Is Women's Progress Blocked By Welfare State?


Women’s progress is a global phenomenon, but one region is widely regarded as being the world leader in gender equality – the Nordics. Science Daily Newspaper bluntly stated in 2016 “[t]he Nordic countries are the most gender equal nations in the world”. During the recent International Women’s Day, Anne Kari Ovind argued in the Huffington Post that Nordic-style gender policies, including Norway’s state-mandated quotas on the share of women on company boards, is an inspiration for the world.

Throughout the world, liberal and socialist thinkers therefore point to Nordic-style welfare policies as a way of promoting gender equality. The Global Gender Gap Index confirms supports the view that Nordic countries are gender equal role models. Iceland tops the latest version of the index, followed by its Nordic neighbors Finland, Norway and Sweden. The only Nordic country that does not qualify to the very top is Denmark, which ranks on 19th position. This is still higher than the 45th position of the United States. Also, in previous versions of the Global Gender Gap Index, the Nordic countries are top performers. The 2014 edition for example reached the conclusion “the Nordic nations continue to act as role models in terms of their ability to achieve gender parity”.

Yet when you look deeply, there is one disturbing reality: women in Scandinavia do not rise as often to the top as their American counterparts. In the Nordic Gender Equality Paradox we found that the rise of the welfare state created jobs for women as well as aided their labor market participation by offering various family-related services. Yet this same system contains disincentives for female ascension in business. One example is high taxes that make it costly to purchase household services (a strategy otherwise used by parents to “buy” time so that they can take care of children as well as focus on their careers); generous benefit systems combined with high taxes that reduce economic incentives for both parents to work full-time and public sector monopolies/oligopolies in female-dominated sectors and parental policies that give women incentive to take long breaks from the working life. Through these mechanisms, welfare state policies create the Nordic Glass Ceiling.

Let us, for the sake of clarity, compare the Nordic nations to the US with the help of the Economist glass-ceiling index. When it comes to issues such as the labor force participation difference between genders and the higher education gap, the Nordics are consistently placed at the top of The Economist index. Direct childcare expenditure for families are relatively low in the Nordics, since much of childcare is tax-funded. Nordic countries additionally have generous public programs for paid leave for mothers. The United States on the other hand has a considerably larger gap in labor force participation, a smaller advantage for women in tertiary education attainment, higher private child-care costs and no paid leave for mothers at all.

Based on the Economist index, the United States has unusually women-unfriendly work policies while the Nordics have the most women-friendly work policies in the world. However, it is the United States which has the highest rate of women managers amongst all countries included in the Index, while the Nordic countries have a lower share.

Does this explanation fit with the level of women who reach executive positions in the Nordic countries? The answer is yes. Iceland, which historically and today has the most limited Nordic welfare state, is the country with a high rate of women managers. Sweden, which has opened public sector monopolies in amongst others education, elderly care and health care for private firms do relatively good – and much better than these market reforms were introduced. Denmark, which still has public monopolies and the highest tax rate amongst modern economies, is the poorest performer.

Then how about Norway’s much-admired quota policies? Norway passed a law at the end of 2003, requiring 40 per cent of board members of public companies to be women. The law, which became mandatory at the beginning of 2006, has gained considerable international attention. However, while the quotas law has been mimicked by many other nations, in effect it has not worked. In an important paper, Marianne Bertrand and co-authors look at the way the introduction of gender quotas affected women in Norwegian firms. The researchers find that the change had:

No trickle-down effect. This means that whilst a few women at the top received higher wages due to affirmative action directly benefiting them, the broader group of female 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 the few elite women who directly benefited from it.

• No significant changes in the gender wage gap or in female representation in top positions. Again, 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”.

The Swedish government planned to introduce a similar quota legislation but, after considerable critique (in which I participated), pulled back the suggestion which did not have support in Parliament. It is a policy which simply fails to promote women’s career progress in a meaningful way. Reducing the hinders that the welfare state creates for women’s progress would be the way to achieve this goal. After all, it is the United States with its limited government approach to helping women which in practice has most women managers – not the Nordic countries with their long history of gender equality.

This is certainly a controversial idea right now, but there is a case to be made that limited government and free markets provides the best way to promote women’s careers – not interventionist state policies.

Dr. Nima Sanandaji is the president of ECEPR and author of 25 books. He has recently published the study The Nordic Glass Ceiling for the Cato Institute.