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Social Security: The Nordic Way of Dealing With Crisis

By Arpita Mary Abraham

Since the onslaught of the global pandemic, experts all over the world are looking at how Nordic countries- Sweden, Denmark, Norway, Iceland, and Finland are dealing with the crisis. Even though individual country responses have been very different, something very common runs through their lockdown plans. To begin with, it is imperative to understand how Nordic models work. According to Investopedia, the Nordic countries have adopted a combination of social welfare and economic systems, merging features of capitalism, such as economic efficiency and the market economy along with social benefits such as income distribution and state pensions. Social services such as education and child care are funded by taxes. Unions ensure that wages are high thus eliminating the need to have a minimum wage legislation. Political freedom and low levels of corruption together have ensured one of the strongest social safety nets in the world. Tax rates in these countries are high, which in turn helps these governments to build strong social security nets. In 2018, Sweden’s top personal income tax rate was 61.85%, 55.8% in Denmark and 38.52% in Norway. This is high compared to the top tax bracket in the United States, which was 37% in 2019. This democratic socialism or the Scandinavian model has also provided important lessons in the global fight against COVID-19. In this article, the focus has been narrowed down to one country in particular – Norway.

According to the 2019 World Happiness Report, Norway ranks third among a total of 156 countries. This has been mainly due to its phenomenal social support system, lack of corruption, and freedom. According to a report published by NY Times, the elementary idea that welfare benefits and high taxes will cause people to work less might be considered ‘backward’ if one looks at the social safety net in place in Norway. It has been known that some of the highest employment rates in the advanced world are in places with the most generous welfare systems and highest taxes. Countries like the United States and the United Kingdom have smaller social safety nets and relatively low taxes, face substantially lower rates of employment. Policies and subsidies in Norway and other Scandinavian countries work in such a way that they ensure flexibility to choose for people facing a trade-off between taking up a job or staying at home to take care of their kids. Child care benefits and subsidies provide people, especially women, with better opportunities to work. Combining this with flexible work hours, transportation options, strong labour unions and higher pay, would give reasons for the high employment rates in these countries.

Taking a closer look at Norway’s social security net would help us to better understand its nuances. Due to high educational attainment, the Norwegian labour force is considered to be one of the most educated in the world (measured by the share of its working population that has completed secondary or tertiary education). According to SGI Network, significant share of its budget is spent on public education. Norway is also considered to be a very equitable society, with the lowest poverty rates in the world. Family support expenditure, in the form of child allowances, child care, and paid leave arrangements exceed 3% of the GDP. This is well above the European Union average. Social insurance spending for disability, sickness and occupational injury benefits are also very generous. As for the healthcare sector, Norway has an extensive system, which provides high-quality services to its resident community for free. Infant mortality rates are one of the lowest in the world. The Norwegian government finances 84% of Health care spending. Health care expenditures total about 12% of the country’s GDP, which is a third more than the OECD average.

The labour market participation rate for women is 70% in Norway, which is one of the highest in the world. The country also has a family policy that promotes equal opportunity and equitable representation of women, especially in political and business leadership positions. 12 month paternal/ maternal leave programs have also helped to increase paternal involvement in the first few years of children’s lives. Married and unmarried couples are also treated in a non-discriminatory way as tax declarations for labour incomes have to be filed individually, irrespective of a person’s marital status. Single mothers also get institutional support through cash transfers and the provision of day care. Integration policies for immigrants focus on access to education and employment. This includes additional school resources allocated to immigrant children and free language training. Cultural identity has also been preserved by offering children additional classes in their mother tongues. Norway has also been a leading contributor to bilateral and multilateral development activities such as education for women, actively taking part in the fight against deforestation and climate change and calling for the sustainable development of oceans.

With the onset of the global pandemic, Norway has introduced various measures to help combat the spread of COVID-19. Reduction in employer’s social security contribution obligation and payment deadline extensions have been proposed. The number of leaves under parental care has been increased considering closed schools and child care needs. Through this, it is imperative to understand that having a strong social security net is essential. Increased immigration, high unemployment rates and Norway’s shift from being a homogeneous to a heterogeneous society is bringing in more challenges. These challenges might require redesigning social security nets, but the elementary idea that social security nets are significant to economic stability remains. More importantly, this also gets rid of the notion that welfare programs reduce people’s willingness to work.

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