Weaning Swedes off welfare

In the Western world, Sweden is often considered a Social Democratic paradise, the irrefutable proof that the welfare state can transform society for the better. But outsiders, and still too many Swedes, tend to overestimate the gains and underestimate the costs of social engineering, says Nima Sanandaji, president of the Swedish think tank Captus.

To start with:

Homogenous Sweden was already an egalitarian society with few social problems before the expansion of the welfare state.

It is often forgotten that in 1950, Sweden had lower taxes, fewer trade restrictions and more hours worked per working-age person than in the contemporary United States.

And yet, Sweden was already blessed with essentially the same flat income and wealth distribution it has today, half a century after the expansion of the welfare state.

In the 1950s and 1960s, the integration of migrants worked quite well. The foreign-born had a 20 per cent higher employment rate than native Swedes in 1950. Half a century later, in the mature welfare state, the picture has dramatically changed, says Sanandaji:

According to the latest figures, only 48 per cent of non-Western immigrants are gainfully employed, which is 30 percentage points below the average.

For this group, originating from places such as Turkey, Chile, the former Yugoslavia, the Middle East and North Africa, welfare dependency is nine times higher than for native Swedes.

No doubt, a generous welfare system initially helps many immigrant families, cushioning the transition to a new country. However, the combination of high taxes, a regulated labour market, the world's highest union-imposed minimum wages and the lavish transfer programmes effectively keeps out immigrants from the labour market, says Sanandaji.

Source: Nima Sanandaji, Welfare Wean' Wall Street Journal, March 17, 2008.

For text: http://online.wsj.com/article/SB120570934979440167.html

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

FMF Policy Bulletin/ 25 March 2008