Tuesday, September 6, 2016

Welfare policies have the same effects in Nordic countries as they do in other countries

By Veronique de Rugy of Mercatus. Excerpt:
"Don't believe it, says Nima Sanandaji, a researcher who grew up in Sweden. His new book, "Debunking Utopia: Exposing the Myth of Nordic Socialism," is a balanced and comprehensive analysis of Nordic public policies, including their home runs and failures. In particular, it nicely lays out the human and social cost of the welfare state.

Welfare policies have the same effects in Nordic countries as they do in other countries. As Nordic people have been asked to pay higher and higher taxes in exchange for the welfare payouts, their incentives to work less and capture government or mandatary company handouts have evolved to the point of undermining the countries' economic foundations. Sanandaji has a lot of data, including some showing how Nordic workers have a stronger tendency to call in sick during sporting events. Maybe the most extreme example is a 41 percent increase of sickness among men in Sweden during the 2002 World Cup, up from 7 percent during the 1988 Winter Olympics.

Work ethics and a higher tolerance for collecting undeserved benefits have developed slowly, but the data show that over time, "Nordic people have changed their attitudes as social democratic policies have made it less rewarding to work hard and more rewarding to live off the government."

To be sure, Nordic countries are at the forefront of gender equality, as we're often reminded, and government programs such as paid family leave for both men and women and generous child care handouts help women balance their home life and work life. However, as Sanandaji asks, why are there so few Nordic women at the top? Data from the International Labour Organization show that in the United States, the share of female managers is 43 percent, as opposed to 28 percent in Denmark, 30 percent in Finland, 32 percent in Norway and 36 percent in Sweden.

Though it's true that Nordic women participate in the labor force at higher rates than other countries, studies show that broad-based welfare policies tend to limit their ability to reach the top. That's partly because they're overrepresented in public-sector monopolies where wages are flat and rise based on seniority rather than individual achievement.

The truth is that Nordic nations were always leading in the fight for women, long before the welfare state came along. They also became comparatively rich when economic policy was dominated by free markets and small government in the 19th century and early 20th century. Unfortunately, the big welfare state policies, starting in the 1960s, have hampered their economic performance.

Finally, Sanandaji writes, "Nordic countries have more generous welfare systems than the United States, but change has indeed taken place." In recent years, they've tempered the damage of their big-government policies by scaling back their welfare states and setting limits on their fiscal burdens. Their governments have adopted more work incentives, lowered taxes and allowed for more flexibility when hiring and firing workers. They've opened their public schools and health care to more competition, and Sweden partially privatized its pension system. They may not be free market quite yet, but they're no socialist — or even liberal — utopia, either."

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