OP-ED | “Time to switch from workfare to entrepreneurship”

Less than two months ago, he took on the role of the new CEO of the Swedish Federation of Business Owners. In this Op–ed, Magnus Demervall suggests what reforms for entrepreneurs he believes are needed to build a stronger Swedish economy.

Sweden’s economy is in a critical situation, with several years of stagnation behind it. Hopes of a turnaround in 2025 cannot rest solely on the Riksbank cutting interest rates or on a global economic upturn. In an uncertain world characterized by war and the threat of trade wars, active policies are needed to create a favorable business climate that promotes growth.

The alarming figures speak for themselves: in 2024, there was a record wave of bankruptcies, with over 10,000 companies going bankrupt, while the number of start-ups fell by 20,000. This is a blow to an economy already struggling with high unemployment.

What Sweden really needs is a strong ‘entrepreneurship policy’ that cuts costs, simplifies rules and ensures the supply of skills.

The recognition that work is the foundation of prosperity is central. The government’s and the opposition’s emphasis on the “work line” is laudable, but insufficient. Focusing solely on incentives to work misses a crucial dimension: the incentives to create work.

What Sweden really needs is a strong ‘entrepreneurship policy’ that lowers costs, simplifies rules and ensures the supply of skills. Only then can the work policy produce results in the form of new jobs.

The one-sided focus on increasing incentives for employees to perform, without a corresponding focus on making it easier for entrepreneurs to hire, creates an imbalance. It must be as profitable to create jobs as to take a job.

It must be as profitable to create jobs as to take a job.

Before tax money can be distributed, it must be generated. It is in private companies, especially small businesses, that jobs and tax revenues are created. In fact, small businesses are the largest taxpayer in the majority of Sweden’s municipalities.

Efforts to boost entrepreneurship in recent years, such as improved entrepreneurial tax and regulatory simplification measures, are steps in the right direction. But much more is needed. We need a coherent and proactive approach to entrepreneurship that addresses the fundamental barriers to growth and job creation.

To build a stronger economy – implement these reforms for businesses:

1. prioritize cost reductions over inefficient subsidies and business support.

• It is time to abandon ineffective subsidy policies. According to a government report, almost SEK 100 billion is pumped into business subsidies every year – money that could be used to reduce companies’ basic costs.

• A recent survey by the Federation of Swedish Enterprises clearly shows that over 80% of small businesses prefer tax cuts to subsidies, even those that have previously received support.
• To strengthen competitiveness and increase job creation, the government should shift its focus from business support to concrete cost reductions, for example through lower social security contributions and reduced corporate tax.
  

2. reform the labor market to benefit small businesses.

• Current labor market rules are outdated and disproportionate, especially for small businesses. Outdated health and safety regulations, rigid dismissal rules and far-reaching industrial action hamper job creation.
• The Co-Determination Act (MBL) is in dire need of an update. Proportionality rules for industrial action are needed to create a more balanced relationship between employers and trade unions.
• To give small businesses with fewer than 10 employees the security and opportunity to grow, the possibility of industrial action should be completely banned.
  

3. make regulatory simplification a permanent feature of policy.

• The establishment of the Simplification and Implementation Councils is an important step in the right direction to reduce red tape for businesses. However, these expert councils need to be made permanent to ensure that regulatory simplification permeates all new legislation.
• The government must not passively rely on the work of the Councils. More initiatives are needed to actively reduce the regulatory burden and create a more business-friendly environment.
  

4. invest in skills provision as an engine for growth.

• The lack of the right skills is one of the biggest obstacles to business growth. Expanding vocational education and training is therefore crucial.
• Vocational programs need to be designed in close cooperation with employers of all sizes and combined with language training to facilitate integration into the labor market.
• The government’s high wage floor for labor immigration risks exacerbating skills shortages in many sectors. This barrier must be removed urgently.
  

5. abolish corporate ‘hidden taxes’.

• Periodic inspections and controls, for example in the field of environment and food, represent a significant hidden tax for businesses. It is a taxation we would never accept for private individuals. A motorist stopped for a check and found to be sober would hardly accept a bill for the inconvenience, but that is the case for small businesses that comply with the law.
• The government should review the financing of these controls to reduce the financial burden on businesses and free up resources for their core activities.

We live in an increasingly uncertain world, which means that we cannot rely on a global economic upturn. Only an investment in Sweden’s entrepreneurs offers a credible path to more jobs, a stronger economy and increased prosperity. That is why Sweden needs a strong and coherent entrepreneurship policy.

Magnus Demervall

CEO, The Swedish Federation of Business Owners