Challenges to the Swedish Welfare State
Is the Social Democratic Model of Welfare sustainable in the face of global challenges like increased immigration and financial crises?
Social Democratic Welfare is a model of welfare first outline in Esping-Anderson’s 1989 book The Three Worlds of Welfare Capitalism. It is a welfare system which features high levels of decommodification (empowering workers rather than the market) and destratification (minimizing inequalities), as well as a large state role.
Liberal Welfare is another model outlined by Esping-Anderson (1989) and features more commodification (larger market role) and stratification (larger class differences, with a minimal state role; think laissez-faire economics meets welfare policy.
Introduction
The Social Democratic model of welfare, as with other traditional models of welfare, faces serious challenges as the world becomes more interconnected and globalized. This paper will analyze the sustainability of the Swedish Social Democratic welfare state as a study for the overall stability and long-term sustainability of the Social Democratic model overall. It will first compare the Swedish welfare response after the 1990 and 2008 financial crises, two examples of the challenge of globalized economic connections for Social Democratic welfare. This paper will then discuss the impact of migrants, a telling sign of the sustainability of a policy model as migration is only increasing. The comparison of how migrants fare in Sweden and Ireland, a liberal welfare state, will exemplify the comparable sustainability and stability of the Social Democratic welfare model. When discussing welfare responses and impacts, this paper will also consider narratives and public opinion as it shapes and is shaped by welfare, again comparing Social Democratic and Liberal approaches to answer the question of sustainability for the Social Democratic model. Finally, a conclusion will be drawn, outlining both the sustainability of the Social Democratic welfare state as it stands today and the potential for future adjustments to a globalized world.
1 Financial Crises
1.1 Comparative Policy Responses
Oftentimes, crises will open up new policy directions and reflect the sustainability and stability of a particular policy or political regime. The 1990 and 2008 financial crises allow for a critical look at Sweden’s welfare policies. Firstly, these crises clearly reflect the global connectivity of Sweden’s economic and therefore political system; economic downturns in the 1990s were centered in the United Kingdom and United States, two important Swedish export markets, and 2008 saw complications with Swedish banking in Baltic countries (Palme, 2019). This global connectivity is a factor in both the crises and the policy response. In the 1990 crisis, there was a large impact on employment which created a shortage in tax revenue, forcing subsequent cuts in social services which left even more Swedes jobless (Ibid., p. 231). These cuts reflected the loss of tax revenue but also the restriction of social spending by the Bank of Sweden’s foreign creditors who doubted government capability and therefore maintained high interest rates. Trimming benefits and the overall policy cutbacks following the 1990 crisis ‘were not out of free choice’ (Ibid., p. 239). However, in 1998, the policy cutbacks were overall dramatically reversed, and universality of social policy was equal or better than pre-crisis in 1980, reflecting the core values of Swedish politics when not redirected by foreign involvement (Lindbom, 2001). Yet while employment recovered overall, a large influx of immigrants in the 1990s suffered from longer term unemployment than Swedish citizens.
The 2008 recession similarly resulted in an increase in unemployment. However, unemployment was primarily in the manufacturing sector and cuts in social services did not result in unemployment in the social sector as in 1990 (Palme, 2019, p. 232). Policy responses to this crisis were seen in decreased benefits and increased restrictions to accessing benefits; both the monetary amount and number of people receiving benefits decreased. Unemployment coverage went from 87% in 2006 to 74% in 2008 (Ibid., p. 240). While the GDP recovery was swift, the real impact was a change in policy between the 1990 and 2008 crises. Earned income tax credit, or jobbskatteavdraget, was reduced for ‘those with earnings above a certain minimum’ and not for those ‘without employment earning’ (Ibid., p. 240). During and after the 2008 recession Sweden saw a significant increase in poverty levels in those lacking employment earning, reflecting the differing taxation. This affected population overlaps with the unemployed migrant population that will be discussed later as a factor in the changing Swedish welfare state.
The 1990 and 2008 crisis share an international source of financial strain, as well as a similar policy response. Yet while both crises resulted in significant benefit cuts, the 2008 response reflects an increase in the stratification of benefit provisions, shrinking the coverage dramatically from pre-recession numbers. With the relatively quick GDP recovery and minimal unemployment beyond manufacturing, the 2008 crisis response may seem more effective compared to the widespread unemployment and forced benefit cutbacks of the 1990 crisis. However, the 2008 crisis revealed flaws in pre-recession policies that were not a factor in the 1990s. Changes in tax policies increased stratification after the 2008 recession. By comparing these two policy responses, two decades apart, one can infer that slight shifts away from destratification-focused policies may have an impact on the effectiveness of the Social Democratic welfare state, but if universalism is generally maintained, Sweden will be successful in combating future financial crises.
1.2 Social Democratic Narratives
The slight move away from destratification, as seen in the aforementioned jobbskatteavdraget, as well as slight decreases in benefits can reflect a shifting narrative around social policy. Narratives regarding social problems are essential facets of different welfare models. Greve (2022) argues that slight increases in economic inequality feeds narratives about individual rather than structural causes behind social problems, impacting the solidarity essential to the Social Democratic model. This focus on individual responsibility is a key aspect of liberal welfare states, which focus on empowering the labor market rather than reducing inequality partly as a result of this narrative (Esping-Anderson, 1989, p. 74). The Social Democratic welfare model places a lot of emphasis on welfare as a mechanism for equality, aiming for universalism through its policies and relying on a narrative of social solidarity and trust in government for successful implementation of high taxes and high redistribution. This narrative is subscribed to by long term residents and citizens of the country, and often eligibility rests on ‘being a citizen’ (Ibid., p. 85). If xenophobia increases in the face of migrant needs, the citizen-migrant division could contribute to a narrative which undermines Swedish welfare.
2 Migration
2.1 Migration Narratives
Beyond changes in tax policy, increased migration is another major factor that has impacted the traditional social democratic welfare state. Regan Damron and Markus Crepaz (2009) argue that Social Democratic welfare approach results in less stigmatization and more integration; a narrative that appears to foster receptivity to migrants. In analyzing both universal and selective Swedish welfare policies it was found that with more universal policies, beneficiaries are measurably more trusting (Damron & Crepaz, 2009, p. 442). But migration poses challenges to the ‘traditional social solidarity’ required for a successful Social Democratic welfare regime (Greve, 2022), partially because social ‘trust’ is more convenient when ‘societies are rather homogeneous’ (Damron & Crepaz, 2009, p. 442). Survey results showed thatover 46% of Swedes believe migrants ‘abuse the system’ and 60% believe they take more than they put in (Ibid., p. 450). Despite these numbers, Social Democratic welfare states exhibited the lowest levels of xenophobia regarding welfare provisions compared to Liberal and Conservative welfare states, and Sweden’s ‘welfare chauvinism’ has actually decreased from 1995–2003, differing from other Scandinavian states (Ibid., p. 451). This narrative fostered by the Social Democratic state appears to advocate for its sustainability and potential to integrate migrants into Swedish society, or at least fare better than Liberal and Conservative states; Nordic countries held the most positive views about ‘migrant contribution’ to society (Greve, 2022). However, the reality of migrant integration may tell a different story.
2.2 Effects of Migration
When discussing the aftereffects of the 1990 financial crisis on Sweden, the immigrant unemployment rate was briefly mentioned; high rates of immigrant unemployment lasted longer than citizen unemployment after the crisis (Palme, 2019, p. 231). In a study of Swedish welfare comparing the years 1980 and 1998, Lindbom (2001) identifies a 62% increase in the reliance on employment benefits, as well as a large increase in social assistance expenditure. The primary factor was not an issue of welfare retrenchment, Lindbom argues, but the changing demographic of the Swedish population, specifically the influx of immigrants (p. 182). In ‘almost all European countries’ social assistance benefits are received by immigrants at higher rates than non-immigrants (Hooijer & Picot, 2015, p. 1880). While Swedish welfare is in some ways ‘even more universal’ in 1998 than 1990, showing no real signs of retrenchment, the increase in social expenditure is significant (Lindbom, 2001, p. 180).
What, then, explains the reliance of migrants on social assistance benefits? Hooijer and Picot (2015) argue that a high number of non-labour immigrants and a generous welfare state combines to produce ‘high migrant disadvantage’ (p. 1890). Sweden’s ‘relatively liberal refugee policies’ have resulted in immigrants making up 8.8% of the total population, producing this aforementioned migrant disadvantage (Ibid., p. 1895). This disadvantage is explained by inaccessible labour-reliant benefits which require an extensive employment record. Despite Sweden’s integration policies and efforts to aid migrants’ labor market success, finding highly skilled work as an immigrant is a difficult reality. Often migrants either lack the qualifications or find their qualifications are ‘not recognized’, and businesses are not typically willing to ‘take a risk and hire migrants’ (Ibid., p. 1895). These ‘exclusionary mechanisms’ limit the reach of Sweden’s universal policies and result in migrants relying on social assistance rather than employment benefits, leading to large gaps in equality ‘between migrants and natives’ (Ibid., pp. 1896–1898).
2.3 Liberal Response to Migrants
This gap is not insurmountable, however. The comparatively positive narratives around migrants in Social Democratic welfare regimes lend themselves to potential political support for better integration policies and migrant support than other countries with less welcoming perspectives. As a comparative example, Liberal welfare states do not have sufficient benefits and social support to ensure equality in benefit reliance for immigrants and natives. In Ireland’s liberal welfare state migrants are typically positioned in lower-paying jobs than the native population and receive benefits that still place them below the poverty line. Ireland lacks the integrative policies that Sweden implements and is relatively closed to non-labour migrants. Additionally, migrant rights are actively limited by the state through restricted access to citizenship and a ‘two-year residence condition’ for receiving already minimal means-tested benefits (Hooijer & Picot, 2015, p. 1896). Citizen concerns in Liberal welfare states like Ireland are much more prominent regarding immigrant impact on wages and social assistance (Damron & Crepaz, 2009). Both liberal and social democratic welfare models clearly face challenges with migrants, and yet the social democratic orientation towards migration lends itself to future success and flexibility with migrant integration. Sweden can sustain Social Democratic welfare as long as social solidarity can adapt to a heterogenous society.
Conclusion
The economic and migratory facets of globalization pose challenges to Social Democratic welfare, as seen in Sweden. Financial crises in two distinct time periods have tested the stability of the Swedish welfare state and proven its strength; the success of the Social Democratic model was seen in the employment recovery of both the 1990 and 2008 crises, and, despite short-term retrenchment of welfare, Social Democratic policies prevailed. Both crises revealed the separate, distinct challenge of immigration and the disproportionate unemployment and economic inequality of new migrant populations in Sweden. Gaps in effective integration of migrants into the labour market resulted in unequal access to welfare. However, the analysis of migration in Ireland’s Liberal welfare state revealed that Sweden is better positioned to adjust policies while maintaining a Social Democratic approach, whereas the Liberal approach was entirely unwelcoming to migrants. In all these welfare challenges, the narratives that Social Democratic and Liberal welfare create regarding individual responsibility, solidarity, and migrant-citizen divides are indicators of the success and sustainability of welfare approaches. The relatively positive orientation towards migrants in Sweden is a huge indicator of Sweden’s capability to implement generous and welcoming integration policies, as long as solidarity and trust is maintained. While Social Democratic welfare will not look like it first did in homogenous, sheltered, nation-states, the future of Social Democratic policy approaches looks promising, at least compared to Liberal welfare models.
Works Cited
Damron, R. & Crepaz, M. M. L., 2009. Constructing Tolerance How the Welfare State Shapes Attitudes About Immigrants. Comparative Political Studies, 42(3), pp. 437–463.
Esping-Anderson, G., 1989. The Three Worlds of Welfare Capitalism. 1 ed. Cambridge: Polity Press.
Greve, B., 2022. Constantly changing Nordic welfare states: A Bermuda triangle?. Social Policy & Administration, 56(4), pp. 543–548.
Hooijer, G. & Picot, G., 2015. European Welfare States and Migrant Poverty: The Institutional Determinants of Disadvantage. Comparative Political Studies, 48(4), pp. 1879–1904.
Lindbom, A., 2001. Dismantling the Social Democratic Welfare Model?. Scandinavian Political Studies, 24(3), pp. 171–193.
Palme, J., 2019. Sweden: In Times of Two Crises. In: 1, ed. Welfare and the Great Recession: A Comparative Study. Oxford: Oxford University Press, pp. 228–246.
