The Swedish Welfare System

There’s a lot to learn from a country like Sweden. Having lived and studied in the south of Sweden for the better part of the past year, I’ve found it easy to see why it’s held in such high regard. With free education, universal healthcare, and myriad other benefits available to its citizens, Sweden is a great example of a how a welfare state can look after its people and yet still remain competitive in a global market.

Its generous parental leave scheme is one example of the welfare offered to Swedes. 480 days of leave are given to both parents, with a maximum of 420 days for one parent. Parents are entitled to 80% of their wages, for the first 390 days of leave, capped at a maximum of 910 Swedishkronor a day (150 AUD) – the following 90 days are compensated at a flat rate of 180 kronor per day (30 AUD). Any of these days can be taken up until the child completes their first year of schooling.

This leave system is intended to alleviate gender inequality, by allowing women to work whilst still raising children. In 2012, dads took 24% of the total parental leave, and recent reports show that Sweden has the 4th smallest gender gap in the world in terms of education levels, healthcare and labour participation. Equality is evidently a big factor in Swedish policymaking. In terms of income distribution, Sweden’s gini coefficient of .25 (1.00 = maximum inequality and 0 = perfect equality) puts it in the top echelon of the most equal countries in the world.

Free education is another perk of the Swedish welfare system – from primary school right through to tertiary studies. Not only are students not required to pay course fees, but they also receive a monthly grant from the government – one third of that grant is considered to be gratis, however the remaining two thirds is to be repaid as a loan (with small levels of interest between 1-2%), over a maximum of 25 years. However, there has been some slight deregulation in the system over the past decade – up until 2009, all students were eligible for the free tertiary tuition –now only EU students are eligible. Currently, if a non-EU citizen wishes to study in Sweden, such as us Australians, they can be charged hefty fees. For example, a Masters in Economics at Lund University will cost around 110,000 kronor per year (18,041 AUD). This shift in policy resulted in a dramatic drop in non-EU tertiary enrolment in Sweden of 75% the following year, taking a bit of strain off the education budget.

Despite preserving free education for EU students and hence foregoing the benefits of deregulation such as increased competition, innovation and a lower burden on the budget – Sweden has been able to maintain a standard of high quality education. A recent report undertaken by Universitas 21, which ranked the world education systems on the basis of resources, total output and other factors, found Sweden to be second in the world behind the U.S. – and first when taken into account GDP per capita. This suggests that a highly regulated educational system, without local students paying fees does have the potential to provide a successful and well-rounded education.

It’s evident that with all these social benefits need to be paid for somehow – Sweden is renowned for its high levels of taxation. Their Value Added Tax (VAT), our equivalent of the GST, is 25%, one of the highest in Europe, and their progressive income tax can be as high as 57% in some municipalities.

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The figures above are really quite remarkable – nearly half of the income generated in the economy goes straight into hands of the government. Despite this, the word tax is not met with discontent in Sweden– in fact most Swedes embrace the hightax rates. Skatteverket, The Swedish Tax Agency, was voted the second most reputable public institution in a 2013 poll, suggesting a high level of confidence in the system. Similar things could be said for Denmark, their Scandinavian neighbours.

It’s hard to pinpoint exactly why such positive attitudes are held towards taxes, but it seems that as long as they know the money is going to be used towards positive contributions for society, such as a safety net for the poor, healthcare, education and childcare, then people are quite happy to pay.

High taxes however, do not necessarily impede too much on Sweden’s economic performance – adjusting for purchasing power, Sweden’s GDP per capita is $43017 USD, whilst also boasting a global competitiveness ranking of sixth in the world. A predominantly export-orientated economy, Sweden also operates with a consistent trade surplus.

So, despite the impeding doom of the ‘budget crisis’, Australia’s debt-to-GDP ratio of 32.60% pales in comparison to Sweden’s 41.50% – yet policymakers would have you believe that cutting welfare in education and other services is the only answer. Perhaps we can learn a thing or two from the swedes.