Saturday, November 03, 2007

If Sweden Left The EU and Joined the US, It Would Be the Poorest U.S. State, Below Even Mississippi

There is some lively discussion in the comments section of this recent post about poverty, Sweden, income inequality, etc. One issue is about the unemployment rates in Sweden vs. the USA, which are displayed in the graph above. Over the last 15 years, the average jobless rate in Sweden was 7.3%, more than two percentage points higher than the U.S. average of 5.2%. I think it would safe to assume that if Sweden was a U.S. state, it would have had the highest unemployment rate in the country since 1993, higher even than Mississippi, Michigan or Alaska.

And for an analysis of Sweden's economic condition, I suggest reading this post: "
Swede and Sour," by Swedish author and blogger Johan Norberg, here are some excerpts:

If Sweden left the EU and joined the U.S. we would be the poorest state of America. Using fixed prices and purchasing power parity adjusted data, the median household income in Sweden in the late 1990s was the equivalent of $26,800 compared with a median of $39,400 for U.S. households - before taxes. And then we should remember that Sweden has the world´s highest taxes.

The Swedish Research Institute of Trade, which conducted the study, underlined that African Americans, who have the lowest income in the United States, now have a higher standard of living than an ordinary Swedish household.

Between 1870-1970, Swedish growth was the highest in the world, next to Japan's. In 1970 Sweden was the fourth richest among the OECD-members, after USA, Luxembourg and Switzerland.

After more than 30 years of high taxation and an expanding welfare state, Sweden is not the 4th richest OECD-country any longer, but the 15th. This hurts the least well off most. Between 1980 and 1999, the gross income of Sweden's poorest households increased by just over 6% while the poorest in the U.S. enjoyed a three time larger increase.

Bottom Line: Unless you think that Mississippi and Michigan represent ideal economic models of growth and prosperity, you probably shouldn't think about Sweden as economic nirvana.

Update: According to this study from Swedish think tank Timbro ("EU vs. USA"), "This report is about the fact that per capita GDP is lower in most of the countries of Europe than in most of the states of the USA." Further, "Sweden would be the seventh poorest as a state of the USA."


At 11/03/2007 12:56 PM, Blogger spencer said...

According to the CIA world factbook real per capita GDP on a PPP basis is $43,800 in the US and $32,200 in Sweden.

This makes Swedish per captia gdp about 75% of the US. On this basis they would rank between North Dakota and Utah and 13 states would have a lower per capita GDP.

Moreover, according to the same source the share of income going to the bottom 10% of the population in Sweden is 3.7% while in the Us it is 1.8%. So if you used this measure to rank the relative well being of the bottom share of the population Sweden would rank roughly around the middle of American states.

What is the source of the data
you are quoting. It clearly disagrees significantly with the data reported by the CIA?

At 11/03/2007 3:39 PM, Blogger Mark J. Perry said...

From this website:

"Relative to households in the United States, Swedish family income is considerably less. In fact, the study concludes, average income in Sweden is less than average income for black Americans, which comprise the lowest-income socioeconomic group in this country.

The research came from the Swedish Institute of Trade, which, according to Reuters, "compared official U.S. and Swedish statistics on household income as well as gross domestic product, private consumption and retail spending per capita between 1980 and 1999."

The study used "fixed prices and purchasing power parity adjusted data," and found that "the median household income in Sweden at the end of the 1990s was the equivalent of $26,800, compared with a median of $39,400 for U.S. households." Furthermore, the study points out that Swedish productivity has fallen rapidly relative to per capital productivity in the USA."

Spencer: Note that the study compares "median household income," not GDP per capita.

At 11/03/2007 5:05 PM, Anonymous Anonymous said...

Mr. Perry the web page you cite as a source for your information is one man's opinion.

William L. Anderson, the author of the page you cite, was not even good enough to provide links to the source of his opinion.

Allow me to "cherry pick" a quote from Mr. Anderson's article...the one you quote from at:

While I have never been to Sweden (even though I have relatives there), I would think that even the poorest sections of Stockholm and other Swedish cities are more livable and attractive than what one finds in many U.S. cities.

At 11/03/2007 5:43 PM, Anonymous Anonymous said...

But the four members of ABBA are all millionaires. That should count for something, although it should be noted their income derives almost entirely from sources outside of Sweden.

At 11/03/2007 5:55 PM, Anonymous Anonymous said...

Smells like cherry picking to me. For some reason, this concentrates on national income and GDP per capita only. If they worked say, 1/2 as much but earned 2/3 of the income, then I say they've made their choice, and they've chosen leisure instead of higher income. And there's nothing wrong with that.

At 11/03/2007 7:20 PM, Anonymous bob wright said...

I can't believe we're using CIA data. The same CIA that can't get intelligence correct is now supposed to get economic data correct?

At 11/03/2007 8:49 PM, Anonymous Anonymous said...

bob wright said...

I can't believe we're using CIA data. The same CIA that can't get intelligence correct is now supposed to get economic data correct?

Can you cite sources for your allegations or are you just trying to reduce the perceived value of an argument you don't agree with?

At 11/04/2007 9:36 AM, Blogger Ironman said...

I think you've just inspired a post on the topic - we built a dynamic table comparing individual US states and the EU-15 nations using data from 2004, but we have the data through 2006 now, so we can certainly update it.

For a little different take, here's a chart showing the relative positions of individual US states and EU nations based upon their health expenditures and GDP for 2005.

At 7/24/2008 6:34 AM, Anonymous Anonymous said...

According to the CIA World Factbook, updated June 18, 2008, the US has a nominal per capita GDP of just under $46,000. Sweden, by contrast, shows up on the table with a figure of $50,415. I suppose you will argue with the methodology, or say that PPP is the only reasonable figure to look at (PPP is also important, but one cannot cherry-pick data). Also, economic growth was higher in Sweden than the US.
(2008 figures for nominal GDP not available from CIA website, for some odd reason, just PPP)

At 7/24/2008 6:44 AM, Anonymous Anonymous said...

Mark Perry:
Using median houshold income to compare the US and Sweden is like using average ball speed to compare Tiger Woods and Roger Federer. It is quite meaningless, as the societies are entirely different. In Sweden, for example, health care is free, as is education from preschool to graduate school. In the US, these items are often paid for to varying degrees out of pocket, which means it is deducted from income. Also, US households may be larger than Swedish households.

At 10/23/2008 10:06 PM, Anonymous Anonymous said...

Sweden had a financial crisis in the early 90s (similar to what is happening in the US today).

It would be equally misleading to in a few years compare Sweden and the US with a diagram showing unemployment rates from 2008. It would probably look quite different.

Also, you can not compare the unemployment rates without considering how they are calculated. In Sweden people without work can be "hidden" from the statistics in the free education system and programs. On the other hand, the US figure does not include everyone not working, which is true to a higher extent in the official Swedish statistics.

Your bottom line does not make sense since the "economic models of Mississippi and Michigan" are in no way similar to the social-democratic-capitalist model of Sweden, and years you chose to compare are not representative.

Your post reads more like a political argument than what I would expect from someone with a background in research...

The US has been doing great, and you can show it even by sticking to relevant data.

At 11/05/2008 3:13 PM, Anonymous Anonymous said...

"It’s true that the US has the highest GDP per capita in the world. Sweden, the bête noire of conservatives, has a GDP per capita comparable to that of Mississippi, one of the poorest states in the Union. But that statistic misleads, because it is skewed by the overwhelming rates of income inequality here. Median family income in Sweden is far higher than in Mississippi – comparable to that of the US as a whole. And, of course, the Swedes achieve that while taking longer vacations, having longer life-expectancies, etc. The average American is not significantly better-off than his counterparts in other developed countries, and the admirable growth of the American economy “as a whole” has not trickled down to the average worker. Median Family Income (adjusted for inflation) rose only 0.5% per year from 1979 to 1997."

At 11/13/2008 8:28 PM, Anonymous Anonymous said...

I'm from Sweden but has lived in the US for 13 years. I've been fortunate to earn very well here in the states but know many people who struggle as well. I would say it is easier to find a 6-figure job in the US but it is also easier to find yourself in powerty too.

Here are some of my counter arguments to Perry's post:

1) Employment utilization (% of eligible workers are actually working) in Sweden is higher than in the US by about 4%. The US is on par with France (about 76% if I remember correctly) while Sweden's is close to 80%. This is a better measure of employment/unemployment imo than the flawed unemployment rates reported by both the US and Sweden.

2) In the US it is everyone's responsibility to save for 401K, pay medical insurance, save for college etc. In Sweden this is mostly covered by taxes. I don't think GDP per capita adjusts for this which is one reason why it is a flawed measure.

3) Hourly employment cost in Sweden is about the same as in the US. This means that the wages before taxes are about the same. In Sweden the employer pays 35% to the government in SS & Medicare taxes while in the US it is closer to 8%. Take the difference (27%) and you can adjust Sweden's GDP/capita by: 32,200/(1-27) = 44,109. This makes sense to me and it results in the GDP/capita to be the same as the US which the employment cost indicates.

4) In Sweden you get 32 days of vacation minimum and 16 months of maternity leave. You get paid $150 per child every month. You live longer and healthier.

5) It is a myth that the US is more upward mobile. Studies show that in the US your social status is more likely determined by your parents than in Sweden and most other developed nations. This makes sense intuitively as well as higher education is very expensive in the US and quality of schools vary widely.

Not stating that Sweden is better than the US but don't like the bias in this blog.


At 10/25/2009 3:44 AM, Anonymous Anonymous said...

Economist seem to be forgetting that America's economy nearly collapsed, even with our awesome GDP and low unemployment. Our economic indicators look great when your borrowing from Peter to pay Paul. Americans have build 3500 sqf homes for a family of three, two SUV's in every drive and propped up all this wealth with huge trade deficits with our neighbors. Swedish people have wisely traded the self destructive notion of nation wide wealth for stability and some much needed time off. Americans however seem all to happy to work themselves to death, every year extending their age for retirement further and further while spending themselves and the rest of us into the poor house. Our growing distorted sense of what makes us a great nation has nearly spent us into bankruptcy. Our middle class jumps at every Wall St carrot that comes down the pipeline and this last boondoggle with the housing industry nearly bankrupted us all, well not all of us hint hint. Its painfully clear that there is no invisible hand at work in our economy only the greedy little mitts that continue to hoodwink the middle class who's effect trickles down to poor factory workers and those well to-do African Americans in Mississippi who just want a roof over their heads, food in their bellies and to know that their children will receive a fair shake in life. One last thing to point out is that its American economist who like to point out the glowing differences between our two nations, with their GDP chest pounding and howling the merits of Americas economy and her broad sweeping umbrella of financial coverage for all. You guys would do well to remember the lessons of the past 2 years and try some humility when comparing the economic well being of America to Europe. Remember, Europeans aren't flooding our borders everyday nor are they inundating our hospitals or clamoring to import the American way of life.


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