Norway and the United States Welfare System - Case Study Example

Comparison of Norway and United s welfare models Introduction After the end of the Second World War, different models of governance, economic development and management of state resources and the welfare of citizens developed. Social welfare models otherwise known as the welfare models is one of the systems that developed in different countries across the globe, with each country having its own model? Welfare models are concepts developed by governments that are used as reference points in the process of protection and promotion of economic development and the issues of citizen social wellbeing and development. Countries that adopt welfare models adopt practices that promote equality of opportunities, equality in the distribution of the resources and the growth of public accountability and equality. The term ‘welfare models’ is a blanket term that refers to different types of social and economic organization adopted by countries in Europe and America (Likki & Staerkle, 2014). As a result, welfare models include the combination of democracy, capitalism and welfare states like the Nordic structures. The United States and Norway have different social models which explain the variations in their levels of development and the social welfare programs in the country. While countries like Norway, Iceland, Denmark and Finland have adopted a Nordic social welfare model, developed economies like the United States and Britain have developed models classified as social democrat, conservative or liberals (Schjerva, 2012). These models have different systems of government and approaches to social welfare issues such as the distribution of wealth, healthcare services, education and employment approaches. In this paper, the social welfare models of the United States and Norway will be compared to determine their variation, points of convergences, benefits to the citizens, strengths and weaknesses (Likki & Staerkle, 2014). Norway and US welfare models The social model of the United States was first developed by Theodore Roosevelt under the new nationalism program and implemented by the succeeding presidents. President Woodrow Wilson for example extended this social model under the new freedom approach which increased the federal government investment in social welfare programs in the country. Before the devastating impacts of the great depression, the social model system of the United States focused on individual, families, churches and even business through compensation, insurance policies and leave programs. However, the devastating impacts of the great depression compelled the government to increase its involvement in social programs, leading to the development of the social welfare program in the country (Schjerva, 2012). To increase the functionality of state governments and improve the nature of services they offered, the federal government increased the loans and grants. Programs like the civilian conservation coup were developed under the leadership of Roosevelt through the support of the congress. In 1960, the United States government developed the great society program under its welfare model which led to the abolition of food stamps. The federal government took upon itself the cost of such stamps as a way of fighting poverty in the country and increasing cost of living. The enactment of the welfare reform act of 1996 further highlighted the commitment of the government in improving the social needs of the citizens and increasing access to job opportunities. Though the social welfare adopted in the United States has remained a combination of democratic and capitalist, its social programs have aimed at improving the welfare of the citizens and increasing equal access to opportunities (Likki & Staerkle, 2014). Norway, on the other hand, has adopted a Nordic welfare model that is common among other Scandinavian countries like Sweden, Finland and Denmark. Under this model, the countries have adopted a foundation of shared political goal which aims at encouraging a stronger social cohesion and peaceful coexistence through the promotion of equality. The Nordic welfare model is supported by three pillar tenets which is visible in all countries that have adopted it. These include the principle of equal opportunities for all citizens, social solidarity and the development a secure environment to enhance growth and personal development. Based on this model, social rights are promoted and the access of all citizens to free and universal healthcare, education and culture is guaranteed. Social outcasts and the vulnerable in Nordic societies are given adequate care by the central government to enable them afford the basic goods and services. The main motivation behind this social model is the provision of equal opportunities for all the citizens to enable them takes part in the development process of the country and the decision making on issues that affect their individual growth and prosperity. To enhance the welfare of employees, the Nordic welfare model develops a stronger tie with the labour market and the policy makers within (Ditch & Roberts, 2002). This welfare is funded by tax payer’s money and this explains the relatively high taxes imposed on goods and services in Norway and any other Scandinavian country with the same welfare model. Due to the emphasis on equality and equal access to opportunities within this welfare model, the levels of employment and the flexibility of the labour market are high (Schjerva, 2012). Comparison of Norway and the US welfare model The welfare models of Norway and the United States have striking differences due to the structure of the social welfare programs and the differences in the social welfare programs supported by the government. The social security distribution and taxes imposed on goods and services are one area that distinctly differentiates the two models and how they impact on the life style of the people in the country. The differences in the two welfare models have been attributed to historical changes in redistribution and the sizes of the governments which have resulted into the need to adopt different welfare model programs. In this comparison, different programs facilitated by the two governments will be compared including the income support and safety nets at the lowest level possible (Ditch & Roberts, 2002). Family and child benefits in Norway and the US Under the Nordic welfare model of Norway, family benefits are guaranteed to every parent and this does not consider the relative income of the parents. The children are therefore supported under this program until they attain a majority age of 16 in Norway. The age can be lifted in case the child attends higher education and needs the support of the government under the social welfare programs. Families in the United States on the other hand do not enjoy such allowances despite the presence or absence of need for them. The model only provides special allowances to needy children under the temporary assistance for needy families, a program that was introduced recently in the country. This clearly shows the distinct differences in the family support programs initiated by the two governments under their welfare models and programs (Schjerva, 2012). Healthcare programs The healthcare programs of Norway and the United States also have different variations under the two different welfare model programs adopted by the countries. Norway has a universal healthcare coverage for all its citizens with unlimited benefits in case one becomes ill. This makes healthcare access in the country relatively cheap and affordable by all irrespective of their social standings. The united states on the other hand relies on the two health programs to provide universal healthcare, programs that do not guarantee universality at any cost (Heath, 2011). These include the Medicare and the Medicaid programs that target families that are aged and the low income households. Due to the specific target of the low income households and the elderly, the healthcare program run under the welfare model of the United States is not universal as compared to Norway and any other Scandinavian country in Europe. In Norway, most of the expenses that accrue from the healthcare process are covered by the healthcare programs managed by different government agencies. In the United States, if for example one of the members of a representative family becomes sick and is admitted for treatment, he or she does not qualify for the program funds. In Norway, however, the benefits of the universal program include the payment of doctors and consultation fees, the cost of hospitalization and the medical prescriptions made. In the United States, the welfare model provides medical insurances as an alternative compensation package due to the nature of its welfare model. Access to health service facilities in the two countries therefore differ, with Norway caring more for its citizens’ welfare needs as compared to the United States (Heath, 2011). Apart from the healthcare programs, Norway has a sick benefit scheme under its welfare model to cushion the sick from losing their earnings during the time they are sick. In the United States, the sick benefits is scarcely offered with only five out of the over 50 states providing alternative salary to their sick. The payments made by the Norway welfare model program are 70-80% of the total gross earnings of an individual when in stable health. In case the head of a representative home or the bread winner is incapacitated due to sickness and cannot engage in constructive employment to cater for the family needs, this welfare model with provide commensurate payments to such a person until he/she attains the retirement age. However, both Norway and the United States cover accidental injuries obtained while working within the government enterprises though the benefits paid by the two countries differ significantly. In Norway, the incomes of the affected will be replaced based on the amounts allocated to them by the sickness benefit program. In the United States, however, payment will be based on two thirds the average weekly earnings of the person affected with a maximum of $270-$714 dollars per week depending on the states and the average salary prior to the injury. Based on these figures, the Nordic welfare model and the United States capitalistic and democratic model, care for the needs of the injured at duty. Disability welfare models in the two countries The United States and Norway both have provision for the replacement of incomes for citizens who are incapacitated and therefore unable to engage in meaningful and gainful employment. In the two countries, compensation is compulsory and only influenced by the individual’s work history and position held during the time of employment. In the United States, a worker must have been covered for five years prior to the accident that caused the disability for him/her to receive the benefits. Though both Norway and the United States cover their disabled citizens, the extent of coverage differs significantly and this is influenced by the welfare models of the two countries. The united states disability amount is computed based on the employee’s average monthly earning while Norway uses the basic pension augmented by the income based supplementary pension, the care allowances enjoyed by the citizens and the handicap allowances if any to make the computations (Alesina, Glaeser & Sacerdote, 2001). Poverty relief programs The welfare schemes across the globe places high emphasis on poverty relief programs and seeks to adopt methods of ensuring that the citizens do not suffer from lack of basic needs. However, the programs adopted under the Nordic welfare schemes differ from that adopted by the United States government. In most cases, such people do not meet the eligibility criteria for the other welfare schemes discussed due to insufficient contributions or inadequate earnings. In Norway, the Socialbidrag has been developed to alleviate poverty among citizens who are not engaged in worthwhile employment in the country. This plan provides the citizens with access to cheap housing opportunities and basic needs like food, healthcare needs and education. In the United States, different plans are in place to assist the poor and to enable the government alleviate poverty and attain a standard of living cognizant with the country’s economic development. The supplemental security income was developed to provide basic needs to the needy aged, blind and disabled person, whose annual income is below $5808, thus making them unable to contribute to the social welfare programs. Under this program, the federal government provides payment to these people augmented by other payments made by the state and local authority governments. The temporary assistance for needy families is the second welfare program targeting the poor in the country but is limited for a period of two years within which the recipient must find meaningful employment for personal support. Other programs are also operated by the United States government under the poverty alleviation program including the food and nutrition assistance program and the housing assistance program which provide relief to the low income earners in the country (Korpi, 2000). Labour market policies Labour policies in a country are influenced by the welfare models adopted and how the rights and needs of the employees both in the public and private sector are considered. The governments under the Nordic and the United States welfare model have made legislations to define their role in the income redistribution processes. Through labour participation and regulation, the government has a hand in the setting of the real mages based on the performance of the market and the welfare model adopted. Control of the minimum wages in the two countries has been made by the government with the participation of the respective parties including the private sector and the labour unions. This has enabled the government to implement its welfare model without resistance as the labour markets are made to be able to support and supplement such programs. In this area, the United States and Norway welfare models differ slightly but have a common approach to the process of setting the minimum wage. Economic comparison of the welfare models in Norway and the United States The previous sections have discussed the different economic programs adopted by the two countries under their different welfare models and how each has aimed at improving the life of the citizens. In this section, the economic explanation of the different models and the disparities will be comparatively made. Redistribution of taxes differs in the two countries and this has been used to show the disparities and inequalities in the taxes paid by the citizens (Korpi, 2000). Using the Denninger and Squire databases, the United States has a Gini coefficient of 38.5 while Norway has a 26.9 Gini coefficient. This demonstrates that Norway has less pre-tax inequality as compared to the United States. Based on this coefficient, the income distribution in the two countries can be compared and the levels of inequality determined. In the United States, the top 20% earners took home over 43% of the pre-tax dollars in the country in one year. This is relatively high when compared to Norway and other Nordic welfare model countries in Europe whose top earners remained below 40%. This shows that the welfare model in the United States results into a major pre-tax inequalities and a skewed income distribution as compared to the Nordic welfare of Norway. In countries with a larger income inequality like the United States, the poor have stronger political clout and this enables them to extract much redistribution from the rich. In such a system therefore, the one man, one vote rule is changed into a one dollar one vote model (Alesina, Glaeser & Sacerdote, 2001). Strengths of the Nordic welfare model over the American model The success of the Nordic model in Norway has been attributed to its strengths which have enabled the country to rank highly in terms of wealth and equality. In this section, a comparison of the strength of this system relative to the weaknesses of the American model will be made with reference to different sections. This results into a balance of the widespread collectivism, in combination with varying levels of individual freedom and rights. This has enabled Norway to have one of the highest GDP as compared to the United States. In this model, the citizens have a strong belief that the state will be helpful whenever the situation demands for the assistance, a fact which cannot be comfortably said of the United States. The Nordic welfare model of Norway ensures the development of a fair society through equitable distribution of natural resources in the country. At the beginning of the previous century, conflict existed between capital and labour which affected different parts of Europe. In response to the conflict, Norway and other Nordic countries responded by developing a system that fair through equitable distribution of natural resources. Through collective agreements between workers and the state arbitration institutions, the country built a strong equitable society (Korpi, 2000). The country monitors players in the private sector through strict taxation programs that ensures that the benefits are enjoyed by all citizens equally. In comparison, the United States is a free society where the private sector enjoys tax holidays and is free to implement their programs without the interference of the government (Schapiro, 2007). As results, investment companies like Morgan Stanley and Goldman Sachs whose operations are not strictly controlled by the state could find an enclosed environment within Norway (Esping-Andersen & John, 2009). The development of an individualism and solidarity approach in Norway has been attributed to increased empowerment and emancipation of women in the country. By laying strong emphasis on social solidarity and individualism, the people have been freed from the bond of being answerable to the community and the people around them. With these weak patriarchal structures and the less independence that this model places on others, people living in Norway feel they have a stronger control of their own lives (Serrano & Magnusson, 2007). Challenges facing the Nordic model relative to the American system strengths Despite the benefits and equitable distribution of natural resources that have been created by the Nordic models in Norway, scholars have in the recent past criticized the approach and argued that it stifles innovation and the development of the private sector. Natives in Norway have continued to praise their system due to the benefits it has offered them without questioning the absolute government control of everything which stifles independence and the growth of personal ideas (Kuivalainen & Nelson, 2010). The citizens have continued to embrace the state control, one that a New Yorker will find oppressive and claustrophobic. In Norway, everything that does not belong under the control of the government is heavily taxed and this stifles the growth and prosperity of the private sector in the country. This is quite different to the pure capitalistic model of the United States that has encouraged innovation in the country and led to the growth of companies in the private sector. Restriction in Norway are also more than double those found within the united states welfare model as buying simple goods like aspirin requires one to queue for several hours in government owned pharmacies as supermarkets are not allowed to stock them. The quantity of the medication bought at any given time is also strictly restricted to 40 tablets which are also heavily taxed and its use closely monitored by government agencies (Behrendt, 2002). Fellesskap in Norway is viewed as religion despite the presence of different churches in the country as there is a law that govern each and every occasion in a communal model that restrict the freedom enjoyed by the citizens. The current globalization and international liberalization makes Norway a locked country that cannot support most American based multinationals. This is due to the liberal nature of the American welfare model which, though has led to increased inequality, has enabled the private sector to prosper. It is time for Norway to adopt a common a liberal Nordic structure that supports the private sector and reduces the restrictions on the legal actions of the private citizens (Behrendt, 2002). Nordic United States With the prosperity of the Nordic welfare system in Norway and other countries in the Scandinavian states, analysts have argued whether the United States can adopt the Nordic system of Norway. According to Daron Acemoglu of MIT, the United States cannot be Nordic due to the capitalistic model of our society which encourages liberalism and the freedom of the private sector (Acemoglu & James, 2006). As a cutthroat leader, the possibility of the united states switching to a cuddly capitalism will results to decreased economic growth of not just the united states but other world economies. With the welfare model system of the United States, technological interdependence between countries has been made possible due to technological innovations and contribution of technologically advanced countries. As the world technology leader, constraints and limits exists in the redistribution process at the top and places innovation at the top priority in the country (Serrano & Magnusson, 2007). Conclusion Welfare models have existed in different countries across the world especially in European Scandinavian countries such as Norway, Denmark and Sweden, countries that have witnessed equality in the distribution of natural resources. The United States also developed a welfare model at the beginning of the last century under the leadership of Roosevelt and the subsequent implementation by the successive leadership. The welfare model of the United States and Norway has significant difference and this explains the disparities in the levels of development in the two countries (Bawer, 2001). The Nordic welfare model encourages the adoption of programs that create equality and redistribution of resources through a progressive taxation system as opposed to the United States. In this paper, the United States and Norway welfare models have been comparatively discussed and the points of variation of convergence discussed. References Acemoglu, D. & James, A., 2006, Economic Origins of Dictatorship and Democracy, Cambridge: Cambridge University Press. Alesina, A., Glaeser, E. & Sacerdote, B 2001, Why doesn’t the US have a European-style welfare state, Harvard institute of economic research, discussion paper no. 1933. Bawer, B 2001, New challenges to the Nordic welfare model, CATO policy report, 13(3), 11-14. Behrendt, C 2002, At the Margins of the Welfare State. Social assistance and alleviation of poverty in Germany, Sweden and the United Kingdom. Aldershot: Ash gate. Ditch, J. & Roberts, E 2002, Integrated Approaches to Active Welfare and Employment Policies. Dublin: European Foundation for the Improvement of Living and Working Conditions. Esping-Andersen, G. & John M 2009, Economic Inequality and the Welfare State. Oxford: Oxford University Press. Heath, J 2011, Three normative models of welfare state, public reason, 3(2), 13-43. Korpi, W 2000, “Faces of Inequality: Gender, Class, and Patterns of Inequalities in Different Types of Welfare Sates”, Social Politics, 7(2): 127-91. Kuivalainen, S. & Nelson, K 2010, The Nordic welfare model in a European perspective, institute for futures studies, working paper no. 11. Likki, T. & Staerkle, M 2014, Welfare support in Europe: interplay if dependency culture beliefs and meritocratic context, oxford university press. Schapiro, D 2007, Is the Welfare State Justified? Cambridge: Cambridge University Press. Schjerva, R 2012, The Norwegian welfare model-prosperous and sustainable? Finance department seminar. Available at: http://www.regjeringen.no/nb/dokumentarkiv.html?id=115322 Serrano A. & Magnusson, L 2007, Reshaping Welfare States and Activation Regimes in Europe, Brussels: P.I.E. Peter Lang. Read More