Nordic policies continued to be friendly to women’s work participation in the beginning of the twentieth century. For example, around 1900 the question of protective labor legislation was brought up in the Nordic countries. Inspired by international developments, governments wanted to “protect” women from work in factories. These proposals caused a heated debate. Sweden did introduce a night-work prohibition in 1909, after considerable criticism from the women’s movement. Unlike in other European countries and the United States, a special prohibition on women’s night work was, however, never included in Danish and Norwegian factory laws. Women were allowed to participate in the industrial upheaval of these countries.10
A perhaps unintentional effect of the transition toward welfare state monopolies was that women’s business ownership suffered.
Anita Lignell Du Rietz has written numerous studies on women’s business ownership in Sweden over time. She has shown that many businesses, such as taverns, tailor stores, breweries, and shops were run by women entrepreneurs during the nineteenth century. Other women-dominated businesses that developed over time included schools and pharmacies. However, as the Swedish welfare state grew during the twentieth century, government monopolies were enforced, crowding out private enterprise. Crucially, male-dominated sectors, such as manufacturing, mining, and forestry, continued to be run by private firms. On the other hand, women-dominated sectors, such as health care, child care, and education, were taken over by the public sector. Therefore, a perhaps unintentional effect of the transition toward welfare state monopolies was that women’s business ownership suffered.11 In fact, the development of the welfare state – although aimed at fostering gender equality and successful in boosting women’s labor participations – has limited women’s progress in many ways.
Today, at first glance, Nordic countries seem to have all that is required for women to thrive in the workplace; they have high rates of employment among women, uniquely gender-equal norms, public provision of child care, and generous parental leave programs. It might thus come as a surprise that Nordic countries have relatively few women in management. According to the International Labor Organization, the share of women managers in the Nordics is far below that in the United States. Iceland, the Nordic country with a more limited welfare model, is the only one that comes close (see the following table12).
SHARE OF WOMEN MANAGERS
COUNTRY
PERCENT OF ALL MANAGERS (THROUGH 2012)
UNITED STATES
43
ICELAND
40
SWEDEN
36
NORWAY
32
FINLAND
30
DENMARK
28
International Labour Organization (2015).
It may come as a surprise to American admirers of Nordic-style democratic socialism that these countries have a systematic underrepresentation of women at the top. Although few seem aware of this fact, it has for long been evident that these countries have lower shares of women reaching top business careers than in many other modern economies. A Eurostat study from 1995 found that the share of women among top earners was only 6 percent in Sweden, considerably lower than the 15 percent in France.13 Nine years later a study from UCLA concluded that merely 11 percent of managers and professionals in Sweden were women, lower than in other developed economies.14 How is it that the country with the most gender-equal norms, and an astonishing history of gender equality, underperforms in this regard? Why do we see that the Nordic region as a whole, although having a number of advantages both in terms of policy and gender-equal values, performs so badly?
This seems even more puzzling once we take into account that politicians from both left and right in the Nordics put great emphasis on feminist ideas. Sweden is again one step ahead of the pack. The former Communist Party leader Gudrun Schyman has built up a strong, left-oriented feminist party in the country. The Swedish Feminist Initiative, as the party is called, made international headlines when it won a seat in the European Parliament during the 2014 election. The same year, the Feminist Initiative gained 3.1 percent of votes during the Swedish national election, close to the 4.0 percent limit for entering parliament. This is quite impressive in a country where the mainstream parties are already competing for the feminist vote.
In Sweden a gender perspective, built in part on the idea that gender is a social construct and that there is a classical Marxist struggle between the sexes, underpins much of academic research into women’s issues as well as the political debate. Gender theory is part of the public education system, from kindergarten to doctorate level studies. All this seems to do little, if anything, to pave the way for women’s career opportunities in the modern marketplace. Clearly, it cannot be a lack of feminist ideas and policies, welfare state support, or gender-equal values that is holding the country back compared to the rest of the world. Of course, one could argue that Sweden could have even more of left-oriented feminism, even more welfare state support for working mothers, and even more gender-equal values. But already the country is ahead of the rest of the world in these regards. Why, then, do we find few women who climb to the top of the private sector? There must be an explanation, for Sweden in particular and for the Nordic region as a whole, for why women are held back.
Economists Magnus Henrekson and Mikael Stenkula have written a scientific review titled “Why Are There So Few Female Top Executives in Egalitarian Welfare States?” They note that Sweden, where women have made considerable progress in society as a whole, are clearly underrepresented in executive positions. Even when public-sector executives are included, which inflates the Swedish share of women on top, Sweden has few women executives. The two economists wrote, “Sweden falls behind not only Anglo-Saxon countries, such as the United States and the United Kingdom, but also other large continental European countries, such as West Germany and France [in terms of share of women in intermediate and higher executive positions]. Among the countries compared, Sweden clearly comes out at the bottom.” Henrekson and Stenkula conclude that “broad-based welfare-state policies impede women’s representation in elite competitive positions.”15
Similarly, Monica Renstig, founder of Women’s Business Research Institute in Sweden wrote:
Which country is most likely to foster female managers to reach the highest rungs of power? Would you say it is the US where new mothers are offered 12 weeks of maternity leave, almost no subsidized child care, no paid paternity leave and where there is a notoriously hard-driving business culture? Or Sweden, where new moms and dads have 14 months of fully paid time-off at their jobs? The correct answer is the United States. Despite the fact that Sweden has put great effort into building up its welfare system in the hopes of providing women with more opportunity to have children and a career, in the private sector, few women are breaking the glass ceiling.16
Interestingly enough, the notion that welfare-state policies can limit women’s ability to reach the top is not new. Going back a few years to 1998, a report entitled Gender and Jobs: Sex Segregation of Occupations in the World, published by the International Labour Office noted that an unusually gender segregated labor market had developed in Nordic countries, since many women worked in the public rather than the private sector. The report found that “in terms of differences among industrialized countries, several studies comment on how Nordic Scandinavian countries, and in particular Sweden, have among the greatest inequalities.”17
A key explanation lies in the nature of the welfare state. In Sweden and other Nordic countries, female-dominated sectors, such as health care and education, are mainly run by the public sector. A study from the Nordic Innovation Centre, for example, explains: “Nearly 50 percent of all women employees in Denmark are employed in the public sector. Compared to the male counterpart where just above 15 percent are employed in the public sector. This difference alone can explain some of the gender gap with respect to entrepreneurship. The same story is prevalen
t in Sweden.”18
Similarly, Matti Alestalo, Sven E. O. Hort, and Stein Kuhnle wrote in their paper The Nordic Model: Conditions, Origins, Outcomes, Lessons:
The Nordic countries deviated from other advanced countries because the expansion of the service sector was mainly a welfare state phenomenon. The increasing female labour force participation was paved by the expansion of public employment. Also in this respect Sweden was the leader, followed by Denmark, while Finland and Norway stayed at [a] somewhat lower level. In Sweden, Denmark and Norway a great proportion of this change came through the increase of part-time work but the fate of Finnish women was full-time work.19
The emergence of a large public sector has historically played an important role for women’s entry into the labor market. One reason is that many women have found jobs in the public sector; another is that public services such as child care facilitate the combination of work and the fulfillment of family responsibilities. The expansion of the public sector, not least that of public child care, in part explains why the Nordic nations reached a high employment rate among women earlier than other Western countries. Still today the Nordics have many women in employment. In the long run, however, women’s career success has been hampered by the fact that the labor market entry of women has been so intimately connected with the growth of the public sector. Public-sector monopolies have harmed women’s progress.
Lack of competition and public-sector monopolies tend to limit long-term productive growth.20 In addition, monopolistic employers have limited incentives to treat their employees well. This doesn’t only apply to the Nordics, but also to other countries where the government runs services such as education and health care. If you are a nurse in the United Kingdom and are displeased with how the National Health Service is treating you, what other employer can you turn to? If you are a teacher in the United States, in a time before voucher schools were allowed, who could you turn to if dissatisfied with how public schools were run? These issues are quite relevant for women’s progress in the Nordic countries, where the public sector is large. Monopolistic structures have combined with a strong influence of union wage setting to create a situation where individual hard work is not rewarded significantly. Wages in the women-dominated public sectors in Nordic countries are flat. Wage rises follow seniority, according to labor union contracts, rather than individual achievement. There are, of course, managerial positions also in the public sector, but the opportunities for individual career paths, and certainly for entrepreneurship, are typically more limited compared with in the private sector.
Eva Meyersson Milgrom, Trond Petersen, and Vemund Snartland have looked at the wage differences between men and women in Sweden, Norway, and the United States. They found that “the wage gap is small when comparing men and women working in the same type of occupation for the same employer. Segregation of men and women by occupation accounts for more of the gap in Sweden than in the other two countries.”21 Thus, it seems that the occupation segregation in Sweden – closely connected with public-sector monopolies – is creating distinct disadvantages for working women.
Women make up around 70 percent of those in the various Nordic countries working in the public sector. This is higher than the average rate of below 60 percent for modern economies.22 It should also be kept in mind that women in Nordic countries tend to be particularly overrepresented in local public-sector jobs, where the pay and career progress is more limited compared with the state sector. In Sweden, for example, central government jobs, which tend to be better paying, are evenly divided between men and women, while only one-fifth of those in local government employment are men.23
The notion that public sector monopolies hinder women can be studied more in depth by looking at the change brought on by recent liberalizations. Gradually since the early 1990s, the previous public monopolies have been opened up in Sweden as voucher systems, allowing for-profit schools, hospitals, and elderly care centers to operate with tax funding. A study from the Confederation of Swedish Enterprise has looked at how incomes have developed for the individuals who worked for public-sector employers in welfare, and whose workplaces were privatized during 2002. Privatization drove up wages, evident by the fact that these individuals gained 5 percentage points’ higher wages than similar employees whose workplaces had not been privatized. Individuals whose workplaces become privatized also benefited from gaining a stronger foothold on the labor market. Their risk of being unemployed was lower than those whose workplaces had continued to be part of public monopolies.24
Again we see that the Nordic countries are illustrative of the benefits that come from market reforms. But of course, those who point to Nordic-style democratic socialism as the recipe for gender equality tend to overlook how scaling back the scope of government has promoted women’s careers. Instead they admire the state-mandated quotas that were introduced in Norway in 2006. The law, which requires that 40 percent of board members of public companies be women, is often held up internationally as a feminist success story. The simple line of reasoning seems to be: the quotas aimed to increase the share of women on corporate boards, and achieved this goal. In reality however, the policies have been anything but a success. To begin with, researchers have found that the quotas have been bad for business. A sign that the quota law was not popular among the business community is that share prices fell on average by 3.5 percent following its announcement. Once firms were forced to follow the law, another challenge became apparent: the difficulty to fill the board positions with experienced individuals. The new female directors were on average eight years younger than existing male directors, which suggests less experience.25
Kenneth Ahern and Amy Dittmar have examined the Norwegian evidence by looking not only at the stock price but also the Tobin’s Q. This measure is a commonly used way of examining the market value of firms. The researchers found that firm value as measured by Tobin’s Q fell by over 12 percent with every 10 percent increase in female board members. They wrote, “The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance.”26 More important, the affirmative action legislation has systematically failed to improve women’s career potential. Marianne Bertrand and her coauthors have looked at how introduction of gender quotas affected women in Norwegian firms. They found the following:
•There was no trickle-down effect. This means that while a few women on top gained higher wages due to affirmative action directly benefiting them, the broad group of women employees did not receive higher wages due to a gender shift in board leadership.
•The reform had “no obvious impact on highly qualified women whose qualifications mirror those of board members but who were not appointed to boards.” The affirmative action thus failed to break the glass ceiling in any meaningful way except for benefiting a few elite women.
•There were no significant changes in the gender wage gap or in female representation in top positions. Again, women’s wages and the ability of women in general to climb to the top were simply not affected.
•Lastly, “there is little evidence that the reform affected the decisions of women more generally; it was not accompanied by any change in female enrollment in business education programs, or a convergence in earnings trajectories between recent male and female graduates of such programs. While young women preparing for a career in business report being aware of the reform and expect their earnings and promotion chances to benefit from it, the reform did not affect their fertility and marital plans.”27
As another example, in mid-2015 the Nordic Labour Journal published an article explaining that Norway had no female CEOs in its sixty largest firms, even though eight years had passed since the quotas had been introduced.28 Norway thus seems to be the perfect case for why affirmative action is not a good idea if we want to promote women’s career opportunities. It is quite typical that global admirers of social democracy draw the precisely opposite conclusion. Facts about the No
rdics seem less interesting than the myths of successful socialism in the region. Separating culture from politics is again important. There are indeed good reasons to admire the Nordic countries for their women-friendly attitudes, history, and perhaps also family-oriented policies. But it is evident that the social democratic system, as well as affirmative action, have been largely unsuccessful in promoting women’s ability to climb to the top. In this regard, the American system seems much more women-friendly than the Nordic one.
The social democratic system, as well as affirmative action, have been largely unsuccessful in promoting women’s ability to climb to the top.
Part 4
WELFARE POVERTY
8
THE GENEROUS WELFARE TRAP
BY LAUNCHING THE NEW DEAL, Franklin D. Roosevelt became the architect of the American welfare state. However, Roosevelt was concerned that the institution he was fostering would not live long, since it might destroy the spirit of self-reliance. Two years into his presidency, he held a speech to Congress praising the expansion of welfare programs. During the same speech the president warned that many of the individuals who had lost their jobs during the Great Depression still remained unemployed. “The burden on the Federal Government has grown with great rapidity,” he said, adding that one reason was that many had become dependent on various forms of public handouts. With foresight Roosevelt explained: “When humane considerations are concerned, Americans give them precedence. The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is in violation of the traditions of America.”1 In today’s political climate, Franklin D. Roosevelt’s view on public benefits would seem quite harsh, far from politically correct. Hillary Clinton and Bernie Sanders would never say such things. Most Republican candidates wouldn’t either. Roosevelt’s words today sound like something coming from a radical opponent of the American welfare state. Many would surely be surprised to find that they were uttered by the founder of the very same system.
Debunking Utopia Page 9