Denmark Isn't Magic: New research suggests that the American dream isn’t alive in Scandinavia—but generous redistribution of wealth isn’t a terrible consolation prize by Derek Thompson in The Atlantic. Excerpts:
"But this Danish Dream is a “Scandinavian Fantasy,” according to a new paper
by Rasmus Landersø at the Rockwool Foundation Research Unit in
Copenhagen and James J. Heckman at the University of Chicago. Low-income
Danish kids are not much more likely to earn a middle-class wage than
their American counterparts. What’s more, the children of non-college
graduates in Denmark are about as unlikely to attend college as their
American counterparts.
If that’s true, how does Denmark rank number-one among all rich
countries in social mobility? It’s all about what happens after wages:
The country’s high taxes on the rich and income transfers to the poor
“compress” economic inequality within each generation: When the rungs on
the economic ladder are closer together, it’s easier to move a little
bit up (or down) over the course of a generation."
The first big idea is that
Denmark is not a nation of Horatio Algersens. Its high social mobility
is not the result of an economy that is uniquely good at helping poor
children earn middle-class salaries. Instead, it is a country much like
the U.S., where the children of poor parents who don’t go to college are
also unlikely to attend college or earn a high wage. Social mobility in
Denmark and the U.S. seem to be remarkably similar when looking
exclusively at wages—that is, before including taxes and transfers.
It
is only after accounting for Denmark’s high taxes on the rich and large
transfers to the poor that its social mobility looks so much better
than the U.S.’s. America’s (relatively conservative) economic philosophy
is that, with low taxes and little regulation, the market is an open
savannah where the most talent will win out. But Denmark’s economic
philosophy seems to be that the market is an unfortunate socioeconomic
lottery system, and so the country compensates the poor with generous
transfers paid by high taxes on the rich.
The second big
idea in the paper is that Denmark’s large investment in public
education pays off in higher cognitive skills among low-income children,
but not in higher-education mobility—i.e., the odds that a child of a
non-college grad will go on to finish college.
Overall,
Denmark spends much more than the U.S. on all levels of education. In
particular, a much higher share of its poor young children is enrolled
in daycare and preschool than the United States. This large public
investment in kids seems to increase cognitive skills among poor Danish
children compared to their American peers. In international math and
reading scores, for example, the poorest quartile in Denmark far
outperforms their counterparts in the U.S.
But
despite this far greater investment in young children and public
colleges, Danish children of high-school graduates are still extremely
unlikely to go onto college. Put slightly differently, a tiny share of
Denmark’s college graduate population comes from homes where neither
parent finished high school. The children of college-grads almost always
go to college; the children of non-grads often don’t—even in Denmark.
The
third big idea is that Denmark’s welfare policies might reduce its
citizens’ incentives to go to college. In the early 1990s, when Denmark
raised the minimum age of eligibility for social assistance, college
enrollment among Danish twentysomethings fell below its trajectory.
Based on this finding, the researchers conclude that welfare policies
may reduce college enrollment. Denmark makes it more comfortable to be
poor and less lucrative to be rich, so many young people decide to end
their education after high school.
This final idea may
be the most controversial. After all, it’s not clear how to frame this
finding. Democrats can say: Despite conservative arguments that a
welfare state could destroy poor young people’s ambition, Denmark’s
educational mobility is no worse than the U.S. But Republicans can say:
Despite liberal arguments that Denmark is so much better than the U.S.
at social mobility, its poor kids are no more likely to go to college.
“There is something here for the Republicans and for the Democrats,”
Heckman told me.
The most significant implication of
this paper is not a happy one: Equality of opportunity is a fantasy. It
does not exist in the U.S., it does not exist in Denmark, and it
probably doesn’t exist anywhere. The children of rich college graduates
are far more likely to grow up to become rich college graduates, even in
the world's social-democratic fantasyland. That is because, everywhere,
parents matter.
And it’s probably a good thing that
parents matter. For the government to make equality of opportunity its
singular and absolute policy goal would probably mean breaking up
neighborhoods, forcing arranged marriages, enrolling all children in a
unified curriculum, and having them all taught by a mass-produced robot;
that would eliminate neighborhood effects, assortative mating, peer
effects, curricular differences, and the problem of unequal teaching
quality. It is unclear that there is a constituency for this policy,
even among the most radical of Bernie bros."
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