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Ohio Wesleyan University Goran Skosples 10. Sweden and Social Democracy

Ohio Wesleyan University Goran Skosples 10. Sweden and Social Democracy. The Swedish Model. one of the “failures” of a pure market system is __________________________ Heavy use of transfer payments and provision of public g&s to address this failure  welfare state

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Ohio Wesleyan University Goran Skosples 10. Sweden and Social Democracy

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  1. Ohio Wesleyan University Goran Skosples 10. Sweden and Social Democracy

  2. The Swedish Model • one of the “failures” of a pure market system is __________________________ • Heavy use of transfer payments and provision of public g&s to address this failure welfare state • Maintenance of a high level of employment • Macroeconomic tools: • Microeconomic tools: • one of the best Human Poverty Indexes (HPI), one of the most equitable distributions of income, high life expectancy

  3. Centralized Wage Bargaining • negotiations between management (SAF) and labor (LO) with the support role for the gov’t • Management • labor: • The EFO model • competitive (exposed (x)) and domestic (protected) sector • The rate of wage change in the protected sector (non-export) is fixed at the rate comparable to Wx

  4. Wage solidarity • the same wage for all jobs requiring comparable effort and comparable skills across all industries (and across seniority) • w MPL • wage spread between average wages between highest and lowest paid industries

  5. Wage drift • wage equality discourages job shifts  wage is not a _____________________ • employers offer non-monetary incentives such as special “perks” and fringe benefits • an increase in effective wage 

  6. Active Labor Market Policy • a vital component of promoting full employment • market economy: • micro eq’m: _______________ provide incentive for workers to change jobs (industries) • macro eq’m: _____________ ensures full employment • Sweden: • ___________-oriented programs • ___________-oriented programs • ___________ programs • generous benefits  depend on active job search

  7. The Welfare State • universal health care insurance, public pensions system, public education, 5 weeks of vacation, 15-month parental leave… • high marginal tax rates

  8. The Reformed Welfare State • used to be overly generous: “cradle to grave security” • Structural reforms in late 1990s and 2000s • Pension system • defined benefit  defined contribution • later retirement • Free schools (vouchers) • flexicurity • Still a comprehensive welfare state, but with more market mechanisms • pragmatism over ideology

  9. People pay taxes and get services high marginal tax rates Government transparency and trust low level of corruption and influence of special interests The Reformed Welfare State

  10. Conclusion • Folkhemmet – “people's community” • For a welfare state to exist, you need a close community  problems with immigration • Equalitarianism: welfare programs not seen as distributing income from one group to another • public spending still large: • 1993: 67%  2012: 49% • but debt fell: 1993 = 70%  2010 = 37% • innovations – willingness to experiment • high social mobility

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