Sunday, January 1, 2012

Wrong Juholt: Sweden is still more equal than U.S in 1980s

Increasingly, newspapers have “Fact-check” sections where they attempt to adjudicate political controversies.

The problem with is that very often, the people who write these articles are journalists, not the arbitrates of the objective truth. But since people trust the newspaper as giving them fact rather than subjective opinion, this becomes a problem when the fact-check itself requires fact-checking.

A couple days ago the leader of the Social-Democratic party argued that Sweden today has higher income inequality than the United States in the middle of the 1980s.

The right-of-center daily SVD has a “Fact-Check” of this claim, and concludes that the Social Democrats are mostly right in their claim that Sweden is as unequal as the U.S was in the mid-1980s.

But the OECD tells a different - and in my view more plausible - story.

Here are international Gini-data from the OECD. The higher the Gini-coefficient the higher income inequality. Since the state taxes the rich and subsidizes the poor, inequality in both countries is lower after taking taxes and transfers into account.

The U.S Mid-1980s Before Tax and Transfers 0.436
The U.S Mid-1980s After Tax and Transfers: 0.337

Sweden Late-2000s Before Tax and Transfers: 0.426
Sweden Late-2000s After Tax and Transfers: 0.259

Even before tax and transfers, Sweden is still slightly more equal. (At any case we should we ignore the effect of the welfare state, since the discussion is precisely about government policy?)

SVD was sloppy in it's “Fact-Check”.

Here is the Gini-coefficient of disposable income 1975-2008, again from the recent OECD report "Divided We Stand: Why Inequality Keeps Rising".


Note, as my brother Nima Sanandaji did, that income inequality was also rising in Sweden during long periods of Social-Democratic rule, for instance 1994-2006. There has been a secular rise in Inequality in most OECD-countries. Likely the cause is common changes in the global economy (globalization, rise in the premium for human capital) rather than the fault of any particular government.

14 comments:

  1. Nice one Tino, interesting stuff.

    So the fact that inequality rose in both countries hints at underlying technological or globalisation-related shifts as you say. Yet the big difference in Gini scores between the US and Sweden also suggests that the high inequality of countries like the US is not inevitable, right? If the US applied other policies (say, the stronger social democratic policies of Sweden) do you think it could reverse the shift towards greater income inequality there? (Ignoring for now the effect on economic growth or poverty, thinking only of inequality.)

    ReplyDelete
  2. Of course, you use 2008 and not being said "today".
    Likely to have the disposable income of the bottom decile has fallen by around 10% from 2007 to 2011
    Between 09-10 declined, according to SCB by 3.4%

    The top decile:
    Between 07-10 has increased by around 4% for the highest decile, figures for 2011 are not yet.


    Naturligtvis använder du 2008 och inte som sägs ”idag”.
    Sannolikt så har den disponibla inkomsten för den lägsta decilen sjunkit med runt 10% 2007-2011
    Mellan 09-10 sjönk den enligt SCB med 3,4%

    Den översta decilen:
    Mellan 07 – 10 har den ökat med runt 4% för den översta decilen, siffror för 2011 finns inte ännu.

    http://www.scb.se/Pages/TableAndChart____163546.aspx

    ReplyDelete
  3. 1. I report the last available year the OECD reports data. Between 2008 and 2010, the Gini-coefficient in Sweden according to Statistics Sweden increased by 0.009, i.e. too little to change anything fundamentally.

    2 You are interpreting the phrase “today” too literary. In fact, Juholt was talking about 2009, which is the last year in the SNS-report he cites, not actually “today” (not that it would matter).

    http://www.sns.se/sites/default/files/vr-2011_inlaga_0.pdf

    Skimming, I actually cannot find any place in the report stating that Sweden has higher income inequality today than the United States during the 1980s (if I missed it, tell me). On page 34, inequality is clearly higher in the U.S during the 3 points showed for the 1980s than the last years reported for Sweden.

    You can’t use data from one source for Sweden in 2009 and another source (Luxembourg income study) for the U.S in the 1980s. The American inequality is low in the latter in part because they ignore capital gains.

    3. We are discussing Juholt and SVD claims about income-inequality, not the absolute income of the lowest decile. These are different things.

    Indeed the poor in the United States with Swedish ancestry (the correct comparison group in my view) have as high or higher income than the poor in Sweden, but since when is that a Social-Democratic talking point?

    http://super-economy.blogspot.com/2010/03/super-economy-in-one-picture.html

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  4. This comment has been removed by the author.

    ReplyDelete
  5. P.S

    The SvD check states as an excuse to ignore capital gains "På den tiden var dock kapitalvinsterna generellt lägre än de är i dag, både nationellt och globalt – och skulle utgöra en högst marginell faktor i jämförelsen, bedömer Markus Jäntti."

    This is incorrect. Capital gains are very volatile, but have been remarkably constant at around 3% of GDP in Sweden and the United States both for a long time. They were particularly high in the U.S during the 1980s.

    http://taxpolicycenter.org/UploadedPDF/1000841_Tax_Fact_8-29-05.pdf

    Excluding capital gains in Sweden, Gini in 2010 was 0,268.

    ReplyDelete
  6. Thanks for another interesting article. Politcians, journalists and "thinkers" of the system - whether they are in "opposition" or not - are generally bunglers and bullies who are paid to spread lies and/or misguiding semi truths.

    ReplyDelete
  7. Tino, vansinnet håller på att segra här i Sverige.
    http://www.svd.se/nyheter/inrikes/gront-ljus-till-ullenhag-om-invandringsmyt_6739593.svd

    Vi behöver dig mer än någonsin i den svenska debatten. Vi måste kunna diskutera denna fråga på ett öppet och ärligt sätt men det finns inga journalister och debattörer som klarar av att ta smällen.

    Sorry for using swedish.

    ReplyDelete
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  10. Tino
    Thanks for your excellent blog , I admire the intelligence of your analysis.
    I am English but have experience of Sweden over 3 decades.How far would you say the relative success of the trades unions in Sweden accounts for the long period of very low rates of poverty. Could it have been done without tax being higher than in say Britian or France?

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