Cut benefits and taxes, motivate people to work. Sweden fights unemployment

The Swedish government has presented a proposal to reduce unemployment benefits and simultaneously lower income tax. Both measures are intended to promote employment and will be part of the 2026 budget, Bloomberg reported.

The labor market continues to face persistent problems. In August, the unemployment rate reached 8.8 percent—the third highest in Europe after Spain and Finland, according to Eurostat.

“This will be a budget for hard-working people, in which we reduce taxes for those who work and in which it is worthwhile to transition from benefits to work,” explained Social Affairs Minister Anna Tenje, emphasizing that it is important for children to see their parents working and not living permanently on social benefits.

The new system would introduce a so-called benefit cap. This would mainly affect large families with two unemployed parents, who could lose up to 8,000 Swedish kronor (around 725 euros) per month. At the same time, the government would provide financial incentives for unemployed people who find a job.

Economic policy is thus becoming a key issue ahead of the elections in September. Opposition leader and former Prime Minister Magdalena Andersson of the Social Democrats claims that the combination of lower taxes and lower benefits is more likely to harm the economy.

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