Sweden shows the corrupting influence of welfare

In the Western world, Sweden is often considered a Social Democratic paradise, the irrefutable proof that the welfare state can transform society for the better. But outsiders, and still too many Swedes, tend to overestimate the gains and underestimate the costs of social engineering.

To start with, homogenous Sweden was already an egalitarian society with few social problems before the expansion of the welfare state. It is often forgotten that in 1950 Sweden had lower taxes, fewer trade restrictions and more hours worked per working-age person than contemporary U.S. -- and yet was already blessed with essentially the same flat income and wealth distribution it has today, half a century after the expansion of the welfare state.

In the 1950s and 1960s, the integration of migrants worked quite well. The foreign-born had a 20% higher employment rate than native Swedes in 1950. Half a century later, in the mature welfare state, the picture has dramatically changed. According to the latest figures, only 48% of non-Western immigrants are gainfully employed, which is 30 percentage points below the average. For this group, originating from places such as Turkey, Chile, the former Yugoslavia, the Middle East and North Africa, welfare dependency is nine times higher than for native Swedes.

No doubt, a generous welfare system initially helps many immigrant families, cushioning the transition to a new country. However, the combination of high taxes, a regulated labor market, the world's highest union-imposed minimum wages and the lavish transfer programs effectively keeps out immigrants from the labor market.

Last year, the OECD advised Sweden to pursue labor-market and welfare reforms to tackle immigrant unemployment. The OECD recommended policies such as "substantial easing of job security rules, more individual wage flexibility and considerable reductions in benefit levels."

Sweden's powerful unions and the left-leaning intellectual elites work against such reforms. Swedish voters, though, are beginning to have mixed feelings. In 2006, they ousted the Social-Democratic government and elected a center-right coalition that promised to cut taxes and benefits. Labor-market reforms, though, were missing from their election campaign.

High unemployment among immigrants is of course not confined to just Sweden or Scandinavia. Throughout Europe, governments have found that well-intentioned social insurance policies can lead to lasting welfare dependence, especially among immigrants. Belgium is the European country with the highest difference in employment rates between the foreign-born and natives. The images of burning cars in the suburbs of Paris that were broadcast around the world illustrate the kind of social and economic problems France is facing with its restive immigrant population.

Given the high barriers to entry, many immigrants in Europe no longer start accumulating essential language and labor market skills. This is in stark contrast with the situation across the Atlantic. For example, in 2000, Iranians in the U.S. had a family income that was 42% above the U.S. average. The income of Iranian immigrants in Sweden, however, was 39% below the country's average...

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Posted by John Ray. For a daily critique of Leftist activities, see DISSECTING LEFTISM. For a daily survey of Australian politics, see AUSTRALIAN POLITICS Also, don't forget your handy-dandy summary of Obama news and commentary at OBAMA WATCH