Who pays for Sweden’s free lunch?

Sweden's generous welfare system has served to break down the protestant work ethic, argues Captus's Nima Sanandaji.

Sweden has traditionally relied heavily on the strong protestant work ethic of its citizens. A cornerstone of the country’s welfare system has been a population which has been reluctant to misuse the system. Although taxes have been high and government benefits generous, the strong work ethic has stopped people from taking advantage of the welfare state. Alas, this attitude has been largely abandoned. As time has passed, people have adapted to the system.

Dependence on state handouts is widespread amongst the adult generations. Today around 21-22 percent of the Swedish population in working age is being supported by one form government handout or another, up from around 11 percent in 1970 (as reported by Swedish Public Television 15th March 2005).

Many unemployed people are unwilling to take jobs that pay less than their former employment. The reason is that government compensation is often almost as high as their previous salaries; taking a job that pays less than their old one might very well mean lower income than the state benefit.

In a survey form the Swedish Enterprise Institute 70 percent of companies with 10-200 employees say that they interviewed who did not even want the jobs offered. This phenomenon is explained by the fact that people seek jobs that they are unwilling to take, only in order to convince public officials that they are actively seeking employment so they can continue collecting government handouts.

As widespread as government dependence is amongst adults, it might yet become worse amongst the new generation of Swedes.

In 2006 youth unemployment in Sweden was amonght the highest in the EU, fully 21.5 percent. Many young Swedes, in particular those with an immigrant background or from low income Swedish families, are becoming more and more used to the idea that it is acceptable to live off taxpayers’ moneys. This is creating a phenomenon that can be described as a ”free-lunch generation”. A generation that does not clearly see the moral difference between earning something by hard work or receiving it from the state. The attitude is simply “anything that I want, I should have.”

It is not uncommon for young Swedes to choose to live off government benefits during a period of their lives, either faking that they are seeking employment or somehow convincing government officials that they are on sick leave. The reason might simply be that they have found a lucrative black-sector job, or that they want to use the time to focus on a personal project, such as a music career.

All Swedes who go to higher education today receive a handout from the state. Perhaps this is to be expected in a society with widespread dependence on politicians, but the attitude among these young students is remarkable. As one of them wrote in a letter to a newspaper:

“Why should I only get this handout only the months that I attend school?” Explaining that he needs money for going out with his friends and buying clothes all year round, the young author concluded: “I don’t have anything against working. But if the government doesn’t make sure that I have a job, it is their responsibility to pay me the handouts all year around”.

The system also routinely punishes those who work hard. If you are a college student and work part time parallel to your studies, your government loans will be reduced. And if you are unemployed, make sure not to take just any job. When a girl I know lost her job last year, she sought the first part time position that came along, although it was only a few hours.

While she had worked hard all her life and never relied on government support, she thought that it would only be fair to get some money to support her whilst she was seeking employment. But as it turns out, working a few hours disqualified her from receiving benefits for a period.

Later the same girl wanted to move to England. She explained that she believed that she would find it much easier to find work there compared to in Sweden. Was it possible for the unemployment agency to give her unemployment benefits when abroad? Well, yes, there is such a possibility. But only if she stayed in Sweden for a full period of 30 days as unemployed first. If she traveled to England to find work before the period had passed, there would be no support.

The Swedish welfare system is doing a good job at breaking the work ethic of the young. We have recently even seen a phenomenon where young people who couldn’t find employment became classified as on early retirement. Permanently shutting out young adults from the working market might not make much sense, but the solution comes in handy for local unemployment agencies that can thus reduce the number of those classified as unemployed.

Societies are based on norms and values. Two norms that have so far played an imortant part in making Sweden function are the work ethic and individual responsibiliy. But norms are influenced by the economic realities of a system. When many low income families find that they might very well earn as much money by staying home from work, or even more money if they combine handouts with black market jobs, more and more people will take advantage of this. And among particularly the young, the norms concerning responsibility and work will adapt to this situation.

As the world renowned Swedish author Johan Norberg recently wrote in The National Interest (Summer 2006):

“The system of high taxes and generous welfare benefits worked for so long because the tradition of self-reliance was so strong. But mentalities have a tendency of changing when incentives change. The growth of taxes and benefits punished hard work and encouraged absenteeism.

“Immigrants and younger generations of Swedes have faced distorted incentives and have not developed the work ethic that was nurtured before the effects of the welfare state began to erode them. When others cheat the system and get away with it, suddenly you are considered a fool if you get up early every morning and work late.”

The Swedish welfare system is effectively breaking down the very norms that make the society function. As people become more and more accustomed on living of government one question arises: who is ultimately going to draw the short straw and become forced to pay for the supposedly free lunch?

Nima Sanandaji is the president of the Swedish free market think tank Captus and publisher of the weekly online Swedish magazine Captus Tidning. He is also a PhD student at The Royal Institute of Technology in Stockholm.