Rising inequality is a talking point for lots of politicians across the ideological spectrum. And no one has hit the topic harder than Bernie Sanders. But could the kind of socialistic—or, more precisely, social democratic—ideas he proposes actually address the problem?
The Washington Post’s Wonkblog recently interviewed sociologist Lane Kenworthy about the potential outcomes of social democratic ideas in America. Kenworthy supports much of Sanders’ agenda, arguing that government spending on broad-based social programs would protect Americans from shocks like losing a job and would ultimately improve our lives.
To see what this might look like, we don’t have to wait for Sanders to be elected. Many of the world’s wealthiest countries have already set up systems much like what Sanders envisions. In a 2005 paper, Kenworthy and political scientist Jonas Pontusson considered the effects of these kinds of policies.
Kenworthy and Pontussin looked at “gross market income”—wages, salaries, and such—earned by working-age households in eleven affluent countries in the 1980s and ’90s. This measure incorporated wages made by full-time workers, part-time workers, and the unemployed. The countries in their data set were mostly in Western Europe, with the addition of the U.S., Canada, and Australia. Of the eleven countries, ten saw an increase in inequality.
Notably, the U.S. does not stand out in this regard. The European social democracies often cited by Sanders and his allies—Sweden, Finland, Norway, and Denmark—all saw inequality in household earnings widen. The one exception was the Netherlands, where unemployment dropped dramatically and the employment rate rose by 10 percent during the 1990s.
What does set the U.S. and Scandinavia apart is how different the picture looks after government redistribution.
“At the end of the day, what matters to people is not market income, but rather disposable income,” Kenworthy and Pontussin wrote. “That is, income after taxes and transfers.”
During the 1980s and ‘90s, almost all the countries moved increasing sums of money from higher to lower earners. (The Netherlands is a big exception again here—it greatly reduced its social welfare expenditures as more people went to work.) Nine of the countries became significantly more redistributive. This didn’t eliminate the increase in total income inequality, but in most cases it did reduce it quite a lot.
Meanwhile, the U.S. was the one country that did not become much more redistributive even as market inequality grew. The reasons for this aren’t altogether clear, though it may have something to do with the fact that unions are weaker here than in many countries.
To someone like Bernie Sanders, though, the real point is clear. The way to reduce inequality, exemplified by other rich countries, is very simple. It’s to give lower-earning people more money.