How do the American and Swedish Welfare States Differ?

How do the American and Swedish Welfare States Differ?


Hi, I’m Drew Halfmann
from UC Davis Sociology. Today I’m going to address the question,
how do the American and Swedish welfare states differ? Let’s start with the US. So first I’m just going to sort of
talk about the different programs, and then I’ll draw some of the contrasts. We’ll start with the US. The US has a two-tier pension system. The first tier is old age, survivors, and disability insurance, OASDI, what’s
commonly referred to as Social Security. This provides benefits to old people at a
replacement rate of approximately 40% for an average wage earner. The second program is supplemental
security income, or SSI. This is a program that’s
less generous than OASDI. It’s for people who did not work enough
during their lifetimes to qualify for Social Security. These benefits can be up to $698 a month,
depending on the size of the family. So this is a lower,
less generous tier to the pension system. There’s also disability insurance,
either through OASDI or through SSI. And this relates very much to,
you know, did the person work or not? If you work and then become disabled, you
would be eligible for Social Security and quite a generous pension. If you never work, in other words, were
maybe disabled from birth and were unable to work, you most likely would receive
payments from SSI, much less generous. So this is a very interesting sort of
inequality among people with disabilities depending upon whether they work first
before they encounter their disability. United States also has
an unemployment insurance program. It has workers compensation,
which compensates people for provides, health insurance for
when people get injured on the job. There’s a refundable
child tax credit of $500. Refundable means that people
may owe $1000 in taxes and they get this child tax credit,
it reduces their tax liability to $500. But what if I didn’t owe anything in
taxes, if I had no tax liability. Well, because it’s refundable, I would be
eligible for a check from the government for $500, so that makes the tax credit
serve not just more middle class people who have a tax liability, but also poor
people who do not have a tax liability. United States also has a requirement for
large corporations that parents be given, like new parents for example, be able
to take a parental leave of 12 weeks. There are a number of programs meant to
address poor people in the United States. And this is something unique to
the Unites States is that a lot of its programs are focused on the poor
rather than on the broad middle class. United States has something called
the Earned Income Tax Credit which is a tax credit for the working poor. This is also refundable in
the way I just mentioned. It has TANF, which is the Temporary
Assistance to Needy Families program. This is aid to poor people with a work and
education requirement. …
poor people with children, I should say. There’s general assistance for the childless poor,
who are not eligible for SSI. This is quite small,
usually $100 to $400 per month. Only 30 states have it. And only 12 of those states cover
people who do not have a disability. This is mainly a program for people who
have disabilities in only some states. There’s also the Supplemental Nutritional
Assistance Program, [SNAPS FINGERS] SNAP, used to be called food stamps. There’s also Head Start, which is
a child care program for the poor. It’s very popular among both
Republicans and Democrats, but it’s never been funded properly, and as
a result, only about 20% of the people who are eligible for the program are actually
able to take advantage of it. Lastly, there’s the health care system in
the United States, which is a very ornate, complicated hybrid system with
lots of different components. First of all,
it has public health insurance for the old which is called Medicare. There’s also public health insurance for
the poor which is called Medicaid. Some states like to call
it by their own term, and in California it’s called Medi-Cal. There’s also a public health service. And when I say health service, that means
the government doesn’t just pay for the healthcare, but they actually
provide the healthcare in their own hospitals with their own doctors. So there’s a public health service for veterans in the United States called
the Veteran’s Administration. Most people get their insurance
from their employer, and this employer provided insurance
is subsidized by a tax exclusion where the benefits provided by an employer
for health insurance are not taxed. They are provided tax
free to the employees. Recently the Affordable Care Act passed,
well, I guess not that recent, 2008, the Affordable Care Act passed,
often refered to as Obamacare. This provides subsidies to people to
purchase private insurance if they are not covered by their employer. And then lastly, the United States does
not have a nursing home insurance program, but many people receive nursing home
care through the Medicaid program, the program for the poor. Basically Medicare does not really
cover long term care, and so people will enter a nursing home, Medicare
will make a few payments and stop, and then basically they have to spend
all their money until they become poor, then they will eligible for Medicaid. So it’s odd you know, Medicaid is
mainly a poor people’s program, but most of the people on the program are
elderly people in nursing homes, who were formerly middle class, but who became poor
so that they could, well, became poor because they had nursing home expenditures
and now they are eligible for Medicaid. Let’s talk about Sweden. Oh, before we do that. The number of people
lifted out of poverty by these various programs might surprise you. Most people think of
poor people’s programs, when they think about those programs, they
think about the means tested programs. In other words,
the programs that are directed only for the poor, that are targeted to the poor. But it’s actually not those programs
that do the most to raise the poor out of poverty. And so universal programs that
serve both poor people and non-poor people raise many,
many people out of poverty. The biggest of these is Social Security. It raises 22 million people out of poverty
in the United States, has done tremendous, a tremendous amount to reduce poverty
among the elderly in the United States. There’s also the Child Tax Credit which
is available to everyone, poor or non-poor, but which disproportionately
helps people who are poor, and it raises two million
of them out of poverty. Unemployment insurance also for the poor and non-poor raising 1.2
million people out of poverty. Then there are the means-tested programs, the largest of these is is
the Earned Income Tax Credit, which raises a little more than
five million people out of poverty. There’s housing assistance for the poor
which raises four million out of poverty. Food stamps which raise four
million out of poverty. The supplemental security income which
raises almost four million people out of poverty. And then lastly, TANF, Temporary Assistance to Needy Families
which raises 1.4 million out of poverty. Most people, when they think of
a poverty program, they think of TANF. It’s the main program targeted to poor
people with children, mainly women. But that’s really
a misapprehension about the ways in which the American welfare
state serves the poor. We’ll talk about a lot of programs,
some oriented to the poor, some not, but
they all have major benefits for the poor. Let’s talk about Sweden. Sweden also has a two tier pension system, it’s a little different than the United
States’s two tier system in that the tiers are both higher
than the American tiers. First of all,
they have a universal pension. Everyone receives it, regardless of
whether they worked during their lifetimes or not, and
it’s paid in the same amount to everyone. In the American system, people receive payments based on how
much they earned when they were working. In the Swedish system, everyone’s
receiving the exact same amount. Universal is a term meaning, you know, the same or equal across everyone,
everyone getting it. A second pension system is
the income based system, which is closer to our
Social Security system. It’s based on how much people earned
while they were in the work force. This pension was basically
established because many of them were upper income people in Sweden were not
happy receiving the universal pension, which did not provide as high a standard
of living as they had had when they were working, and so they wanted to have
an income-based pension as well. So that, that adds some inequality
into the Swedish system that is somewhat different than the general
orientation of the system. Sweden has a universal
national health service, meaning that health services are provided
by the government, the government owns the hospitals, the government employs
the doctors, this national health service also includes home health care and nursing
home care so it’s quite comprehensive. There’s also sickness insurance. This is basically sick days. In the United States your employer may
give you sick days if you have a good job. If you have a crappy job,
your employer may not pay for your sick days and sometimes you can
even get fired it you take sick days. In Sweden, there’s a mandatory number
of days that you can take, and the government pays for
those days that you take. It’s not up to the employer. There’s also a family allowance
in Sweden of about $1,800 a year. This, in this way, the society
helps pay for raising children. This is somewhat similar to our
child care tax credit of $500, though obviously larger. These are the ones that
really surprise people. Paid parental leave of one year and
three months at an 80% replacement rate. We’ll talk about replacement
rates a lot in this course. The replacement rate is the percentage of
your normal income that is provided by a particular program. So for example, if you made, you know, $10,000 a month and while you were
working and then you retired, you would receive $8,000 a month if
there was an 80% replacement rate. So you’re getting about
80% of your normal wage. So in this parental leave program,
people are receiving a very high level of benefits that compensate for most of the
time that they’re out of the workforce. And it’s long too. One year and three months. There’s also… people can take a paid leave to
take care of a sick child, or an elderly parent of up to two months. There are paid contact days. Ten days for you to attend a school conference of
your child or something of that sort. Universal pre-school for ages one to six. So basically, the system, the way the
system works is that people have a child, they leave the labor force for a year and three months, and then the child
enters universal low cost daycare. There are also after-school and
school holiday child care centers. There’s quite extensive
assistance in public housing for the poor,
very generous unemployment insurance. And I’ll tell you a little bit about,
more about that in a minute. And then lastly, something called
active labor market policy, which is something unique to Sweden and
a real claim to fame for Sweden. And I’ll talk a little bit more
about that in a second, as well. Let’s compare unemployment insurance
in the United States and Sweden. In Sweden, the limit for receiving
unemployment insurance is 300 days. The replacement rate is 80%, quite high, the coverage rate is 90%, most unemployed
people are covered by the system. In the US, the limit is 182 days,
so shorter. The replacement rate is about 50%,
so less generous. Moreover, the number of people who
are eligible is quite a bit lower. You have to have been in the labor
force for at least 15 weeks during the previous year or have earned
a minimum amount set by statute. Let’s talk about active labor market
policy to finish up this comparison. Active labor market policy
is a system of programs that the government provides in order to
make the labor market work better for employees, and also sort of to socialize
the costs of labor market dislocations. So there’s a few dimensions here. So one is on the labor supply aspect,
the government provides extensive educational retraining
and vocational programs to workers, provides programs that provide
work experience for youth. They often will help
employers to provide training to workers who have skills that are no
longer necessary in the economy. On the labor demand side, the government
will provide subsidies to employers to help hire or
retain workers during slowdowns. They’ll provide funding, as I said,
to help employers retain their obsolete workers, or obsolete skills I should say,
and encourage their retention. Oftentimes, the government will
just buy a bunch of stuff during recession in order to make
the recession less severe. It will also provide temporary
public sector relief jobs to people who are unemployed. The United States had a program
similar to this during the New Deal, it was called
the Works Progress Administration. Roosevelt meant for that program
to stick around until today, but it was ended by
the Republican Congress in 1940. Lastly, there’s coordination
within the labor market. This is aptitude testing, employment
counseling, job placement services and even relocation grants. If somebody is unable to find
a job in their local area and they can find a job in
another part of the country, the government will help to pay for
their move to that job. The goal here is to,
I mean this is capitalism, okay? And so, you know, some jobs,
companies are going to go out of business, companies are going to shed workers
because they can’t afford them, or their skills are going
to become obsolete, but the goal here is to socialize those
costs not to put them all on the worker. And instead,
the government is saying you know, it’s good that we have labor market
flexibility, but we need to make sure that it is not just the worker who pays
the cost of this flexibility. So that’s all I’ll say for now, but
we’ll talk more about, you know, these differences between the US and Sweden and also between those
countries and other rich countries. One last comparison I’ll make. This, this is a figure that shows
the poverty rate in different countries. And the way poverty is measured here
is they take the median income in each country and then take half of that median income and
define that as the poverty line. Now in this figure, there are the red
lines and then the darker blue lines. The red lines show the amount of poverty
before welfare state programs kick in. The blue lines show the poverty rate
after those benefits are provided. And what you’ll see here is that in most
countries, the sort of pre-welfare state poverty rate is quite high in the area
of 20, 25% in the United States. In Sweden, it’s about 26% in each place. So very similar levels of market produced
poverty, but what’s different is, is that Sweden does much more through
its welfare state to reduce poverty. Reducing the poverty rate to just 5%
after the welfare state programs kick in. United States only reduces poverty
to 17% through those programs. So you know, the high levels of poverty
in the United States are not because, you know,
our labor market works differently or that there’s less opportunity in our
economy necessarily than in Sweden. It’s because we do less to end poverty
through various social programs, and that’s a very key distinction
between the United States and Sweden, and between the United States and
other rich countries more generally.

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