New London Day October 15, 1964
Sylvia Porter

What Effect Has Welfare State
Had on the Ambition of Swedes?

STOCKHOLM—Does cradle-to-grave security lessen an in­dividual’s ambition to work? Does a government guarantee of basic health insurance and an adequate old-age pension dis­courage individual purchases of private insurance? Does a full-employment welfare state slash the rate of savings, boost the number of suicides, alcoholics, illegitimate babies?

The questions imply the ac­cusations which are frequently made about the impact of a welfare state on the individual, and we must weigh them as we debate the adoption of new welfare measures in the U. S.

In Sweden, the most advanced welfare state in the world, the accusations have long been made. Thus, I asked the ques­tions wherever I turned here and found these answers.

Ambition Still High

1. Does a cradle-to-grave welfare society slash the individual’s ambition and incentive to work hard for higher earnings?
2. There is no evidence what­soever that it has in Sweden.

One reason is that, despite Sweden’s high level of income taxes, workers an d corporations still can keep enough after taxes to make it decidedly worthwhile to try to earn more.

The average income tax paid by a middle-income family is 30 to 35 per cent, the highest effective individual rate is 70 per cent, and the total tax paid by a corporation is around 50 per cent. As Ambassador Sven Dahlman, vice president of the Federation of Swedish

Industries, remarked, “even the steepest rates leave enough to encourage us to work for higher incomes.”

Another reason is Sweden’s system of piece-rate wages which, of course, spurs incentive and permits workers to earn far more than the apparent I wage scale.

Means Greater Pension

A third reason is that the Swedish worker is fully aware that his pension depends on his level of earnings and that the higher his earnings go, the high­er will be his future pension.

A Royal Commission study a while ago dug into this precise question, concluded there had been no decline in ambition to work.

1. Does a government guar­antee of basic health insurance and an adequate pension discourage purchase of private in­surance ?
2. Neither has done this in Sweden to date.

When national health insur­ance was introduced in 1955, the exception was that this would cut sharply into private health insurance sales. Instead, sales have been rising steadily as the Swedes have tried to add to their basic health insurance.

When a supplementary, ex­ceedingly generous pension sys­tem was introduced in 1960, again the expectation was that sales of private insurance would slump. Instead, sales of private life insurance rose ten per cent in 1960, also have continued

climbing.

Incidentally, the development of social security in the U. S. has had a similar effect. Year after year

our private insurance sales have jumped to record totals as millions of us have attempted to build our own old-age protection on top of our basic social security benefits.

May Be Saving Less

1. What about the rate of cash and other savings?
2. The answer here is not so clear. It could be that theSwedes are saving less in cashbecause of their awareness of inflation. It could be that because of their welfare protection, they feel more inclined to spend-as-they-live on things and services and less inclined to save for old-age emergencies. The statistics show, though, that savings in forms other than insurance have risen from less than four per cent of after-tax; personal incomes in 1959 to more than eight per cent now.
3. What about the rates ofsuicide, alcoholism, immoral­ity?
4. Sweden does have a high rate of suicide, a major prob­lem of alcoholism, a disturbing rate of children born out of wedlock.

But I could find no evidence that the problems are due to the fact that her people have secur­ity against joblessness, catastro­phic illness, poverty, etc.

More likely reasons could be her long, hard winters, of her crowded cities and isolated rural areas.

You well may bitterly oppose extension of welfare measures here because of their cost, inevitable “compulsion” and controls. But the commonplace accusations just don’t stand up under objective analysis