This post was originally intended for the launch of the People’s Policy Project website. But as that is running behind schedule, I figure I will post it here.
When policy commentators talk about the Nordic economies, they tend to focus on their comprehensive welfare states. And for good reason. Denmark, Finland, Norway, and Sweden are home to some of the most generous welfare systems in the world. Each has an efficient single-payer health care system, free college, long parental leave, heavily subsidized child care, and many other social benefits too numerous to list here.
Social Expenditures as Percent of GDP (2016)19.3%19.3%25.1%25.1%27.1%27.1%28.7%28.7%30.8%30.8%USANorwaySwedenDenmarkFinland0%5%10%15%20%25%30%35%Source: OECD
As marvelous as the Nordic welfare states are, the outsized attention they receive can sometimes lead commentators to the wrong conclusions about the peculiarities of Nordic economies. Jonathan Chait thinks
the Nordic economies feature an “amped-up version of … neoliberalism” while an oddly large number
of conservative and libertarian writers claim the Nordics are quasi-libertarian.
The common thread to these mistaken conclusions, aside from the desire to deny that there are leftist success stories in the world, is the apparent belief that the only extraordinary part of Nordic economies are the welfare states. Except for their generous social benefits, everything else is properly capitalist and even more capitalist than the United States. Or so the argument goes.Labor Market
But this is not true. In addition to their large welfare states and high tax levels, Nordic economies are also home to large public sectors, strong job protections, and labor markets governed by centralized union contracts.Around 1 in 3 workers in Denmark and Norway are employed by the government.
Percent of Workers Employed by Government (2008)14.5%14.5%22.9%22.9%31.5%31.5%34.5%34.5%USAFinlandDenmarkNorway0%10%20%30%40%Source: OECD
Protections against termination by employers are much stronger in the Nordic countries.
Strictness of Employment Protection Index (2013)22.214.171.124.172.312.312.322.322.522.52USAFinlandNorwayDenmarkSweden00.511.522.53Source: OECD
Centrally-bargained union contracts establish the work rules and pay scales for the vast majority of Nordic workers.
Percent of Workers Covered by Union Contract (2013)11.9%11.9%70.0%70.0%84.0%84.0%89.0%89.0%93.0%93.0%USANorwayDenmarkSwedenFinland0%20%40%60%80%100%Source: ILO
These labor market characteristics are hardly neoliberal or quasi-libertarian, at least if we stick to typical definitions of those terms. The neoliberal tendency, as exemplified most recently by France’s Emmanuel Macron, is to cut public sector jobs
, reduce job protections
, and push for local rather than centralized labor agreements
. For the US labor market to become more like the Nordics, it would have to move in the opposite direction on all of those fronts.