Rising Inequality in the Egalitarian Nordics

Abstract

The chapter demonstrates that while the Nordic countries remain relatively affluent and egalitarian, inequality of disposable household income has been on the rise over the past 30 years. The increase in income inequality and relative income poverty has been strongest in Sweden and more modest in the three other countries. In Sweden, and, to a lesser extent, in Finland and Denmark, a reduced role for social transfers among the working age population has contributed to a decline in relative income levels enjoyed by the bottom quintile. Often in the wake of serious macro-economic downturns, politicians have reduced the generosity of social transfers to improve labour market incentives. Even if these reforms have had the intended effect on employment, the increase in earnings has not been sufficient to replace the loss of social transfers.