The New York Times Discovers Sweden

The Times had an article this morning that reports on Sweden’s success in sustaining healthy rates of economic growth, while also ensuring a high degree of economic security for its workforce. The article is mostly fair, but is misleading on a few points.

For example, the article reports that Sweden overhauled its Social Security system in the mid-nineties and added private accounts. This is true, but it would have been helpful to add that the defined benefit portion of Sweden’s system is still approximately one-third larger (relative to wages) than the current U.S. system.

The article also reports a common complaint that the official unemployment rate of 4.8 percent substantially understates true unemployment because it excludes the people in government retraining programs. (The article reports that labor unions put the true rate at 8 percent. Labor unions rarely appear as a source for economic data in Times articles.) It is not clear why workers in government funded training programs should be counted among the unemployed. Would it be appropriate to count workers in companies receiving tax breaks as unemployed?

In its discussion of unemployment the article also adds that, “according to some estimates, Swedes take an average of 17 weeks a year off from work on sick, disability or parental leave, further twisting the statistics. Absenteeism is the highest in the developed world.” Presumably, these comments are intended to imply that the unemployment rate is actually worse than the official numbers indicate, but it is hard to follow the logic here. Other things equal, aren’t people better off if they get long vacations and can take sick days without worrying about losing their jobs. (I said “other things equal” – so we’re assuming this doesn’t affect productivity, economic growth, etc.)

It may have been appropriate to mention in this context that the employment rate (the share of the working age population that is employed) is approximately 2 percentage points higher in Sweden than in the United States.

The article concludes with the obligatory warning that Sweden and the other Nordic success stories are unique, “And in this debate, size, geography and history do matter. Sweden has been free of war for 200 years. Norway, with 4.6 million people, is rich in oil but fiscally cautious. The economy in Finland, with some 5.2 million people, revolves around the fortunes of the cellphone giant Nokia.

Also, the Nordic countries tend toward the individualism of seafaring lands whose past spanned trade and conquest. Only Finland, the lone republic among the Scandinavian monarchies, joined the euro common currency, and Norway has rejected membership in the European Union altogether.”

In other words, don’t try these policies at home.