Sweden should look to US for welfare solutions

Sweden has a lot to learn from the United States when it comes to reducing welfare dependency, writes Nima Sanandaji of the Captus think tank.

Reading modern US history might give Swedish policymakers a few good ideas about how to combat a societal ill often ignored in the public policy debate: widespread welfare dependency.

In 1987, Tommy Thompson was elected governor of Wisconsin. Similar to other US politicians, Thompson was worried about the large and growing number of people living off welfare. Policies intended to help the poor were creating long-lasting welfare dependency, resulting in social poverty. During the next ten years, Thompson’s administration focused on a number of programmes designed to combat reliance on state handouts.

In Wisconsin, measures were implemented to ensure that those receiving welfare benefits did indeed actively seek jobs or become involved in labour market programmes. Benefits recipients were also informed about the social problems associated with welfare dependency. Thompson realized that part of the problem lay in the lack of responsibility amongst public sector bureaucrats.

The more common approach in politics would have been to allocate funding to welfare offices that were least successful in encouraging welfare recipients to start working. But Thompson’s administration believed that this strategy would feed the trend of inefficiency found within public bureaucracy. Therefore he chose the opposite approach, financially rewarding those offices that succeeded in reducing dependency. Offices that failed to reach their goals were at the same time exposed to competition.

These measures might seem harsh, but resulted in an unparalleled success at the time. In the nation as a whole, welfare dependency was still increasing. The number of families with children on welfare in the US rose by a third during the early 1990s. But in Wisconsin the same figure was reduced by half during the ten years that followed Thompson’s victory in 1987. In Milwaukee’s inner city, the reduction was 25 percent; in the remaining parts of the state close to 70 percent. Tens of thousands of families previously supported by taxpayer’s money could now stand on their own legs and offer their children a brighter future.

The reforms in Wisconsin were an inspiration for the national welfare reforms enacted in 1996 by the Clinton administration. Again, the focus was on bringing back personal responsibility to a system which had become easy to manipulate and which trapped people in long-term dependency.

Perhaps the most radical element in the reform was the introduction of a five year time limit on how long somebody could receive welfare benefits. At the time, many critics believed that these measures would hurt the poor. But ten years later the effect was found to be quite the opposite. The number of families living on welfare had been more than halved from 4.3 to 1.9 million throughout the US. In particular many single mothers had lifted themselves and their children out of poverty.

So why write about welfare reforms in the US? In the same way that Bill Clinton was wise in drawing inspiration from the welfare reforms in Wisconsin, Swedish policy makers should learn from the constructive way in which welfare dependency was reduced on the other side of the Atlantic.

There are many who choose to view Sweden as an ideal country lacking any societal ills. But this view doesn’t reflect reality. The generous welfare system, the high taxes on work, and difficulties for those entering the labour market and start businesses have trapped many Swedish families in dependency on various government programmes. Social poverty appears among children growing up in families where none of the parents are working, and where there are few positive role models to be found who have succeeded through hard work and education.

This problem is not at all insignificant among the ten percent of Sweden’s population who are immigrants from non-Western countries. Within first generation non-Western immigrants, welfare dependency is a full nine times higher compared to those born in Sweden. This situation of dependency is indeed underlying many of Sweden’s societal problems, giving immigrants the false impression that native Swedes do not want them participating in the labour market and giving native Swedes the false impression that immigrants are too lazy to work.

Perhaps the lesson we can learn from Thompson’s and Clinton’s reforms relates to how exactly we can reduce reliance on government handouts. But perhaps the first important step is to change our attitude toward the welfare system. In Sweden, welfare is automatically seen as a set of benevolent government programmes designed to create a kind and secure society. But is it really responsible to create systems which reward passivity rather than responsibility and hard work?