Thursday, September 14, 2006

Are poor Swedes worse off than poor Americans?

The Economic Policy Institute recently released a report on The State of Working America . Chapter 8, on international comparisons, led Tim Worstall at Tech Central Station to declare: America: More Like Sweden Than You Thought and the Swedish liberal blogger Johan Norberg to claim: POOR SWEDES WORSE OFF THAN POOR AMERICANS.
The suport for these claims is this chart:

Worstall says,

But hang on a minute, that's not quite what is being shown. In the USA the
poor get 39% of the US median income and in Finland (and Sweden) the poor get
38% of the US median income. It's not worth quibbling over 1% so let's take it
as read that the poor in America have exactly the same standard of living as the
poor in Finland (and Sweden). Which is really a rather revealing number don't
you think? All those punitive tax rates, all that redistribution, that blessed
egalitarianism, the flatter distribution of income, leads to a change in the
living standards of the poor of precisely ... nothing.

Norberg says,

In other words, the EPI´s own graph shows that the call for high taxes
and dramatic redistribution does not make the poor better off, it just
makes the rich worse off.

What struck me is the complete absence of context to both of these claims. Having some limited experience with the "poor" in both countries, the claims that they are equivalent just seem like bullshit. I'm pretty sure I'd much rather be poor in Sweden than poor in the US.

For fun you can read some of the comments on Worstall's piece--typical internet craziness. But the commenter faircritic, hits the nail on the head. The problem with Worstall is that he equates "income received" with "standard of living." Norberg continues with this equivalence and simply states that the poor in Sweden are no better off than the poor in America. Neither of them consider the other factors such as access to healthcare, pollution levels, crime, etc. that are crucial to standard of living.

Doctor Biobrain takes apart the argument nicely and I encourage you to go to his site for a complete rebuttal of Worstall. Here are some thoughts to add to it:

1) The chart says nothing about the number of poor in both countries. According to the report, poverty rates (defined as the percentage of people making less than 50% of the country's median income) are significantly different between Sweden and America: 17% of Americans are considered poor while only 6.5% of Swedes are. In fact, Sweden has the lowest poverty rates of all the countries in the study.

2) Unemployment rates in Sweden are higher (6.9%) than in the US (5.5%). So that is a point for the US. But if you look at who is unemployed in the two countries, it's pretty interesting. In the US, people with less than a high school education are hit harder by unemployment (9.9% unemployment in the US vs. 6.1% unemployment in Sweden) while educated people are pretty equal.

Obviously, there are problems with both systems. And comparison between the two is difficult.

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