sou · H8B346 · 2020-08-07 00:00:00 — Beyond these technological, economic and political factors, there is a tendency for inequality to grow as a result of the way human interaction works. Both theoretical arguments and historical experi- ence indicate that, under normal circumstances, inequality grows under its own momentum. In other words, a given level of equality in a society is not inherently stable, but needs to be defended and maintained. Historically, wars and outbreaks of epidemic diseases have sometimes had a levelling effect, quite simply because high mortality has led to shortages of labour. The history of the Nordic countries over the hundred years from the 1870s, however, shows that economic progress is perfectly compatible with greater equality, without the need for either violence or major epidemics. Social science research tells us that trade unions and suffrage help to create conditions for a favourable combination of equality and growth. Arguments for greater equality As noted in the introduction, the Nordic countries have shown in their practical policies that it is possible to combine high economic growth with a large measure of equality. Despite this, such policies began to questioned in the 1980s, based on a variety of arguments, both abroad and in . Today, three to four decades later, the climate of opinion is different, and there is reason to examine some of the arguments that have been advanced for and against equal living conditions. Reasons put forward for differences in income Before the principal arguments in favour of greater equality are pre- sented, it may be useful to discuss those against equality and for differences in income. One traditional argument has been that individuals with higher incomes have a higher saving ratio and that a more uneven distribu- tion of income thus frees up more capital for investment, resulting in higher growth. However, this argument is only valid in a closed economy; in a globalised financial market, there is no guarantee that the capital will remain in the country and contribute to higher growth here. Indeed, since the mid 1990s has experienced a signif- icant export of capital, illustrating the weakness of the argument. Another reason often put forward is that there need to be large differences in pay to attract people into education, which is said to indirectly promote economic growth. Estimates of the ‘earnings premium’ from education, that is, the personal economic return on a longer education, have been made by the and confirm that is in the lower part of the international distribution. These estimates have a number of weaknesses, however. They end at age 65 and thus take no account of pension differences between income groups, or differences in life expectancy. What is more, it can be noted that a comparatively large proportion of ’s population have attended higher education, so clearly people’s educational choices are not guided solely by the earnings premium calculated in this way. Levels of parental education are an important factor, and high- quality basic education and vocational guidance may therefore be at least as effective in increasing interest in higher education as larger differences in pay. A third reason relates to the conditions for doing business and has found tangible expression in such things as favourable rules for closely held companies, low corporate taxation and generally light taxation of wealth. What such measures have in common is that they have been considered necessary to create more favourable business conditions in the country. However, international comparisons of conditions for doing business in different countries, carried out regularly by the and various financial institutions, show that conditions in are among the most favourable in the world. If this argument had any relevance in the past, in other words, it has now lost its force. That does not mean that economic incentives are unimportant. The need for incentives should be, and is, taken into account, for example in setting salaries and in the design of social insurance systems. What is needed is a balance between incentives and equality. Equality of opportunity and equality of outcome A common distinction in the debate about redistribution is between equality of opportunity and equality of outcome. In general, there is broad political support for equality of opportunity, as it is difficult to argue against all children as far as possible being given the same opportunities in life. The beneficial impact of equality of opportun- ity on economic development has also been confirmed by research, for example by comparisons of countries that have gone from being poor agricultural economies to industrialised middle-income coun- tries. In developed countries, human capital rather than farmland is the key factor of production, and the equality-promoting effect of a well-developed and equal system of basic education has also been confirmed. The distinction between opportunity and outcome is difficult to uphold, however, since what is an outcome at one stage in life becomes an opportunity at the next. Whether or not a student leav- ing compulsory education meets the requirements for admission to upper secondary school is an outcome, but that outcome is an important prior condition for the student’s subsequent education and opportunities as an adult. What is more, a transfer of both human and financial capital occurs across generations, which is of great distributional significance in the longer term. Outcomes for the parental generation are therefore important in shaping the op- portunities available to their children. Without corrective inter- ventions such as subsidised education and inheritance tax, therefore, inequalities will grow over time, even if we were hypothetically to envisage a starting position with an entirely equal distribution. A combination of levelling of opportunities and levelling of out- comes is therefore necessary to achieve a sustainable and reasonably even distribution of society’s resources, for the benefit of all. Intergenerational mobility, sometimes referred to as social mobility, may relate to social class, education or income. Mobility is high if the chances of a person reaching different levels are not strongly dependent on the position of their parents. Social mobility, like equal opportunities, is a political objective that enjoys broad support, and the two are closely connected. Both international and Swedish research show that greater inequality is associated with lower social mobility, an association made clear by comparisons both between countries and between regions within a country. Parents try in various ways to create the most favourable conditions possible for their children, and therefore there will be no equality of opportunity in the long term without a levelling of out- comes. Experience of how education systems have developed in countries with high inequality confirms this fear. The links between equality and economic growth are disputed. This is because most of the studies carried out are based on a measure of inequality known as the coefficient. This is a blunt instrument of measurement: two societies with the same coefficient may have very different social and economic structures, and stable correlations therefore should not be expected when inequality is measured in this way. Analyses that describe the relationship between distribution and growth in more detail find a stable positive correlation between a comparatively high share of income for lower income groups and the rate of economic growth. The causal link appears to operate through human capital, that is to say, in equal countries the differences in human capital between children of parents with a long education and children of those with a short education are small. The underlying explanation is that a school system which guarantees a high mini- mum level of human capital strengthens opportunities for children with a less favourable background to develop their potential and advance, helping to boost social mobility and hence economic development. The link between equality and trust is strong and is borne out in both international and Swedish studies. Analyses of Swedish data from different regions indicate that it is the income share of those belonging to the lower half of the income distribution that is im- portant for the general level of trust. In international studies, the Nordic countries are found to have exceptionally high levels of trust. This is largely explained by their high equality. High standards of public administration have also been shown to have a positive impact on trust, and in that respect, too, the Nordic countries have a strong tradition. Although the average level of trust is high, variations exist between individuals and between groups. People with a weak posi- tion on the labour market, or who are dependent on transfer pay- ments for their incomes, tend to have below-average trust levels. High levels of education and good incomes affect trust in a positive direction. Trust, in turn, has consequences both for how well the economic system works and for welfare in a broader sense. It is even possible to translate changes in trust levels into economic terms. The general level of trust also affects the legitimacy of the political system. The state of health of a population is dependent both on general living conditions and on the design of health care. Individuals with higher levels of education and higher incomes generally enjoy better health. At the same time, an even distribution of conditions and opportunities results in better health outcomes on average in society. A high minimum level is also associated with smaller regional varia- tions in health. A well-developed public health care system with charges to patients that are not too high ensures that good care is available to all sections of the population. International evaluations also demon- a good socio-economic return on public investments in health care, a return that benefits resource-poorer groups more in relative terms. The central role of education The great majority of welfare indicators covary positively with a raised level of education. Education has effects far beyond the labour market, both at the individual level in people’s private lives and at a collective level in society. Concomitant with higher standards of education in a society are a better-functioning democracy, greater trust, better health and lower levels of crime. In international analyses, investments in the education system, like those in health care, are found to yield a high socio-economic return. At the same time, a well-developed system of education is one of the most important instruments in equalising life chances and maintaining equality in a society. All of this means that the educational sector, from preschool to adult education, has a key function in society, alongside its obvious role as the main instrument in the formation of human capital. The first four or five years of life are just as important as a child’s school years in shaping the opportunities that will be available to him or her later in life, so the discussion about individual development cannot be confined to the education system in a narrower sense, but must also include conditions during the early and preschool years of childhood. With increasingly rapid technological development, demands in terms of education in adulthood are also growing, so the time frame has to be extended in that direction as well. A commitment to equal living conditions has found tangible expres- sion in the 2030 Agenda for Sustainable Development, adopted by the UN General in . Many of the 17 goals of the Agenda refer to various aspects of equality, summed up in the ambition to ‘leave no one behind’. 10 the heading ‘Reduced Inequalities’. The targets set as part of this goal include giving priority to the poorest 40 per cent of the populartion in the design of economic policy, and pursuing policies that promote the inclusion of all. In an overall assessment, it would seem that, at present, the argu- ments in favour of greater equality carry more weight than those against it. Equality has long had to take second place to other policy goals, but the rapid changes that have occurred both in and in the wider world justify a reappraisal. : trends and the current situation There are many dimensions to welfare, but the focus in discussions about redistribution policy is nonetheless on income and wealth. Both factor incomes (labour and capital incomes) and disposable in- come (income after taxes and transfers) are of interest. The 2019 Long-Term Survey of the Swedish economy studied trends in the income distribution from a number of different perspectives, both historically and internationally, and using various measures of differ- ences. Some of the main trends emerging were as follows: •The distribution of disposable income in was most even in the early 1980s. Measured by the standard metric of the coefficient, inequality in disposable income has subsequently in- creased by around 60 per cent, from 0.2 to 0.32. •Inequality in factor incomes (labour and capital incomes) has not changed as much. Since the mid 1990s, the coefficient for factor incomes has remained fairly stable, around 0.5. Capital in- comes have grown in significance and are also unevenly dis- tributed, both between different income strata and between men and women. There are several reasons for this trend – increased asset prices, especially for housing; the dual system of taxation introduced in 1991, dealing separately with labour and capital incomes; and gradually more favourable rules for the taxation of closely held companies (the ‘3:12 rules’). This has been coun- teracted by increased wage income in earnings strata just below the median income. The increase in earned income may in turn have several causes. The long-term rise in the dependency ratio – the number of children and elderly people relative to the working-age population – is increasing the demand for labour. Changes in the system of taxes and transfers have also made gainful employment relatively more attractive. •The reason differences in disposable income are growing is that low-income households are more dependent on transfer pay- ments, which on the whole have not kept pace with general trends in earnings. has the equalising effect of the tax system in- creased sufficiently to compensate for the more uneven distribu- tion of capital incomes. •Regional differences have been increasing for several decades. In a long-term view, from the second half of the 19th century, industrialisation meant that economic activity in the country was spread more evenly, having previously been concentrated in the and regions. It was most evenly distrib- uted around 1980. Since then, economic development has once again been marked by a shift towards the metropolitan regions. One consequence of this is rising capital incomes and property prices in those regions, further contributing to a concentration of economic resources. •International studies have shown that income inequality covaries with low social mobility. The Nordic countries accordingly exhibit a high level of social mobility. The growing inequality in has not yet fed through into reduced mobility, which may be due to the considerable inertia of institutions of the welfare state and of associated generation effects. Free education within an as yet comparatively equal system ensures a higher degree of mobility than is found in countries where large social differences have existed for a long time, both in general terms and specifically with regard to educational opportunities. Family background and childhood circumstances have long been major factors in educational success, but their significance has only in- creased since the turn of the century, and then only among students with a foreign background. A person’s level of education is of great significance both for their chances of finding employment and for their pay and working condi- tions. •Sweden and the other Nordic countries have previously had a comparatively even level of education, and compulsory basic (pri- mary and lower secondary) education of a high quality has con- tributed to a levelling of incomes. •With immigration, the spread in education has increased. Among children with a foreign background, a higher proportion go on to higher education, given a certain social background, and on aver- age they also receive stronger parental support in their studies than children from a Swedish background. At the same time, there are groups of immigrants with considerably shorter periods of education and the problems that entail in terms of gaining entry to the labour market and their children being able to benefit from schooling. The changes in society outlined above have left a clear imprint in the form of growing differences in incomes and assets. There is a danger of inequality in Swedish society growing as the result of a general process in which tendencies in a number of different areas are mutu- ally reinforcing. An education system with problems The situation in the Swedish education system has to be described as a cause for concern. Outcomes have long been declining, although the latest international comparisons suggest that this trend has bottomed out, and a recovery has occurred for students with a Swedish background. For students with a foreign background born in , a slight deterioration may be noted. Those born abroad consistently exhibit poorer outcomes, attributable in part to their having arrived in at older ages. An increased spread of educational outcomes can be observed between schools and municipalities. There is a problem of grade in- flation, and both an acute and a long-term shortage of qualified teachers. Having once been a leading nation in terms of the quality and equality of its education system, dropped for a time to a middling position in the group of countries we normally compare ourselves with. Some of the lost ground has since been made up, with the result that is now above the average. With the many changes introduced over the last three decades or so, it is difficult to gain a clear picture of the causes of the problems. At least three major policy changes have contributed: decentralisa- tion to municipalities, changes in educational approach, and school choice combined with free of new schools. Transferring the main responsibility for compulsory and upper secondary education to municipalities meant that the latter were entrusted with a task which, judging from all the evidence, small and medium-sized local authorities have had difficulty fully living up to. A shift in educational approach, from traditional teacher-led learning to what has variously been referred to as student-centred or constructivist learning, has placed a heavy responsibility on students themselves, with negative consequences for learning outcomes in general and for students with a weak educational background at home in particular. School choice, combined with a free right to establish new schools, has contributed to greater segregation, grade inflation and an element of unreliable providers. Housing segregation is still the dominant factor behind educational segregation, but school choice also contributes. In some cases, moreover, the free right of establish- ing new independent schools has thwarted municipal authorities’ attempts to reduce segregation. The relative significance of these three policy shifts cannot be determined, as they have been implemented more or less in parallel. The large influx of foreign-born students has added further diffi- culty to an already problematic situation. Like many other developed industrial nations, has under- gone a demographic development in recent decades that creates problems for the national economy. The dependency ratio – the number of children and elderly people relative to the working population – has tended to rise owing to increasing life expectancy. From this point of view, immigration of younger people or people of working age is beneficial, and the demographic profile of ’s population has indeed been substantially improved by the immigration of recent decades. At the same time, this immigration makes demands in terms of the education system, housing supply and other adjustment measures if the favourable demographic effects are to be turned to good account. Such investments do not come about automatically, but require public-sector initiatives on a significant scale. Without those investments, a potentially favour- able demographic situation in terms of supporting the population will make way for its opposite. has successfully received large groups of immigrants in the past – in the form of both labour immigration from , southern Europe and and immigration of refugees from following the military coup and in connection with the collapse of . What has complicated the issue since the turn of the century is a large influx of both refugees and immigrant workers from geographically and culturally more distant countries. This makes greater demands in terms of adjustment measures, at the same time as central government agencies, regions and municipal- ities have all had to handle problems for which they have had neither the procedures nor the capacity required. A large proportion of newly arrived refugees and their family members lack sufficient education or other qualifications for the Swedish labour market. Many children have come to after the age at which they would normally have started school, and some have a weak educa- tional background. Integration of women from less equal societies is difficult but im- portant, both for those directly concerned and for the next genera- tion. has not been less successful in integrating people of foreign origin than other comparable countries, but the scale and severity of the problems seem to have been underestimated. This in turn gives rise to concomitant problems – housing shortages, dis- crimination and other difficulties on the labour market, crime – which cannot be solved separately from the basic problem of integra- tion. The effects of greater ethnic heterogeneity on trust in a society are not clear-cut. International research points in different direc- tions. Handled in the right way, ethnic diversity can be an asset, but it can also heighten conflicts in a society and make it to achieve the common sense of identity that is one of the cornerstones of trust. Politics, the media picture and public debate play a major part in reinforcing or mitigating such tendencies. The opportunities for cooperation that are created and the signals that are sent by leading politicians are therefore of great significance for the direc- tion developments take. Surveys in point to a declining level of trust, especially among economically vulnerable groups such as the unemployed and those on sickness benefit. A more uncertain labour market In recent decades, traditional full-time employment with one em- ployer has made way for other, more uncertain relationships be- tween employer and employee. For the employer, this is a way of reducing the costs of unforeseen variations in demand for goods or services produced. Part-time work, temporary stand-in jobs and in- voluntary self-employment are a few examples. The overall scale of the phenomenon is difficult to estimate. Changes of this kind are recorded by the employer as increases in productivity, but in reality they amount to passing on the cost of uncertainty to the employee. Both equality in general and gender equality are adversely affected. Social insurance, which is designed on the basis of more tradi- tional forms of employment, works less well for these categories of labour.