What's wrong with the government propping up labor market? It sounds wonderful. The state takes money from for-profit enterprise and uses it to employ scientists and engineers for the greater good. What could be better?
Indeed, but you need those for-profit enterprises to prop it up. The business economy is lacking in market diversity, and much of the country's most successful indigenous businesses have sold large stakes to foreign multi-nationals. With this, Sweden's current business culture of expensive labor and comparatively low output will not sustain their social state in the coming decades. Between a nearly a decade of university (seemingly everyone has a Master's) and generous retirement, Swedes spend more of their adult life on the dole than they do producing for the economy.
All countries need unemployment. It's just one of those bizarre side effects of our economy. If "the reserve" is too small, salaries go up due to employees being scarce, which drives up prices, which drives up salaries and so on, and you could end up with rampant inflation, which hurts exports and can lead to a economic depression and possibly a systems collapse. This very nearly happened to Sweden in the seventies and eighties, and politicians have since learned to pretend that they want everyone to have a job, but at the same time carefully manage the country so that there's not too little unemployment.
In part, the problem was solved by worker immigration as well, which may be the less altruistic part of Sweden's traditionally open stance to immigration. This, along with the fact that Sweden has negative nativity.
Sweden currently has 6.2% unemployment, which may be a tad too much, but for the vast majority is nowhere near "spending most of their adult life on the dole". It is possible to have a country with no unemployment, but not one that has a market economy.
The pension system does need a reform though, primarily because we live longer lives and it's made for a population with shorter life spans.
What complete drivel. How do you even figure that a masters degree would take "nearly a decade". A bachelor + master is five years in Sweden, before the Bologna process the equivalent was four years. If your don't keep up you aren't eligible for student loans or housing.
Scandinavia believes in 30 years to prepare for work 30 years of work and 30 years of retirement. Many Scandinavians spend gap years between each degree, and actually get placement in better schools for waiting to go to school. Although some get their degrees quickly most don't feel a rush as decent money can be made working minimum wage jobs. (Currently in Norway)