Cozy welfare state comes under siege

Sweden: High taxes, the aging population and an explosion in sick leave threaten beloved benefits.

December 23, 2003|By Scott Shane | Scott Shane,SUN STAFF

STOCKHOLM, Sweden - In the happy chaos of their two-bedroom apartment in central Stockholm, Mika and Carolina Laine interrupt each another in their enthusiasm to describe the cozy embrace of the Swedish welfare state.

As 4-year-old Georg plays Robin Hood and 2-year-old Annie learns to skip, the Laines talk about everything from generous paid leave for new parents to free tuition and generous stipends for university students.

"Even if we pay a lot in taxes, we get a lot," says Mika Laine, a 34- year-old middle school teacher. The egalitarian "Swedish model," a source of national pride for decades, "creates possibilities for all people who have a vision to do something for themselves," he says.

But like many Swedes who fret about the world's highest tax burden, worrisome demographic trends and an explosion in sick leave, the Laines wonder how long it can last.

"I want the system to work and keep the standards we have," says Carolina Laine, 33. "But I'm afraid it's impossible."

For Americans, this Scandinavian nation of 9 million presents a striking contrast. Income taxes top out at a marginal rate of 55 percent, compared with 38.6 percent in the United States, and high rates apply at much lower incomes. If retail prices seem high, that's partly because a 25 percent value-added tax is built in.

Fully 51 percent of Sweden's gross domestic product is consumed by taxes, the highest rate among the 30 developed countries tracked by the Organization for Economic Cooperation and Development. At 29 percent and falling, the United States vies with Japan, South Korea and Ireland for the developed world's lowest tax burden.

Yet Swedish taxes buy a lot of peace of mind. Swedes don't worry about losing their health insurance or how to pay for college. Their government's array of social protections prevent anything like the scale of poverty or the decaying, dangerous slums routine in U.S. cities.

The Laines offer a typical case. After each of their children was born, the couple split more than a year of state-paid parental leave. Now they collect monthly payments to help support each child.

When the children need a vaccination or run a fever, their medical care is free. Their subsidized day care center, a 10- minute walk away, has four trained adults for 17 kids.

Such benefits hugely ease the strains of parenthood, they say. Carolina says a Swedish friend recently married an American and moved to Minnesota. "But they plan to move here when they have children," she says.

True, Mika pays 30 percent of his $40,000 salary in income tax. But that money might be said to roll on to his wife, a full-time student of clinical psychology at Stockholm University. Not only does she pay no tuition, the government provides a stipend for her living expenses.

Another young Swedish mother, asked about views of the Swedish welfare state, surveyed her social circle.

"I spoke to a few of my friends and said, `Come up with something about the system that's bad,'" says Esther Goldman, 24, mother of a 10-month-old son. "Everybody said we get so much, it's kind of cheeky to complain."

Their biggest gripe, according to Goldman: Adults have to pay for their own eyeglasses.

The crisis ahead

Yet Goldman says she fears for the Swedish system. "There are a lot of people taking advantage," she says. "It's costing more than we can afford, so I guess there is a crisis."

Similarly, in a sign of anxiety about the future, the Laines recently began paying $30 a month into a private retirement account. They fear state pensions may not survive the graying of the nation, which will place a huge burden on a shrinking working-age population.

"The real crisis is coming in five or 10 years," Mika says.

To a degree, Swedes' feelings toward this high-tax, high-protection system vary according to whether they are "paying or gaining," says Sten Liljedahl, 56, who owns a small architectural firm in southern Sweden. He and his wife, Riita, a teacher, are payers: Together they earn $120,000 a year, of which nearly half goes directly to the government, he says.

"We Swedes are more willing to pay high taxes than people in the U.S.," Liljedahl says. "We were brought up that way. But if you pay, you want to pay for people who are worse off than yourself. Today some people stop working because they can get as much money on welfare as they can working. I don't think that's a good idea."

Yet Liljedahl is quick to note that his three children are full-time university students and he doesn't pay a single krona for their education. And while he feels that the Swedish state "is too trusting," he wants it adjusted, not fundamentally changed. "No one should be in a position where they're living in poverty or can't get health care."

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