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September 17, 2002

More on Sweden's model

Vaara wrote:

But Sweden is poorer than Mississippi!! At least that's what passes for received wisdom in certain corners of blog-land. Even though such a claim is, not to put too fine a point on it, complete baloney.
Very true, but the horror Americans feel in reading that the Swedish government takes over 50% of peoples income in taxes is understandable given the health care and other costs that Americans usually have to pay on their own with after-tax money. In Sweden, of course, there are generous government and employer funds for both health care and to make sure housing is affordable, so the Swedes get to spend their after-tax income on other things. Sweden's generous government-funded health care system is better known, but this page details the extensive housing subsidies used to keep home ownership and rental units affordable.

Now, Instapundit among others helped launched the frenzy of "Swedes are poorer than African Americans" punditry with this post a while ago based on a study by a conservative Swedish think tank arguing that average household income there was lower than in the US.

Hronkomatic noted that this is first deceptive because households are smaller in Sweden than the US, so the supposedly larger household income in the US is divided between more people. And Americans work far more hours per year than Swedes, so any increased annual income is "bought" by giving up the vacations and holidays that Swedes enjoy.

So the key comparison number is really what a person can earn per hour in each country. And here's where you see a fun rightwing ideological trick. When discussing the horrors of the Swedish welfare state, conservatives will bemoan the poverty and low wages of the Swedes. But when discussing regulatory and employment policy, conservatives will argue that hourly compensation costs are destroying business competitiveness in places like Sweden. ie. their workers make too much money and benefits. Sort of odd that such a poor people make more per hour than US workers.

Luckily, the US Bureau of Labor Statistics has periodically done such international comparisons of wages in manufacturing, including employer-paid health, vacation and other benefits. Note on page 6 the table showing that Swedish workers are paid more per hour than US workers. This addresses the obvious fact (obvious to anyone other than Instapundit and others) that ignoring all the non-wage benefits of a welfare state is slightly insane when discussing living standards. If your employer or government is paying for your housing, child care, health care and range of other expenses, just looking at nominal wage rates is just plain stupid.

Here is a more recent European comparison (look near the bottom of the page) where again Swedes are shown making more per hour than US workers. As far as trends, median wages in Sweden rose 22 percent during the 1990s even as the unemployment rate fell considerably. See these statistical analyses from the Swedish government. So the Instapundit dimwit (in the political hooey sense) parade lose out again.

Which is why the Social Democrats in Sweden won reelection once again so handily. Funny how the voters in Sweden seem to know something that the statistic manipulators don't.

Posted by Nathan at September 17, 2002 10:02 AM

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The thing is, you don't even have to go all the way to Sweden. Here in the US, the states with the lowest tax rates also have the highest poverty rates, worst educational and health care systems,etc (think Mississippi, Idaho). In addition, as we found out after Dick Armey's "spoils of war" remarks, the wealthiest states, with their higher tax rates, are effectively subsidizing these poorer states.I guess that's the true American Way in the 21st century.

Posted by: Yuval Rubinstein at September 17, 2002 01:58 PM

The next electoral victories for the Left:

Germany and Brazil, in short order.

Posted by: Jody at September 17, 2002 04:39 PM

Another point I haven't seen made (least of all by any of the right-wing merchants of mendacity) is that Sweden's relatively egalitarian income policy means that there are fewer extremes of poverty and wealth, and thus fewer ultra-high income earners to throw off the curve. I'm thinking especially of those nice folks from Clinton, Mississippi, home of everyone's second-favorite poster child for corporate malfeasance.

Posted by: vaara at September 17, 2002 05:33 PM

This is a new tack on the Sweden question. Why is Sweden the way it is? One reason may be that Sweden may be the only country in the world which has never been conquered and never has been governed by predatory outsiders. (Norway and Denmark are similiar, except for WWII). As a result, the feeling that "government is the enemy" is weak, and the idea that it's OK to cheat the government is also weak. So on the one hand, people don't resent the high taxes, and the other, they don't milk the welfare system and cheat on their taxes the way, for example, Italians would.

Explaining the US is a different story.

Posted by: zizka at September 17, 2002 10:12 PM

R: Vaara's point-- To be more fair than the original half-ass study deserves, they did use median income -- meaning the 50% percentile of income users -- rather than average income, so high or low earners would not throw off the numbers. Whether they actually had good numbers on that point, since the study press release refers to per capita income as well, is an open question given how screwed up their methodology was.

As far as why Sweden is the way it is, one answer is that Sweden stayed out of World War I, which disrupted the upsurge of social democratic parties that had been moving forward before the War to End All Wars. Swedish Social Democrats therefore were in the position to implement more serious reforms in response to the Depression, before fascism took hold as in other European states. (Note the popularity of facsism shows that the issue was not distrust of government per se).

The other answer is that Sweden's unions came out of early battles with the capitalist far stronger than most of their counterparts. And they continued to organize. By the mid-90s, over 90% of Swedes were members of a labor union, giving a strong organizational base for political support for the welfare state.

Posted by: Nathan at September 18, 2002 12:18 AM

vaara: "home of everyone's second-favorite poster child for corporate malfeasance"

don't you mean "malfeance"?

Posted by: skippy at September 18, 2002 03:24 AM

The frightening thing is the rate of increase in the lower class incomes is growing very slowly in most European countries; only six percent in 20 years! And the progressive tax structures are mostly not indexed for inflation, because to make it so would make revenue decline, and benefits as health and pension are taking such a large amount of money. It can't last very long, because people like me move!

Posted by: lekkerding at November 25, 2002 09:30 PM

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