Income Inequality Grows Across Nordic Region

The amount of benefit increases hasn't risen at the same rate as wages - which doesn't help close the inequality gap.

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File picture of elderly person walking in the street / Credit: Benjamin Suomela / Norden.org

Across the Nordic region the rich are getting richer, and the poor are getting poorer.

That’s the conclusion of a new report from the Nordic Council of Ministers which looked into income inequality in Finland, Sweden, Denmark, Norway and Iceland. Some of the main reasons seem to be that traditional welfare systems are becoming less supportive, while benefit levels are not keeping up with wage increases.

“Increased income inequality is an international phenomenon” says Jesper Roine, one of the editors of the 2018 Nordic Economic Policy Review.

“The [income inequality] increases in the Nordic countries are from low starting points but have been higher than the OECD average in Sweden, Finland and Denmark” he says.

Inequality Worse For Those On Lowest Incomes

In many Western countries, the increase in income inequality has been mainly due to major differences in wage levels and other market incomes associated with new technology, globalisation and weaker trade unions.

However, the new report finds the situation is different in the Nordic countries, where a major factor has been that tax and benefit systems are giving out less money, mainly because benefits have not risen at the same rate as wages.

The Nordic Council report finds this gap between increases in wages and benefits is the crucial reason why those on the lowest incomes have seen significantly slower increases in their disposable income than those on higher incomes.

Balancing Out The Inequality

The report finds that welfare state and its services, like schools health and social care, can help balance out the inequalities.

If the value of those services is included when calculating incomes, it greately reduces the relative poverty rate. This is especially the case for single people and people on pensions.

Another conclusion in the report is that women’s disposable incomes are more evenly distributed than men’s. Narrowing the gender pay gap has stopped overall inequality growing even greater.