Wednesday, May 31, 2006

Poverty and Welfare

Nathan Newman compares the US with Nordic countries, and Uncle Sam don't look so great:
Many US political leaders engage in happy talk that welfare reform was a success, but the documented reality is that both over the last few years and over the last few decades, the low level of US spending to help the poor has meant less opportunity for the children of the poor to attain the dream of a better life than the poor in Europe, where more welfare spending and fairer education systems gave them a chance to join the middle class.
Nathan quotes this Economist article (subscription required):
Around three-quarters of sons born into the poorest fifth of the population in Nordic countries in the late 1950s had moved out of that category by the time they were in their early 40s. In contrast, only just over half of American men born at the bottom later moved up.
The Nordic countries are distinctive in one further way: the sons born at the bottom (into the poorest fifth) earn roughly the same as those born a rung above them (the second-poorest fifth). In other words, Nordic countries have almost completely snapped the link between the earnings of parents and children at and near the bottom. That is not at all true of America.
So why is this?
The obvious explanation for greater mobility in the Nordic countries is their tax and welfare systems, which (especially when compared with America's) deliberately try to help the children of the poor to do better than their parents. One might expect social mobility and economic flexibility to go together—in fact, to be two sides of the same coin. But to the extent that redistribution is an explanation, it implies the opposite: that social mobility is a product of high public spending, a bit like the low incidence of poverty or longer life expectancy (on both of which Europe also does better than America). But greater public spending tends also to be associated with less economic flexibility—which is why Nordic countries have sought to limit the more arthritis-inducing features of their tax-and-spend programmes.

Yet redistributive fiscal policies cannot be all there is to it. If they were, Nordic countries would not do as well as they do (their welfare states are not appreciably more generous than Britain's). The other part of the explanation seems to be their superior education systems. Education has long been recognised as the most important single trigger of social mobility—and all four Nordic countries do unusually well in the school-appraisal system developed by the OECD.
So... why did I leave Norway again? Good question. The best answer I can come up with is an early-stage wanderlust coupled with later-stage inertia. And then there's luv, of course.

No comments: