Why Sweden has no minimum wage and so many billionaires

Sweden gives everyone health care, cheap childcare, and paid parental leave regardless of where or whether you work.

Sweden also has no minimum wage, inheritance or wealth tax, and almost no tax break for donating to charity. It has more billionaires per person than the United States.

After interviewing Swedish researchers and reading through Swedish policy debates, I realize its the country following one rule: public money goes to things that help everyone.

Sweden’s commitment to this principle changes politics.

Politicians don’t set wages

Unions and employers in each industry negotiate wage floors. After soldiers killed five people at a workers’ march in the 1930s, unions and employers agreed to settle fights between themselves, without the state.

When the European Union pushed member countries toward minimum wage laws in 2022, Sweden and Denmark fought it.

If parliament set wages, politicians would promise raises to win votes.

Sweden won’t subsidize charity

In America, you can deduct donations to nonprofits from your taxes.

In Sweden, the most you can get back is about $300 and only for approved groups doing research or helping people in need. The Social Democrats, the party that built the welfare state, were skeptical. That’s spending public money on your private priorities.

Sweden dropped taxes that hit a few people and raised little money

In 1976, a famous children’s book author wrote that her marginal tax bill reached 102%. That fall, the Social Democrats lost power for the first time in 44 years.

Over the following decades, Sweden simplified its tax code. A Social Democratic government abolished the inheritance tax. Inheritance and wealth taxes didn’t raise much money, partly because rich Swedes could easily leave the country.

Sweden instead relies on broad taxes. Most workers pay around 32% in local income tax, plus a 25% sales tax on most goods. The top rate of about 52% starts at roughly 1.1 times the average income of roughly $50,000. (An American would face a similar rate at the top bracket of $640,000.)

The Swedish model relies on everyone’s support.

Sweden runs a freer market than America does

The conservative Heritage Foundation ranks all four big Nordic countries above the United States on economic freedom.

Sweden opened its markets after a 1990s banking crisis where interest rates rose to 500%. Both left and right coalitions opened taxi, electricity, telecom, railways, and flights to competition. When Uber arrived, the Social Democratic Minister for Infrastructure signaled openness to all forms of ‘healthy competition’.

Now, Stockholm has more billion-dollar tech companies per person than anywhere except Silicon Valley. More working-age Swedes (65%) than Americans (47%) say there are good opportunities to start a business where they live.

A business friendly ecosystem pays for universal programs (and protects from monopolies).

The universal programs give Sweden politics a goal and benchmark

Once a country has universal programs, they become the standard everything else gets compared to. Nordic researchers still debate how to help poor people specifically without breaking the tradition of treating everyone the same.

Even narrow goals are structured universally. In the late 1990s, Sweden wanted more people to have home computers. It gave a tax break that let any employer lend a computer to any employee, regardless of their job.

America does the inverse: few universal programs but a lot of targeted programs and carve-outs.

California has a separate minimum wage for fast food. Federal tax breaks range from home buying to racehorses, NASCAR tracks, or buying cars over 6,000 lbs. Every year, federal tax breaks cost more than the government spends on Social Security.

Many of our biggest benefits run through specific employment setups. The tax break for employer health insurance mostly helps people with full-time jobs. Unemployment insurance usually doesn’t cover the self-employed, freelancers, or independent contractors.

Our safety nets don’t enjoy the same broad buy in. I also notice going group by group helps more visible or organized groups.

By less visible groups, I mean jobs I grew up around. Part-time non-gig workers like daycare or retail workers that make up much of the bottom 20-40%. These jobs are rarely show up in the news.

By more organized groups, I mean my city’s efforts to ban self-driving cars to protect drivers’ jobs (I live in DC).

Sweden protects the person, not the job. You get care because you’re a person.

Sweden isn’t perfect. Stockholm’s housing shortage means people wait for 8-20 years to rent an apartment.

But Sweden’s saying no to narrow initiatives is something we can borrow.

People tell me Nordic-style benefits could never work here because America is too diverse and distrustful of federal government. But Americans used to trust it.

In 1964, 77% of Americans trusted the federal government to do the right thing most of the time. Today it’s about 22%.

Trust is needed for broad ambitious programs. Without ambitious programs, people fight for narrow protections. A government focused on narrow protections does less and earns less trust.

I worry we’re stuck in that loop. But we chose it, so we can choose differently. As we choose things that help everyone, we change politics.

Thank you to Martin Jacobson for speaking with me. All errors my own.

Most of that $72 billion deduction went to people in the highest income bracket.