Wrong Juholt: Sweden is still more equal than U.S in 1980s

Increasingly, newspapers have “Fact-check” sections where they attempt to adjudicate political controversies.

The problem with is that very often, the people who write these articles are journalists, not the arbitrates of the objective truth. But since people trust the newspaper as giving them fact rather than subjective opinion, this becomes a problem when the fact-check itself requires fact-checking.

A couple days ago the leader of the Social-Democratic party argued that Sweden today has higher income inequality than the United States in the middle of the 1980s.

The right-of-center daily SVD has a “Fact-Check” of this claim, and concludes that the Social Democrats are mostly right in their claim that Sweden is as unequal as the U.S was in the mid-1980s.

But the OECD tells a different – and in my view more plausible – story.

Here are international Gini-data from the OECD. The higher the Gini-coefficient the higher income inequality. Since the state taxes the rich and subsidizes the poor, inequality in both countries is lower after taking taxes and transfers into account.

The U.S Mid-1980s Before Tax and Transfers 0.436
The U.S Mid-1980s After Tax and Transfers: 0.337

Sweden Late-2000s Before Tax and Transfers: 0.426
Sweden Late-2000s After Tax and Transfers: 0.259

Even before tax and transfers, Sweden is still slightly more equal. (At any case we should we ignore the effect of the welfare state, since the discussion is precisely about government policy?)

SVD was sloppy in it’s “Fact-Check”.

Here is the Gini-coefficient of disposable income 1975-2008, again from the recent OECD report “Divided We Stand: Why Inequality Keeps Rising”.

Note, as my brother Nima Sanandaji did, that income inequality was also rising in Sweden during long periods of Social-Democratic rule, for instance 1994-2006. There has been a secular rise in Inequality in most OECD-countries. Likely the cause is common changes in the global economy (globalization, rise in the premium for human capital) rather than the fault of any particular government.

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