The Incentive Argument: Lessons from Nordic Nations

There is a longstanding conservative argument in the United States that too much “welfare” leads to over-dependence on government largesse (at the expense of working Americans), a huge absence of incentive to work and be productive, and the advent of the so-called “welfare queen” (a pejorative term tinged with racist overtones). As noted in a previous blog, we in the US may be looking at this all wrong in focusing on benefits for the poor. Here we will examine the incentive-dependency issue more closely by drawing on the insights of Finnish author Anu Partanen.

In The Nordic Theory of Everything, Partanen lays out all the ways that Nordic countries, including her native Finland, display the “Nordic theory of love” in the ways they support their citizens. She asks whether Nordic countries are “in danger of creating their own ‘welfare queens’” because of the generous benefits women (and men) receive when they have children. Partanen says, “in Finland a woman could easily spend six years at home without losing her job, if she were to have two or three children in a row and take care of each of them at home for two or three years” (page 88). Partanen points out that Finnish law links someone’s benefits to his or her previous salary. Thus if a woman has not worked before, her maternity benefits will be quite small. In the Finnish system, then, there is little incentive for the woman to keep having children just to receive benefits.

Furthermore, “parental leaves [in Nordic countries] are meant to be breaks in a steady career, not a way of life,” and that’s what happens in most cases. Unlike what usually occurs in the US, working parents in Finland and other advanced nations who wish to have a child obtain three vital benefits: a generous period of time off (usually around a year) in which to raise their child, a sufficient monetary benefit, and a guarantee that they can return to their job after their leave. In contrast, there are as yet no federal laws in the US providing paid family leave or assurance that one’s position can be resumed after a long leave. It is no coincidence that Partanen laid out these arguments in a chapter entitled “Family Values for Real” (pages 63-106).  She concludes, “The American fear that government assistance automatically weakens families, encourages single parenthood, and creates welfare queens is not borne out by the experience of the Nordic countries” (page 89).

On the dependency issue, Partanen outlines some of what she witnessed in the US when she first arrived from Finland (pages 30-45):

• In many ways, American children “take over” the lives of their parents. American parents, noted Partanen, “felt they needed to direct all of their young children’s playtime toward activities that were productive, educational, and goal-oriented.”
• Many teachers throughout the US have discovered that parents were often doing their children’s homework, to assure good grades and future success.
• Day care and nannies are expensive and not always easily accessible.
• When it came to applying for college, American parents often micromanage the application process. In families where parents had not attended college, children often could not successfully apply for college or financial aid because they had no one at home to help them.
• When American students do get to college, unless their parents have saved thousands of dollars, parents (or the students themselves) spend enormous sums on tuition, fees, room and board, and other expenses. The cost of higher education, of course, has become a huge issue in the current presidential campaign.
• Young Americans, because of college loans, often start out their careers with significant debt. At the same time, they are often starting out in low-paying jobs – a vicious cycle that is not good for individuals, families or our society.
• Later in life, adult children are often caught in a sad, if not tragic, squeeze: they are perhaps still caring for children or teens at home while simultaneously caring for aging parents (oftentimes at great expense) and trying to hold down at least one job.

These scenarios mean that our “American way” fosters unhealthy dependencies: children upon parents; children’s success upon good grades, often at the expense of honesty and integrity; elderly parents upon adult children; working people upon their employers (because the job/income is so crucial to the family’s survival). Family situations become even worse when the breadwinner experiences a devastating illness (because health care is so expensive in the US), loses a job (because unemployment benefits are so inadequate or even non-existent) or dies (because there are few social safety nets for the survivors).

In contrast, Finland and other Nordic countries have developed systems that create healthy dependencies – dependencies upon government, in fact. But these dependencies are not only for the poor but for the entire society.

• Nordic governments provide excellent health care for all. No one needs to worry that an illness will bankrupt the family, and working people with elderly parents can depend upon social systems to assist with the care of those elders.
• Nordic governments ensure the breadwinner/parent’s job after a generous parental leave. If a job is eliminated due to economic or other business-related pressures, the government provides ample benefits to keep the family functioning throughout the jobless time. There is also adequate job training to help the jobless find another position.
• Educational systems are geared toward developing the whole child, including their social skills and creativity. As Michael Moore found in his documentary Where to Invade Next, European school systems assign considerably less homework to school children than we tend to, and the results are excellent.
• Higher education in Nordic countries (indeed, throughout Europe) is free or low cost, so families do not need to save for decades to pay college expenses. When young adults go into the working world, they are thus not saddled with enormous debt (nor are their parents).

As Partanen notes, “the Nordic experience suggested that when you took old-fashioned familial dependency out of the equation, children became more empowered, spouses more satisfied, and families more resilient – and even happy” (page 45). There is thus nothing to suggest from the way that benefits are disseminated in Nordic countries that these methods dampen citizens’ incentive to work and be productive.

If we look briefly at what does increase incentives, we might include the following:

• A fair economic system that offers different kinds of rewards for hard work and creativity; money is not always the greatest incentive.
• Rewarding work that people can be proud of and that benefits the wider community.
• Social structures that remove the barriers to success and productivity for citizens, workers and employers and reduce anxiety and waste – health care, transportation, paid leave, job security, a living wage, job training.
• Progressive taxation to pay for generous benefits that aid everyone.

Given these differences between the “American way” and the “Nordic way,” we can see the benefits of changing our social and economic systems. We can thus also begin to rid ourselves once and for all the erroneous and damaging myths about incentives, dependency and “welfare queens.”

Resource

Partanen, Anu. The Nordic Theory of Everything: In Search of a Better Life. New York: HarperCollins Publishers, 2016.