Societies and their governments have developeddifferent policy approaches to addressing

domestic inequality. Compare and contrast thehealth or tax regimes of two different countries

and evaluate the impact of their policy regime oninequality.

Social welfare of Sweden and AustraliaGlobal Inequality (POL323), Assessment 2

Student: Ekaterina GrazhdannikovaTutor: Nick Southall

University of Wollongong, autumn 2015

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Inequality has been an issue for mankind since the beginningof time, but today, it poses one of the greatest challenges the

world faces. This has especially been the case since the

Industrial Revolution, which saw the richest class get steadily

wealthier and the poorest, become even poorer. This inequality

has risen dramatically over the last century and has attracted

the attention of people and governments alike. Due to the

awareness of the issue and the social pressure from people,

societies and governments have developed different policy

approaches to addressing domestic inequality. In this essay, I

will discuss what inequality is, how it is measured, compare

the welfare regimes of Sweden and Australia and evaluate how

these policy regimes have impacted the domestic inequality

within their countries.

What is inequality?

Inequality can be described as the unequal distribution of

assets/opportunities within a population domestically or

internationally.1 It is the contrast between the poorest class

and the richest in terms of income, health, employment and

happiness. Internationally, this inequality gap is enormous,

particularly in terms of wealth. Of the world's total wealth of

US$263 trillion, the richest 1% holds 48% of it and the bottom

80% only 5.5%.2 3 The richest 300 people on Earth have the same

1 'Defining Wealth', in Wealth Inequality. Can be seen at: http://inequality.org/wealth-inequality/2 Credit Suisse Research Institute, 'Global Wealth Report 2014', 10/14, Introduction. Can be seen at: https://publications.credit-suisse.com/tasks/render/file/?fileID=60931FDE-A2D2-F568-B041B58C5EA591A4 3 Oxfam quoted in BBC News Business, 'Richest 1% to own more than rest of world, Oxfam

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wealth as the poorest 3 billion, that is more wealth than the

entire populations of India, China, U.S and Brazil combined.4

This suggests that there is a huge and growing gap between the

rich and the poor. This gap is also evident geographically,

where a small portion of rich nations holds more wealth than

the majority of the world. 200 years ago, rich nations were

only 3 times richer than those which are poor. By the end of

colonialism in 1960s, they were 35 times richer. By 2013, they

were 80 times richer.5 The poorer these nation-states become in

contrast with the rich nations, the less they have with which

to provide basic human needs such as medicine, hygiene,

education and food. Consequently, the less opportunities

citizens have of finding employment and living happy and safe

lives. This demonstrates that wealth inequality leads to

further inequalities in lives, affecting other aspects of human

rights, such as safety, health and life.

says', 19/01/15. Can be seen at: http://www.bbc.com/news/business-30875633 4 Davies J., Lluberas R., 'Wealth Population by region, 2014', in Credit Suisse Global Wealth Databook 2014.5 Ibid, p. 6.

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Inequality has most often been measured by income, but today

is also understood in terms of health, employment, education

and happiness indexes which all contribute to the quality of an

individual's life. Specific groups have also been incorporated

in the face of measuring inequality, such as indigenous groups,

gender groups and immigrant populations. Most commonly,

inequality is calculated in terms of the Lorenz Curve and the

Gini Coefficient. The Lorenz Curve is a graphical

representation of the percentage of income earned by various

percentages of the nations' households.6 The more equal a

society, the smaller the gap between the rich and the poor, the

6 World Bank, 'GINI index (World Bank Estimate)', 2015. Can be seen at: http://data.worldbank.org/indicator/SI.POV.GINI?page=6

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closer the Lorenz line to the perfect equality line. The more

unequal a society, the further this gap is from the perfect

equality line. Similarly, the Gini Coefficient is a measure of

the degree of inequality of a distribution of income, where 0

represents perfect equality and 1 represents perfect

inequality.7 The more equal the distribution of income, the

closer to 0 the gini coefficient becomes. As the distribution

of income becomes less equal, the number gets closer to 1.

These methods of measurement rely on more common grounds of

knowledge, such as the GDP of nations and sometimes their

Happiness Index, which are used in calculating the Lorenze

Curve/Gini. These methods of calculating inequality are crucial

in order to create a thorough understanding of the current

world order and the growing gaps in wealth and life

opportunities between the world's richest and the world's

poorest.

Inequality is a serious issue to care about, because with it

come many problems. It blocks opportunities for other human

beings, undermines social cohesion, distorts the political

process and undermines democracy. It is dangerous because it

can lead to political violence (example, Russian Revolution in

1917) and contributes to poor social and health factors. All of

these can lead to economic instability, violent protests, coups

d'état, civil and even international wars. Therefore,

inequality doesn't just affect the world's poorest, it poses a

risk to the rich class and social order more broadly.

7 Ibid

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In recent decades, governments of many states became aware

of the risks involved with the increased inequality gap and

significant poverty. For these reasons, some developed

industrialized countries began implementing various policies

intended to combat inequality. Some of these policies include:

social welfare, free transport, free healthcare, education

programs and higher tax rates on the rich class. Two countries,

Sweden and Australia, have employed a similar regime to combat

domestic inequality: social welfare. The key similarity between

the two is their purpose: to address inequality and make living

conditions better for those who are most unfortunate. Their

programs, under the social welfare, are also similar. However,

the rate of their effectiveness differs. The following section

explores their difference:

Social Welfare, Australia Inequality is a major issue in Australia, where the richest

20% of all households in the country account for 61% of total

household net worth and the poorest 20% for just 1% of the

total.8 In the last 20 years, the income share of the top 1% has

doubled, and the wealth share of the top 0.001% has tripled.

The Gini Coefficient for 2011 made up 0.32 (compared to

Sweden's 0.27) in the rates of inequality, an increase from

0.27 in 1982.9

8 Douglas B., Friel S., Denniss R., Morawetz D., 'Advance Australia Fair? What to do about growing inequality in Australia', in Australia21: Shaping the Future, ANU, 01/14, p. 8. Can be seen at: http://www.australia21.org.au/wp-content/uploads/2014/06/Final-InequalityinAustraliaRepor-2.pdf 9 OECD, 'OECD Income Distribution Database (IDD): Gini, poverty, income, Methods and Concepts', 2011. Can be seen at: http://www.oecd.org/social/income-distribution-database.htm

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Inequality gap between genders is most evident in terms of

employment rates and personal earnings. Of the 72% of people

aged between 15 to 64 who have a paid job, 78% were men and 66%

were women.11 In terms of personal income, men earn 18% more

than women, higher than the OECD average wage gap of 15.5%.12

These statistics show that inequality within Australia is not

only a wealth distribution one, but also a gender one. Wealth

inequality within the country comes as no surprise. Within the

industrialized world, Australia is one of the lowest taxing

countries and its welfare spending as a percentage of the GDP

10 Whiteford P., 'Is Inequality Increasing?', in Crawford School of Public Policy, 10/10/12. 11 OECD Better Life Index, Australia, 2014. Can be seen at: http://www.oecdbetterlifeindex.org/countries/australia/ 12 Ibid.

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is among the lowest in the OECD.13 Because of this, government

revenues are now insufficient to meet the needs of the

community in health, education, income support, and social and

physical infrastructure. Gender equality, on the other hand,

has a more optimistic future. Australia has generally been

successful in addressing the constraints and barriers women

face in accessing work.

In spite of its rates of inequality, Australia employs a

range of social programs designed to combat the poverty line

and lessen the inequality. One of these programs is Centrelink.

Centrelink is the name of the social welfare, originated in

1997 under the umbrella of the Commonwealth Services Delivery

Agency and eventually becoming a branch of the Department of

Human Services in 2011.14 It is a master program of the

Australian Government that delivers a range of government

payments and services for retirees, the unemployed, families,

carers, parents, people with disabilities, Indigenous

Australians, and people from diverse cultural and linguistic

backgrounds. This social welfare has been effective in aiding

society in times of inequality and poverty. On average, a

student receives $519/fortnight (rent assistance included) and

an unemployed citizen $600/fortnight.15 Centrelink has various

other benefits asides from payment allowances, such as the

13 Douglas B., Friel S., Denniss R., Morawetz D., 'Advance Australia Fair? What to do about growing inequality in Australia', in Australia21: Shaping the Future, ANU, 01/14, p. 814 Australian Government Department of Human Services, 'About Us'. Can be seen at: http://www.humanservices.gov.au/corporate/about-us/ 15 Australian Government Department of Human Services, 'Online estimators', last update: 15/05/15. Can be seen at: http://www.humanservices.gov.au/customer/enablers/online-estimators

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medical pensioner card, which provides discounts on

pharmaceuticals and doctor's appointments; and a concession

card for transport, which allows one to pay half price on

transport tickets.16 In 2013-14, Austudy (study financial help)

was granted to 61,458 students; in the same year, Newstart

Allowance (unemployed citizens) to 506,655 individuals; and

Youth Allowance to 374,090.17 This demonstrates that Centrelink

has helped around 1 million individuals in 2013-14. Without

this social welfare, many students would be unable to attend

university, many people would be living on the streets, people

with disabilities would have a hard time surviving, and social

order in Australia would be in chaos because of public unrest

and increased crime as a result of poverty. Inequality is rated

high in Australia, however, social welfare of the country has

significantly helped address inequality by providing people

with enough money to afford equal opportunities. Happiness

Index of the country stands quite high, where the average grade

on a 0-10 scale was 7.3, higher than the OECD average of 6.6

(and higher than Sweden's by 0.1).18

Social Welfare, Sweden

Australia's welfare regime has significantly contributed to

reducing inequality rates, but it falls far behind Sweden in

terms of effectiveness. Sweden is considered to be one of the 16 Australian Government Department of Human Services, 'Special Benefit', last update: 11/05/15. Can be seen at: http://www.humanservices.gov.au/customer/services/centrelink/special-benefit 17 Australian Government Department of Human Services, 'Job seekers and students', 2013-14. Can be seen at: http://www.humanservices.gov.au/corporate/publications-and-resources/annual-report/resources/1314/chapter-03/job-seekers-and-students 18 OECD Better Life Index, Australia, 2014. Can be seen at: http://www.oecdbetterlifeindex.org/countries/australia/

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most equal OECD countries, even in spite of a rapid surge of

income inequality since the early 1990s.19 Income taxes and cash

benefits have played a significant part in redistributing

income in Sweden, in doing so, reducing inequality between the

working-age population by 28%, 3% higher than the OECD average

of 25%.20 Gender inequality in the workforce in Sweden is also

significantly lower than in Australia, where, of Sweden's 74%

of the working-age population aged between 15 to 64 with a paid

job, 72% were women and 76% were men.21 Public social in-kind

benefits, especially in the areas of education and care have

significantly contributed to redistribution in Sweden. It is

the highest spender on public services such as education,

healthcare or welfare among the OECD countries, with around 20%

of GDP going towards its humanitarian programs.22 These services

help reduce inequality by 23%, higher than in most other

countries. Given that Sweden's population in 2013 was 9.593

million, 23% would help 2.206 million people. Centrelink in

Australia has helped 1 million people in 2013-14, a mere 4.3%

of the total population of 23 million at the time. This

signifies that the Swedish social welfare regime is more

effective than the Australian, as it has a wider reach.

Another difference between the two countries' social welfare

programs is that the Swedish welfare is known to address more

specific issues within society, than Centrelink. Swedish social

19 OECD, 'OECD Income inequality data update: Sweden', 01/15. Can be seen at: http://www.oecd.org/sweden/OECD-Income-Inequality-Sweden.pdf 20 Ibid21 OECD Better Life Index, Sweden, 2014. Can be seen at: http://www.oecdbetterlifeindex.org/countries/sweden/ 22 Ibid

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welfare, responsible for by the Ministry of Health and Social

Affairs, is designed to tackle specific issues individuals

have. For instance, it provides free university for its

citizens; free childcare; free dental care; 480 days of

parental leave; rent assistance; health insurance and health

care for everyone, including mental health care, and others.23

In other words, programs that deal with people’s needs. More-

so, a key difference that separates Sweden and Australia is

terms of their welfare regimes is that whilst Centrelink lowers

prices on specific services, Swedish welfare often makes same

services completely gratis. In Australia, the welfare provides a

minimum income, which is not enough to deal with people's

individual needs, such as university fees (especially if you

have more than one child) or health specialists. The Swedish

welfare program addresses all these important needs directly.

Unlike the Human Services of Australia, Swedish Ministry of

Health and Social Affairs is behind a higher number of social

goods and services. This is due to the high funding of 60% of

progressive income tax going to the government, compared to

Australia's mere 30%.24 25 This means that the government of

Sweden has more money with which to improve social services, in

order to decrease inequality standards among citizens.

23 Unnamed, 'Social Benefits', in Work in Sweden, Swedish Institute, 2015. Can be seen at: http://work.sweden.se/living-in-sweden/social-benefits/ 24 Unnamed, 'The "Swedish Model": Welfare For Everyone', in Constitutional Rights Foundation, Summer 1998. Can be seen at: http://www.crf-usa.org/bill-of-rights-in-action/bria-14-3-c-the-swedish-model-welfare-for-everyone 25 OECD, 'Revenue Statistics 2014 - Australia', 2014. Can be seen at: http://www.oecd.org/ctp/consumption/revenue-statistics-and-consumption-tax-trends-2014-australia.pdf

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The difference between Swedish and Australia's welfare

systems is that Australia is more focused on giving people a

minimum income meant to be enough to support all areas of life:

housing, food, university, transport; whereas Sweden is more

focused on increasing the number of social goods and services.

The main criticism of the Australian welfare system is that

giving everybody a minimum income does not necessarily solve

societal problems, as can be seen by the poverty, inequality

and, most importantly, the unemployment statistics in the

country.

Australian and Swedish governmental social welfare regimes

26 OECD, 'OECD Income inequality data update: Sweden', 01/15.

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are similar in some ways. Both seek to lessen the inequality

gap and make life easier for the more unfortunate. However,

Sweden's social welfare has been more effective in addressing

inequality, as evidenced by the Gini Coefficient, the funding

and the programs utilized to aid their citizens. In this world,

inequality is an enormous issue. Fortunately, various societies

and their governments have developed different policy

approaches to addressing domestic inequality. Some states have

been more effective than others, but given the harsh inequality

gap between the richest and the poorest of people, any help is

valuable.

Bibliography:

Australian Government Department of Human Services, 'About Us', last update: 23/03/15. Can be seen at: http://www.humanservices.gov.au/corporate/about-us/ [date of visit: 16/05/15]

Australian Government Department of Human Services, 'Job seekers and students', 2013-14, last update: 17/11/14. Can be seen at: http://www.humanservices.gov.au/corporate/publications-and-resources/annual-report/resources/1314/chapter-03/job-seekers-and-students [date of visit: 16/05/15]

Australian Government Department of Human Services, 'Online estimators', last update: 15/05/15. Can be seen at: http://www.humanservices.gov.au/customer/enablers/online-estimators [date of visit: 16/05/15]

Australian Government Department of Human Services, 'Special Benefit', last update: 11/05/15. Can be seen at:

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http://www.humanservices.gov.au/customer/services/centrelink/special-benefit [date of visit: 16/05/15]

Capgemini and RBC Wealth Management, 'HNWI Market Bounces Back, Pushing Population and Wealth to Record Levels', in 2013 World Wealth Report, p.4. Can be seen at: https://www.capgemini.com/resource-file-access/resource/pdf/wwr_2013_0.pdf [date of visit: 16/05/15]

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Davies J., Lluberas R., 'Wealth Population by region, 2014', in Credit Suisse Global Wealth Databook 2014.

Douglas B., Friel S., Denniss R., Morawetz D., 'Advance AustraliaFair? What to do about growing inequality in Australia', in Australia21: Shaping the Future, ANU, 01/14, p. 8. Can be seen at: http://www.australia21.org.au/wp-content/uploads/2014/06/Final-InequalityinAustraliaRepor-2.pdf [date of visit: 16/05/15]

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http://www.oecd.org/social/income-distribution-database.htm [dateof visit: 16/05/15]

OECD, 'OECD Income inequality data update: Sweden', 01/15. Can be seen at: http://www.oecd.org/sweden/OECD-Income-Inequality-Sweden.pdf [date of visit: 16/05/15]

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Oxfam quoted in BBC News Business, 'Richest 1% to own more than rest of world, Oxfam says', 19/01/15. Can be seen at: http://www.bbc.com/news/business-30875633 [date of visit: 7/06/15]

Unnamed, 'Defining Wealth', in Wealth Inequality. Can be seen at: http://inequality.org/wealth-inequality/ [date of visit: 7/06/15]

Unnamed, 'Social Benefits', in Work in Sweden, Swedish Institute, 2015. Can be seen at: http://work.sweden.se/living-in-sweden/social-benefits/ [date of visit: 16/05/15]

Unnamed, 'The "Swedish Model": Welfare For Everyone', in Constitutional Rights Foundation, Summer 1998. Can be seen at: http://www.crf-usa.org/bill-of-rights-in-action/bria-14-3-c-the-swedish-model-welfare-for-everyone [date of visit: 16/05/15]

Whiteford P., 'Is Inequality Increasing?', in Crawford School of PublicPolicy, 10/10/12.

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