and temporarily improved access to sick pay and unemployment benefits. In Norway and Finland, the national governments temporarily suspended the eligibility criteria for income support and unemployment benefits and increased the daily allowance. Thereby, all dismissed and temporarily laid off workers, including groups like students, fixed-term workers, temporary agency workers, part-time workers and self-employed, gained immediately rights to unemployment benefits from their first day as unemployed.

Denmark and Sweden lowered the eligibility criteria for unemployment benefits, but more so in Sweden than Denmark. In Sweden, the usual rules as to the requested number of accrued working hours before qualifying for Swedish unemployment benefits were temporarily relaxed to ensure part-time workers and other atypical workers’ access to income security in case of job loss. Additionally, benefit levels were increased. In Denmark, many of the usual eligibility criteria for unemployment benefits continued to be in force until mid-September 2020, where the Danish government suspended the requirement to be member of an unemployment benefit fund and temporarily raised unemployment benefit levels. However, the eligibility criteria requesting a certain number of accrued working hours continued to apply in Denmark.

Inclusive measures for freelancers and solo-self-employed

New social benefit schemes have also been introduced to cover freelancers and solo self-employed in the Nordics, but individual governments have relied on different measures. The Norwegian and Finnish governments introduced temporary compensation schemes to secure solo self-employed access to paid sick leave. Norway also used such schemes to support solo self-employed in case of unemployment. In Iceland, the government decided to guarantee freelancers and self-employed rights to sick pay and extended their short-time working scheme to these groups thereby allowing them to top up lost earnings without having to cease their operations.

The Danish and Swedish governments provided financial support to freelancers and solo self-employed that have lost orders, faced company closure or been forced to close down rather than extending their social protection schemes. In Denmark, freelancers and solo self-employed, who could document lost revenue due to the Corona crisis, could receive compensation. They also acquired temporary rights to sick pay from their first day off illness, provided they met the eligibility criteria. In Sweden, the government introduced similar relief packages for crisis-ridden self-employed along with temporary rights to sickness benefits covering all workers, including freelancers and solo self-employed for up to 90 days, provided they were infected, or suspected infected, with COVID 19.

Non-standard workers – falling through the cracks

Although the Nordic governments’ relief packages aim to unite people by creating an encompassing safety net, even for those on the outskirts of the Nordic labour markets, the reforms seem in some instances to have exposed and reinforced social protection gaps. Certain groups, especially freelancers, entrepreneurs and employees with contracts of few hours – often young people –continue to struggle to meet the various eligibility criteria for support. For example, the Nordic wage compensation/furlough schemes do not cover freelancers or solo-self-employed, except for Iceland. Moreover, in Denmark and Sweden, temporary workers cannot be part of the furlough-, wage compensation- or short-time working schemes. In fact, in Sweden crisis-ridden companies are mandated to dismiss temporary workers, external consultants and in other ways curb labour costs to qualify for financial support through these schemes. This stands in sharp contrasts to Norway, Iceland and Finland were all temporarily laid off workers irrespectively of their employment contract are covered with wage compensation in the first weeks of their lay-off. Therefore, many non-standard workers such as temporary workers in Denmark and Sweden may experience higher risks of job loss and lower levels of income support as they are omitted from the various furlough/wage compensation schemes compared to their peers in the other Nordic countries. Moreover, many non-standard workers with contracts of few hours and short duration may still struggle to meet the temporary eligibility criteria for unemployment benefits not only in Denmark and Sweden, but also in Norway, Finland and Iceland, when the usual system kicks in after a certain period.

Future perspectives

In times of crisis, non-standard workers seem better protected in some Nordic countries than others, although Nordic governments have launched unprecedented relief packages. It seems that the corona crisis has not only tested the safety net around non-standard workers, but also pointed to gaps in the Nordic systems, leading to greater public awareness. This has lead to innovative policy responses in all five Nordic countries to adjust their help packages as new gaps emerged to protect all workers and companies. However, in some instances the very same policy measures have exposed and reinforced the cracks in the Nordic social protection. Therefore, it will be interesting to see how these experiences with novel policy solutions will form future policy development for non-standard workers as this could have important implications for the sustainability of the Nordic models.

Note: This blog draws on findings from the publication by Trine P. Larsen and Anna Ilsøe (2021) Covid 19: Non-standard work in times of crisis in Ilsøe A and Larsen TP (eds) Non-standard work in the Nordics – troubled waters under the still surface, Nordic Councils of Ministers: https://pub.norden.org/temanord2021-503/#