Reihan Salam reported yesterday on National Review Online that Sweden has passed the United States in hours worked per working age adults. Let that sink in for a moment: Swedish workers–living in the enlightened social democratic paradise according to the American left–are working harder than Americans. The figures Reihan cites are rather startling:
The only reason the welfare state remains solvent is that an astonishing 85 percent of working-age native Swedes work and pay taxes, far above the European average of 70 percent.
Is it possible that the American welfare state is now more generous than the Swedish welfare state? Salam doesn’t much discuss this possibility, with this interesting exception:
In recent years, Sweden has adopted an Earned Income Tax Credit (EITC), which is, like its U.S. counterpart, designed to encourage labor force participation. Yet the Swedish EITC works very differently from the U.S. EITC. Tino kindly explained some of the differences to me, drawing on published sources. For example, the Swedish EITC is tied to individuals rather than households and the size of the wage subsidy is unrelated to the number of dependents. It is also far more expansive than the U.S. EITC, as it reaches its maximum level at 1.4 times the median income and it never phases out. The key difference between the Swedish and the U.S. EITC is that pensions and most transfers, including unemployment insurance, are taxed in Sweden, and so the goal of the Swedish EITC is in effect to cut taxes on wage income while leaving taxes on pensions and most transfers unchanged, thus making work a more attractive option.
Hmmm, I’m starting to think maybe we should copy Swedish social policy after all. I wonder if this observation, from a Swedish policy expert Reihan cites, has anything to do with it: “In recent years, Sweden has cut taxes and dramatically reduced the generosity of unemployment insurance and other programs.”