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High Income Mobility In Sweden Already Before The Welfare State

September 20, 2011

Early on, Sweden was a country where poor children had a good chance of ending up financially stronger than their parents. This is one conclusion reached in a doctoral thesis in Economic History from the School of Business, Economics and Law at the University of Gothenburg. Researcher Birgitta Jansson shows that the relative poverty in Sweden decreased from 1925 to 1983, with 1983 being the year with the lowest level of income inequality. However, then the pendulum started to swing back towards growing income differences.

Using data from Gothenburg, Jansson studied Swedish household incomes from 1925 to 2003. She looked at income mobility, poverty and income distribution in society, and found that Sweden had a high level of income mobility already before the rise of the welfare state, meaning prior to 1958. Children with poor parents had a good chance of ending up financially stronger than their parents.

‘The fact that Sweden had a high level of income mobility was probably mainly a result of the transition from farming to industry and that we have been a rather homogenous country for a long time,’ says Jansson.

Her research shows that the country’s income differences decreased from 1925 to 1983. Poverty decreased from 1925 to 1947 and then again from 1958 to 1983. During these two periods, the country’s economic growth benefitted the poor through reduced unemployment and decreasing income differences. Yet then the tide turned.

‘After 1983 the trend turned towards growing income differences and increasing relative poverty. This was due to major labour market and tax reforms and that the stock market really started to take off. These changes benefitted the already wealthy more than any other group. Add to this that the general attitude towards very high incomes changed around this time. It became acceptable to make a lot of money,’ says Jansson.

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