Creative Destruction

September 9, 2006

Are America’s Poor as Well Off as Sweden’s Poor?

Filed under: Economics,International Politics — Robert @ 1:33 pm

Interesting article at TCS about comparing Sweden to the United States (always a favorite pastime in our household, when we get bored of trying to guess how many yellowjackets the yellowjacket trap will kill today). Bottom line (but read the article): after transfer programs and such are taken into account, the poorest 10% of Americans earn about 39% of the US median income. The poorest 10% of Swedes earn about 38% of the US median income. In standard of living terms, anyway, it appears that poor Americans are infinitesimally better off than poor Swedes, despite all the transfer programs and such.

The exercise by the TCS author doesn’t, as far as I can tell, talk about the psychic benefits that the stability provided under the Swedish model provide. That is, I imagine (and it seems reasonable) that it’s mentally easier to be poor in Sweden than it is to be poor in the United States. I doubt that poor folk in Sweden worry overmuch that the state is going to fall in Republican hands and that things will get a little tougher in the free hospitals, whereas I know that poor people in the US do worry about that kind of thing. How much that’s worth in terms of “social justice” I don’t know.

About these ads

26 Comments »

  1. Fascinating (eyebrow raise).

    One part of the article, in addition to the very illustrative statistics stood out (numbers I won’t touch just yet… Hey, it’s saturday night and I’m drinking Carlsberg):

    I will admit that I do find it odd the way that only certain parts of the, say, Swedish, “miracle” are held up as ideas for us to copy. Wouldn’t it be interesting if we were urged to adopt some other Swedish policies? Abolish inheritance tax (Sweden doesn’t have one), have a pure voucher scheme to pay for the education system (as Sweden does), do not have a national minimum wage (as Sweden does not) and most certainly do not run the health system as a national monolith (as Sweden again does not). But then those policies don’t accord with the liberal and progressive ideas in the USA so perhaps their being glossed over is understandable, eh?

    Lack of inheritance tax has very little to do with the success/lack of success of the Swedish model, because it was abolished last year. One link. (Sorry, no better one for now).

    Do not have a minimum wage: More complicated than simple “no minimum wage”. From Answers:

    There is no minimum wage that is required by legislation. Instead, minimum wage standards in different sectors are normally set by collective bargaining. Most labour contracts were re-negotiated during 2004, and call for wage increases of around seven percent over a three-year period.

    (my emphasis)

    Unions are strong in Sweden. No minimum wage indeed, except just separate minimum wages for teachers, nurses, metalworkers etc.

    Combined with de facto minimum wage of employers usually having to pay at least as much as the subsidies for unemployment do, then Sweden does kind of have a minimum wage.

    Vouchers is a fact. But again, a relatively new one, since 1992.

    One cogent point is about the health care — many people confuse the mixed-market healthcare of Nordic countries/most of Europe (with strong public component) with the Canadian private-health-care-banned model, and I have seen success of the former used to justify the supposed success of the latter.

    Comment by Tuomas — September 9, 2006 @ 2:36 pm | Reply

  2. I haven’t yet read the article, but I agree that there is more to wellbeing than simply income and political peace of mind. In fact, other measures one might try to factor in include health, happiness, stress, life expectancy, level of education, and social networks/support. I can’t point to anything, but I’ve seen a number of anectodal reports that point to Latin American countries outranking America or Europe despite their political unrest and repressive governments. Interesting food for thought, how one might thrive even under condition that would on their face seem impossible.

    Comment by Brutus — September 9, 2006 @ 3:58 pm | Reply

  3. I very much agree that economic security is a lot of what matters, at least to me personally. I’m not materially that much better off now than I was when I was scraping by month-to-month, but I certainly feel a lot better now.

    Bottom line (but read the article): after transfer programs and such are taken into account, the poorest 10% of Americans earn about 39% of the US median income. The poorest 10% of Swedes earn about 38% of the US median income. In standard of living terms, anyway, it appears that poor Americans are infinitesimally better off than poor Swedes, despite all the transfer programs and such.

    As I understand it, PPP (which is the measure used in the linked article) accounts for transfer programs, but not for medical care – which is a pretty major advantage for the Swedes.

    One cogent point is about the health care — many people confuse the mixed-market healthcare of Nordic countries/most of Europe (with strong public component) with the Canadian private-health-care-banned model, and I have seen success of the former used to justify the supposed success of the latter.

    I think American liberals mainly talk about the Canadian health care system because it’s so close, geographically. More sophisticated discussions among lefty policy wonk types usually suggest that some sort of mixed-market system, such as France’s, is the way to go. Canada’s system is far from the best in the world.

    Comment by Ampersand — September 9, 2006 @ 4:25 pm | Reply

  4. One another advantage is that in all Nordic countries, AFAIK, education is free (as in paid by taxpayers, of course) including college/university. Not only that, students get some subsidies to fulfill their basic economic needs (usually progression in studies is monitored to qualify, though).

    I don’t think it’s just “psychic” benefits. Sorry.

    Another matter is the fact that there is such a small reward for belonging to the 90th percentile in wages, and IMHO the Swedish governments decision to get rid of inheritance taxes and gift taxes while retaining ultra-high progression (the same parties, leftist and greens, that supported this consistently oppose lessened progression) in taxes isn’t egalitarian, rather it maintains the status quo where those who have gotten rich by other means than paid work will stay rich and those who work very hard (and smart) aren’t given proper compensation for their efforts.

    Comment by Tuomas — September 9, 2006 @ 4:57 pm | Reply

  5. For the bottom 10% in the US, education is essentially free, too. At least at state institutions; you don’t automatically get to go to Harvard for free. On the other hand, Sweden doesn’t have a Harvard, so I guess that washes out. The standard of living of poor students in Sweden is probably a lot higher than that of students in the US, though. It’s a cold and hungry four years for some people.

    The thing about screwing the working rich is very interesting. Tell us more. (If you’re sober enough, of course.)

    Comment by bobhayes — September 9, 2006 @ 5:04 pm | Reply

  6. It’s really quite simple.

    Let’s take some (artificial but not far from real life) examples, Kalle, a hard-working and highly educated engineer, and Olli, a man who inherited some apartments, doesn’t really work, but collects rents (is a landlord).

    Let’s say, that both have a gross income of 100000 Euros/year. However, there is a marked difference in the net income. The property tax is 28 %, and flat. However, at that income, Kalle pays about 40 % (depending on municipality), and if his income happens to rise, so does the tax. IMO this leads to accumulation of wealth to those who have inherited it.

    One other thing. For household income, this creates different complications, family formation with a stay-at-home parent isn’t smart, because one income earner with high wages won’t really get as much as two who make half of that each. Also, married men/women whose spouses/household has high income don’t usually (unless they’re sick etc.) qualify for government subsidies. Practically the only way to go is for both to work, or worse, neither to work, and children at government daycare. Don’t even dream about homeschooling, etc.

    The government really has ways in making you dependant over here.

    Comment by Tuomas — September 9, 2006 @ 5:32 pm | Reply

  7. Don’t even dream about homeschooling, etc.

    Tyranny. You should rebel.

    Comment by bobhayes — September 9, 2006 @ 5:51 pm | Reply

  8. I wonder if that sounds like a good idea tomorrow morning, too.

    Comment by Tuomas — September 9, 2006 @ 6:06 pm | Reply

  9. What Amp said aout PPP: international comparisons are hard.

    Robert cites TCS which cites “The State of Working America” which cites a 2006 article by Economist Timothy Smeeding for the proposition that the 10th percentile of US households earn 39% of the US median income in 2000, but that the 10th percentile of Swedish households had only 38% of the purchasing power of the US median income.
    Amp previously cited a 2004 article by Smeeding that also contained the 39% and 38% figures, but included this disclaimer:

    These real income measures are admittedly crude. They should be seen as measures of net spendable income rather than of total consumption, which would also include goods and services such as health care, education and child care that are provided at different prices and under different financing schemes in different nations. To the extent that low-income citizens elsewhere need to spend less out of pocket for such goods as these than do low-income Americans, the latter are at an even greater real income disadvantage.

    Of course, maybe Smeeding had bolstered his confidence in these figures by the time he published his 2006 article; I haven’t read it.

    Comment by nobody.really — September 9, 2006 @ 6:08 pm | Reply

  10. (To clarify, the disclaimer is Smeeding’s, not Amp’s.)

    Comment by nobody.really — September 9, 2006 @ 6:10 pm | Reply

  11. It should be remembered that we are talking about the bottom 10% of Americans. The bottom 10% of Americans generally have access to similar social programs as their peers in Scandahoovia, at grossly similar funding levels. Medicaid is not a “take two aspirin and get out” benefit.

    Comment by Robert — September 9, 2006 @ 6:37 pm | Reply

  12. Problems with the original post:

    1. Comparing Swedish currency income to U.S. currency income involves an exchange rate issue. Commercial exchange rates are often a poor judge of purchasing power differences.

    Since, I suspect, the median income in Sweden lower than it is in the U.S., this probably means that the price for common services purchased in the Swedish market is also lower. Without comparing the cost of living, a straight U.S. dollars to U.S. dollars income comparison doesn’t accurately capture standard of living issues.

    2. The value of health insurance is easily $5,000 a year or better, which is material in this income range. Almost nobody in the 10th percentile of income gets health insurance in the U.S.

    3. Swedes at the 10th percentile of income are likely working far fewer hours per year than Americans at the 10th percentile of income.

    4. Swedes at the 10th percentile of income face much less economic risk in their lives than Americans in the same circumstances. They have more time to get their lives together if they are laid off, they will get more support if they get pregnant and can’t work, they know that even if they are unemployed that they will still get health insurance, and they know that they will get to retire in circumstance not until those when they were working.

    The Swede, in effect, has a job with full middle class benefits, the American does not.

    Comment by ohwilleke — September 11, 2006 @ 7:58 pm | Reply

  13. “It should be remembered that we are talking about the bottom 10% of Americans. The bottom 10% of Americans generally have access to similar social programs as their peers in Scandahoovia, at grossly similar funding levels. Medicaid is not a “take two aspirin and get out” benefit.”

    Generally speaking, the only people who qualify for Medicaid are those on welfare. The working poor, many of whom are in the bottom 10th income wise, generally don’t qualify, although select states are more generous.

    Comment by ohwilleke — September 11, 2006 @ 8:02 pm | Reply

  14. There are 57 million Medicaid beneficiaries and only 300 million Americans total. Assuming that Medicaid is grossly being directed to the bottom part of society, that would seem to cover the bottom 20 percent or so.

    One noted exception: single people without families, who are not eligible.

    Comment by Robert — September 11, 2006 @ 9:26 pm | Reply

  15. “One noted exception: single people without families, who are not eligible.”

    AKA: Me.

    Comment by Off Colfax — September 12, 2006 @ 12:15 am | Reply

  16. If you are a single person, unburdened by familial obligation and reasonably able bodied and of sound mind, and you need or desire something of value, then should you not go and earn the economic surplus needed to provide yourself with what you desire?

    Root, hog, or die. There are others more in need of charity.

    Comment by Robert — September 12, 2006 @ 1:31 am | Reply

  17. This is, I think, the critical moral difference between left and right when it comes to caring for the least vulnerable members of society. The moralist left wants everyone to get good treatment. The moralist right wants the truly needy to get excellent treatment and for the able to go out and earn their own treatment. Grandma War Veteran should be in Palm Beach driving her Segway; you should be at work.

    Comment by Robert — September 12, 2006 @ 1:38 am | Reply

  18. The 57 million number is somewhat deceptive. Many are on the nursing home program for people age 55+. This has much more lenient standards for income (for practical purposes about $30,000ish+ a year) and much more lenient asset standards, than regular Medicaid. And, the vast majority of people in the program also have Medicare, which is not means tested at all.

    Given that the poverty rate for the elderly is low, the conclusion that those in the 10th percentile get Medicaid doesn’t follow.

    In 2001 the household 10th percentile was $10,913, and adjusting for inflation, you are probably talking $12,000ish now.

    Where I live, the cutoff to be eligible for welfare is about $9,000 for a single mother with two children. The asset cutoff is $2,000 in liquid assets. Children under 6 qualify for Medicaid at 133% of the poverty line, older children qualify at 100% of the poverty line.

    The cost of providing Medicaid to welfare recipients is a little over $2,000 a year per person. By comparison the VA spends about $5,000 per person per year, Medicare spends about $6,000 per person per year, and disabled and elderly people on Medicaid cost about $12,000 per person per year.

    It would cost about $80 billion a year to provide Medicaid to everyone who lacks health insurance.

    Comment by ohwilleke — September 12, 2006 @ 6:11 am | Reply

  19. What would it cost to provide Medicaid to everyone who lacks health insurance because they are poor?

    Comment by Robert — September 12, 2006 @ 12:23 pm | Reply

  20. “I doubt that poor folk in Sweden worry overmuch that the state is going to fall in Republican hands and that things will get a little tougher in the free hospitals, whereas I know that poor people in the US do worry about that kind of thing.”

    Oh yes, poor people in Sweden worry too. The decline-to-come of the public health care system in the hands of the conservatives is a social democratic mantra. And the mantra yields votes. Why? Simply because people worry.

    Comment by Lill — September 27, 2006 @ 3:45 am | Reply

  21. Being poor in Sweden is much worse then it is in America.

    Swedish people in general are alot poorer then Americans. Sweden is infact one of the poorest countries within the EU. The government has alot of money, but the people don’t.

    I for one must move away from Sweden because of how hard it is to earn money.

    Comment by Tobias — November 24, 2007 @ 5:53 pm | Reply

  22. As an American who has suffered the ravages of being raised poor in the South, and as an American who lived in Sweden for one year, the question as to which place is it easier to be poor is obvious! In Sweden, NO mother and children would be left on the streets as they are here, NO Swede would die on the street without access to medical care and PROPER shelter, in Sweden, if you lose your job or fall ill, NO ONE will take your home away and kick you to the curb. In America, there IS no help for the poor, other than food stamps, and that is if you are lucky enough to get them. In America, if you are in need of shelter or a home, in MOST places there IS no shelter, or, they kick you out at four AM like they do at the shelters in Denver. In Sweden,things like shelter, food, and medical care are your BASIC HUMAN RIGHTS. In America, shelter, food and medical care are YOUR problem. In Sweden, there are VERY few people who are from a first glance, obviously poor. The poor in Sweden are almost never distinguishable from the very wealthy, everyone there is still wearing $200 a pair Levi’s….In Sweden I NEVER saw a person who looked poor or filthy; In America, go to any downtown or any rural area, see the people wearing filth encrusted RAGS, even the CHILDREN, and you tell me American poor are FAR better off than Swedish poor?! How dare you in your IGNORANCE, say such a thing. One country allows women children and BABIES to LIVE, DIE AND/OR STARVE in boxes on the damned STREET, another has a LAW that every man woman and child DESERVES a roof over their heads at night….America does not CARE for it’s poor, period. Sweden, does. I would be GLAD to pay higher taxes and have a tiny bit less personal freedom to receive the security of being fed and sheltered, a security which is NOT an American virtue. Shame on America for allowing it’s people to live, no, EXIST in such conditions….The simple fact that the shoe,”extreme Makeover, Home Edition,” EXISTS is proof enough that American poor are FAR worse off than most people in most of the Western World. My Scottish friends were even appalled at the poverty conditions in America, and my Swedish friends were aghast, not even BELIEVING that such poverty COULD exist here! It does exist, my friends, and I have lived it, and still am…..One thing I DO know? If I were in Sweden now, my daughter would be with me instead of gone to grandma’s house for the summer because I cannot afford to FEED her. God Bless America my….eye

    Comment by Erin Barney — July 24, 2009 @ 5:44 pm | Reply

  23. I really feel for you, Erin. I admire your passion. I have lived in Denmark for 15 years. Denmark like Sweden is a Nordic social democratic welfare state so some comparisons may be possible. Unfortunately, what you describe may well be out of date. The idea that housing is a right is gone. Basically, if you get sick in Denmark, you are in trouble. Your medical care is free but you risk poor quality, especially at the primary care physician level. If you are temporarily ill, (favorite example here broken leg in upscale ski accident) you can get sick benefit. If you are chronically ill, you cannot get sick benefit or unemployment benefit. This matters because those two things are given to you without you having to sell your house. But the chronically ill must go on welfare, which means you must sell your house your car and everything you have. At this point you need housing of course but social housing is now denied to those who are not in work. New policy to keep the antisocial elements out of social housing! Anybody without a job is voluntarily living off the rest of society, right? In the meantime, welfare is assumed by the current government to be something only bums and addicts need, so they have turned it into a punitive Dickensian workfare regime.

    Denmark used to be a genuinely social and solidaristic country in which both left and right joined to pass social legislation with amazing unity across party lines. But not today. WHATEVER you do, don´t get sick in Denmark!

    Comment by John Grey — December 11, 2009 @ 8:08 pm | Reply

  24. I forgot to add that, formally there are two benefits available in theory to the chronically ill — fleksjob which is part time work where the government tops up the wage to full time, and invalid pension. However, the government now leaves the burden of most payment to the local municipalities and the mood is hostile to applicants because the municipalities are desperate to keep them off the books.

    Plus the law requires anyway that they be put on repeated work trials to see whether a little something can´t be squeezed out of them. One doctor at one of these worktest centers wrote ín an expose that some patients were required to show up with IV’s still attached! And it is a written requirement that if you are too sick to work then you must just bring a mattress for when you collapse. Things are so bad that the head of the council of economic advisors, Peter Birch Sørensen, wrote publically that the government has gone so far into the ditch of economic thinking that society risks becoming “brutal”. This from a guy who is paid to tell the government to think economically! Maybe that is why he was replaced last week…?

    Comment by John Grey — December 11, 2009 @ 8:20 pm | Reply

  25. Seriously, travel and open your eyes!go to NYC or even a lot worse, San Francisco…so many homeless people in rags, or simply badly dressed people. SF really shocked me. Then fly over to Stockholm, and it makes you feel bad because everything is so nice and clean and everybody seems to be superstylish that you yourself start to feel out of fashion. I always wonder what those statistics claiming the US to be the richest nation measure. The States certainly are not poor. But to me, large parts of Europes appear to be definitely richer. Scandinavia, with no doubt, Switzerland, Germany, Austria, Netherlands…

    Comment by Ethan — February 6, 2010 @ 9:46 pm | Reply

  26. I wonder how much of the differences between Sweden and the US are not related to the style of government at all but rather to the intrinsic make up of the people. Is it not possible that fewer people live “in rags” in places like Sweden simply because fewer people are content to do so? Even in the US , why is it there are so many more homeless on the streets in San Francisco than there are in Houston? Perhaps social norms in different places have more to do with this question than whether or not a governmental system is devised to care for those that either can’t or won’t care for themselves. I would be curious to know whether Sweden ever had a big problem with homeless and destitute persons, even before they developed their current governmental and tax structure.

    Comment by Louis — July 19, 2010 @ 10:50 am | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Rubric Theme Blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: