Nothing Is Certain But Change and Taxes: The Imminent Transformation of the Swedish Welfare System

My great aunt’s warm kitchen was filled with such tension I lost my appetite for prosciutto and melon. Mormor, my grandma, had just got off the five hour train up to Stockholm from Malmö to visit me, where I was staying with her sister. The brunette and blonde duo exchanged sharp words between long silences, and for once I was glad to not speak Swedish. Staring at my plate, my brain was able to process a few words: Leon, skatter, lägenhet, att leva. Translated to English, I understood my cousin’s name, followed by taxes, apartment, and to live. Using context clues, I could piece together the puzzle in my mind. Uncomfortable, I was taught that money and politics were taboo topics, yet in Sweden, where half of the average earner’s income goes to taxes, the matters at hand apply more directly to day-to-day life. My great aunt despised the taxation system; my grandma relied on it to pay her rent. Like many others, my grandma benefits from the Swedish welfare system, as a safety net to provide a higher quality of living. An exemplary model of the modern welfare state, Sweden is ranked third of all countries for quality of life by the Organization for Economic Co-operation and Development Better Life Index, determined through their outperformance in civic engagement, life satisfaction, environmental quality, education, income, and public health (OECD, “Sweden”). Sweden’s well-being is backed by progressive social policies funded through high taxes and a robust social safety net. However, the current version of the Swedish welfare state is not sustainable. As this system transforms, the Swedish government and population must take into account emerging important political and sociocultural tensions.

From the outside looking in, I always felt Sweden was a lot of what I didn’t have in LA. My grandparents, for one, plus clean streets, public parks, and a safe subway system. The quality of life would not be possible without its welfare system, which is all-encompassing, providing extensive benefits for its citizens from birth till death. Swedish centralized institutions often send benefits as large-scale transfers, provided on a universal basis. To publicly fund the system, Sweden heavily manages the labor market and imposes high income taxes. Though it creates one of the highest tax burdens in the world, the welfare system has historically been supported by all sectors of society, out of altruism and self interest. In accordance with the global view, the system is both generous and effective. Child support is extensive; upon childbirth or adoption, each parent is entitled to 240 days of paid parental leave, with single parents entitled to a full 480 days. Free nursery schooling begins at age one. This has contributed to high female labor force participation rates, as Sweden is ranked 4th on the 2016 World Economic Forum’s Global Gender Gap Index, having closed more than 81% of its overall gender gap (World Economic Forum 5). Local governments not only subsidize low-income and elderly rental housing but help them find it. Rather than a national minimum wage, unions and employers negotiate sustainable salaries, with 88% of Swedish workers covered by a union agreement (OECD, “Sweden”). Therefore, Sweden bolsters extremely low levels of labor conflict, with a single one-day strike of seven electrical workers occurring in 2021. Fair salaries help fund higher living standards, as the average yearly household net-adjusted disposable income per capita in Sweden is 33,730 USD, more than the U.S. average of 30,490 USD (OECD, “Sweden”). Even still, the government pays for essentials: subsidizing healthcare and education, providing public transportation, mandating 5 weeks of paid vacation time a year, and even sending children monthly allowances for winter coats. I have seen this welfare system work first hand, as it changed the trajectory of my cousin Leon’s life. He lived with my family for long enough that my brother had a bunk bed, and I believed I had two brothers. I was too young to understand the protocol of VISAs that took him away one day in December, but it was seven years till I saw him again. Like many kids, in that span of time I had changed my mind twelve times as to what I wanted to be when I grew up, but his answer remained the same. He would be a veterinarian. However, my cousin was being raised by a single mom on a waitress salary just outside of Stockholm, circumstances that would typically inhibit his ability to dream big. Yet, the Swedish welfare system supported my cousin when my family could no longer be there, providing free school and daycare. He is now finishing his third year of veterinary school and will soon be a doctor.

The Swedish welfare system is designed to help people like my cousin- to give those with fewer opportunities the resources to fulfill their potential. Yet, some things are too good to be true. Levels of systematic efficiency have been weakened by shifting dynamics. Issues are lying beneath the surface, as globalization and the skewed age structure are causing cracks in the Swedish welfare system. “The centralized institutions associated with the Swedish model lack flexibility, hampering efficient and timely adjustment to rapidly changing economic conditions,” a response vital for global economies in an age of globalization (Thakur 3). In an attempt to advance and invigorate its economy, Sweden has tried to increase entrepreneurship, requiring that employers grant a six-month leave of absence for an employee attempting to start their own business, guaranteeing their position in the case it fails. This has fueled an abundance of start-ups. More specifically, 20 start-ups per 1,000 employees, compared to just five in the United States (Calvino 11). However, OECD data also points out that productivity growth has slowed in recent years (OECD, “Swedish Economy Resilient”). The Managing Director of the Swedish Entrepreneurship Forum explains “companies should not survive long-term on support from taxpayers’’ (GEM Global Entrepreneurship Monitor). Currently, Sweden risks unproductive companies surviving off grants from the Treasury, when creative destruction would typically replace them with more efficient, highly innovative start-ups. Additionally, businesses operating in Sweden face high individual tax rates, complex labor laws, and high labor costs. “Starting in the mid-1970s, the Swedish economy began to slow down. Swedish exports have become too expensive due to the high wages and payments made by employers into the different government welfare-state programs” (CRF).

Support for the welfare model is conditional on a fairly shared tax burden, minimal misuse of benefits, and most importantly, economic sustainability. Alarmingly, the Swedish welfare structure is being threatened by a skewed age structure. “An aging population implies a worsening dependency ratio: Fewer people are contributing to the welfare state and more people are receiving benefits from the welfare state” (Deloitte Insights 21). The candle is burning at both ends, as a high proportion of elderly consume social security funds, while a low birth rate has produced fewer contributors to these funds. Funding is being drained out faster than it is pouring in. According to the Swedish National Audit Office, between 2020 and 2030, the welfare budget must be increased by 22 billion USD in order to keep functioning at its current level (Lindberg 3). In response, the Swedish government began pushing extensive tax cuts in 2015, also “reducing generosity of welfare programs and widening the role for private enterprises in public service provision” (Sanandaji). However, further obstacles are hindering Swedish economic success.

Currently, an increase in immigration is further complicating difficulties in funding the Swedish welfare system, however an influx in labor has the potential to be an economic solution. Ideally, immigration can fill the need for more workers, stimulating the economy and increasing tax sources. In order to stabilize the Swedish welfare system, the ratio of non-working to working people would have to remain fairly constant; however, this requires a total of 38 million immigrants by 2080, requiring Sweden’s population to increase fivefold (Heleniak, Sanchez Gassen 4). While this future is not feasible, Sweden under a social democratic government has practiced an open-border policy, adding 163,000 asylum-seekers to its population of 10 million, taking in the highest per capita inflow than any other developed country (Sanandaji). As of 2020, the percentage of inhabitants with a foreign background had risen to 25.9%, most arriving from Syria, Afghanistan, and Iraq (Johansson and Garp 1). Making up a quarter of the population, immigrants have the potential to ease financial pressures if integration into the labor market is efficient and work is available. However, this hasn’t been a flawless process, so public pushback over immigration has begun due to economic inefficiencies. As published by the Monetary Policy Department of the Riksbank (Swedish Bank), “Immigration to Sweden is more often justified on humanitarian rather than labor-market related grounds which, in itself, need not be an obstacle to improved integration, but which does make demands of integration policy” (Segendorf and Theobald 6). In opposition, some Swedes reference a 69.7% employment rate for foreign born citizens, which compares poorly with an 85.5% employment rate for native born Swedes (Swedish Ministry of Foreign Affairs). In reality, the stark difference in employment rates may stem from the Swedish institution’s failure to address flaws in the economic integration process. Unemployed immigrants cannot pay taxes but still benefit from welfare programs. In 2018, the Swedish central government spent over 1.6 billion USD on expenditures toward the introduction of newly arrived immigrants (Government Offices of Sweden). According to the Swedish Pensions Agency, immigrants cost the public sector an average of 74,000 SEK, or 7,000 USD, per year during the person’s lifetime (Andersson, Götmark). Some native Swedes are concerned that immigrants are taking advantage of generous welfare. Asylum-seekers receive monthly cash stipends of up to 1,068 USD as an introductory rate (Försäkringskassan 116). Immigrants are not immediately able to secure jobs due to not speaking Swedish, leaving only low-skill level sector jobs available to them. The Swedish “smart” economy is centered around high-skill, high-paying sector jobs, which shrinks the low-income working class. Sweden has a rigid labor market, so entering the workforce requires skills and connections, resources which refugees lack. Therefore, few low-skill sector job openings are left, leaving many immigrants dependent on welfare. Rather than blaming migrants for slow, costly integration into traditionally low-skill low-wage jobs, reform is needed to shift the course of economic potential.

Though immigration serves as a potential solution, its economic ramifications have negatively influenced public opinion on welfare, further weakening the system. As Steffan Mau revealed in “The Tendency of Cultural Diversity to Eat Away at the Welfare State,” society is less likely to pay for those who are unlike them (3). Introducing diversity into a homogenous society lessens the feeling of collective solidarity, which lowers the level of support for taxes and undermines the legitimacy of the welfare state. Further, the aging population is locked into an interesting relationship with immigration. Though elders have a growing need for immigration to pay for benefits, they have harsher opinions and more intense “othering” of immigrants. “With growing age people are less willing to grant immigrants the same social rights” (Mau 4). Some believe culture is being ruined or corrupted, a nationalist sentiment that the world has changed from the way it used to be.

Beyond the attitudes of the older generation, Sweden is witnessing broader political trends of dissatisfaction with immigration and welfare policy. Right wing media outlets have seized on and exaggerated these xenophobic sentiments, further impairing the success of the welfare model. The far right Sweden Democrat party has its roots in the white nationalist movement and focuses its platform on a zero-immigration policy. In the recent September 11th election, the party polled at a record high of 21%, making it a close second in power to the Social Democrats who polled at a record low of 30% (NPR). Their recent popularity can be attributed to far right media groups, who have taken an active role in highlighting cultural shifts and economic controversies. They have shared a narrative that immigration has “brought crime, chaos and a fraying of the cherished social safety net, not to mention a withering away of national culture and tradition” (Becker). Ledarsidorna, a right-wing populist website used by 8% of Swedish internet users per week, serves as an example, as its stories focus almost exclusively on crime committed by immigrants, violence against Sweden Democrats, and the erosion of Swedish identity (Kantor). Real headlines include “Muslim woman refused to shake hands during job interview” and “People hanging Sweden Democrats posters attacked by Stone Throwers.” The media clings onto statistics, publicizing that those born to two non-native parents in Sweden are three times as likely to be registered as a suspected offender than those born to two native parents (Swedish Ministry of Foreign Affairs). However, the media fails to address profiling and systemic bias in identifying subjects, additionally failing to factor in differences in socioeconomic conditions upon upbringing or mention weaknesses in the integration system. The extremity of the media has influenced further public distrust in the social welfare system, so much so that the Government Offices in Sweden attempted to debunk the claim “The high level of asylum seekers means that the system in Sweden is on the verge of collapse” on their official website. The media has slandered its credibility to provide a harmonized society for its citizens, crumbling the basis of the welfare model as citizens struggle to justify support for and are less willing to pay high taxes.

Public doubt over the welfare system and related rise of nationalism reflect an issue larger than Sweden. Political tensions and a nativist sentiment have been felt globally, with the rise of the far right intertwined with issues of immigration. The West in the 21st century has been characterized by the election of leaders that promised to preserve their nations, not only in the Swedish parliament. As my mom’s cousin said over champagne and strawberry cake, “Sweden needs their own Trump.” Meanwhile in the United States, Trump justified building a wall to strengthen border policy with the claim that “Mexico is sending people that have lots of problems, and they’re bringing those problems with them” (Lee). Following trends toward protectionist policy, Boris Johnson passed a controversial resettlement plan to fly illegal immigrants out of the United Kingdom to Rwanda. The evaluation and re-alignment of certain economic and social power structures have been seen as a threat, highlighted by the media, bringing serious fissures in democracy to light. Trending efforts to protect from immigration weaken diversity, and therefore democracy, in response.

The decline of the Swedish welfare state is not only an important topic for Swedes to analyze, but also for those who are looking at the trajectory of democracy. Damage extends to the global realm, as Sweden is serving as a cautionary tale, framed as a failing social system victim to its own asylum policy. This distorted view is being used by anti-immigration parties to stir xenophobia and garner votes in Britain, Germany, the United States, and Italy. Sweden needs to rethink its integration system and consider new ways to boost social trust and progress. Just as Sweden used to serve as a prime model of social welfare, if the system collapses it gives way as yet another example of how right wing nationalism has impeded democracy.

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