2014 Detroit is a better candidate for social democracy than 1930's Finland

Image: An MRI machine allows doctors to examine tissues throughout the body from the outside. The technology available today would have seemed like science fiction decades ago. (source)



This short post concludes a series on racist assumptions underlying many debates about social policy. The scope of this series has been very wide, and this post will tie together some of these disparate ideas.

In part 1, focused on the violent, impoverished, and oppressed history of Finland. Finland's blood-soaked history--both in the years immediately preceding their transition to social democracy, as well as hundreds of years prior--demonstrates that a prosperous and harmonious society is in no way a prerequisite for social democracy. Such views are a smokescreen for underlying racism. Part 2 addressed the incredibly racist view that social democracy can only succeed in a racially, culturally or ethnically homogeneous society by focusing on the experiences of Kerala, India, and Sweden. Both places have extremely large minority groups; by most measures, Sweden is more diverse than France, the UK, Germany, and most other European countries. Part 3 took the superior societies vs. superior policies argument head on by looking in detail at the implementation of the first social democratic program in Finland, maternal health care. The superior societies argument holds that any policy will succeed in a superior society; the superior policies argument holds that superior policies can succeed in any society. That Finnish society is inherently superior to the rest of the world is absurd given Finnish society's initial resistance to the maternal health program. Widespread resistance to this policy cost the lives of thousands of infants and mothers.


Part 3 contains the most important argument in the entire series. When we assume that social democratic policies can only work in a society that is already prosperous and harmonious, we rule out the most effective solutions for improving quality of life in the places that most desperately need those policies. In particular, if 1930's Finland were a country today, their infant mortality rate would be the eleventh worst of any country in the entire world.

To conclude this series, part 4 will run with this idea by comparing the current quality of life indicators and resources of Detroit, the American city with the highest poverty rate, to those of Finland on the eve of the election of the first social democratic prime minister in 1927.

If you had nothing else except for data on the resources and quality of life indicators of Finland in 1927 and Detroit in 2014, which place would you expect to eventually lead the world in quality of life indicators? As we shall see--though quality of life indicators are appalling in Detroit--they are actually in a better position than Finland was decades ago. If Finland could transform itself a country with the best quality of life indicators in the entire world, Detroit can make a similar transition. Granted, it took extraordinary efforts over several decades for Finland to achieve these successes, and Detroit can expect a similarly long, difficult struggle. But it can be done.

Comparing 2014 Detroit and 1920's Finland
Detroit's infant mortality rate is a 15 per 1000 live births. That's a national disgrace. But Finland's infant mortality rate peaked at a whopping 90 per 1000 live births in the 1930's, a rate six times higher than Detroit. None of this is to say that an infant mortality rate of 15 per 1000 live births is anything but a catastrophe. Nevertheless, the situation in Finland in the first half of the 1900's was far worse than the situation currently facing Detroit.

The neoliberal model on discrimination is wrong

Image: A patient's husband relaxes outside the beautiful Monroe Community Hospital in Rochester, New York. Now a long term care facility, Monroe Community Hospital was designed in 1930 by Thomas Boyde, Jr.. Boyde's architectural firm only interviewed him by mistake, believing he was white until he arrived for his interview. Though impressed with Boyde, the head of the firm only hired Boyde after polling the rest of the firm to see if they would object to working with an African-American architect. (source)



I feel compelled to start posts like this with a disclaimer:  People are more than economic units. People do not exist to serve the economy. The economy should exist to serve people, and not the other way around. This post is about workplace discrimination, and workplace discrimination should be combated simply because discrimination is wrong.

But in a neoliberal world, you have to speak the language of neoliberalism--so the rest of this page is written in neoliberal.

Even economy-first neoliberals should take interest in fighting workplace discrimination. For example, the productivity lost to workplace gender discrimination has been particularly well studied. Obviously, systematic discrimination against half of the workforce is not without consequences. Sexism in the labor market means that huge numbers of women don't return to work after giving birth or are passed over for supervisory roles, and that takes talent and productivity away from the economy. Gwynn Guilford summarizes research attempting to estimate the phenomenal economic growth that would result if the talents and hard work of women were not underutilized:

...seven-tenths of Japanese women drop out of the workforce after having their first child. Getting them back to work could boost Japan’s GDP by as much as 15 percent...If American women worked at the same rates men did, U.S. GDP could grow 9 percent, say economists; France’s would pop by more than 11 percent; and Italy’s would see a whopping 23 percent boost, according to OECD calculations. The average across the OECD would total 12 percent.

How can such inefficiency persist in a free market? Neoliberals believe that inefficiencies are rapidly corrected by the free market, so how can such extraordinary inefficiency possibly persist?

Gender inequality and social democratic policy

Image: A seahorse couple. Seahorses are very unusual in that males, not females, carry offspring through pregnancy and give birth. Thus, much of the following analysis will not apply to seahorses. (source)



For decades, the Scandinavian social democracies have led the world in limiting gender inequality. Currently, the World Economic Forum's Global Gender Gap report--which looks at several areas of women's status, including labor market indicators and the number of female representatives in government--ranks the Scandinavian social democracies very high. Four of the five Scandinavian social democracies take the top four spots; Denmark, the laggard, still finishes in the top ten at #8. Clearly, social democratic policy is effective in helping to limit gender inequality, and this post will broadly outline some social democratic strategies--universal child care and paid parental leave--and the evidence behind them.

This is a social policy blog, so I'm narrowly focusing on the policy basis of gender inequality. But it's important to note that sexism and discrimination have many causes and social policy can only be one medicine that cures a sick society. Confronting the economic roots of discrimination can only go so far. For example, women are disproportionate victims of violence. American men work about 10 hours more per week in paid employment, but women do so much housework that they have on average 5 fewer hours of leisure each week. Addressing the societal perpetuation of sexism in the workplace and beyond cannot simply be the sole responsibility of social policy. Aggressive enforcement of anti-discrimination laws and challenging everyday discrimination is also necessary. Social policy can only take us so far.

The economic case for sexism
In a fascinating article, Gwynn Guilford presents a very clear case about the economic incentives for sexist hiring and promotion practices, and the role of social democratic policy in fighting gender inequality. First, she addresses employers' economic incentives to pay women less than men, and to favor men for promotions:

For the vast majority of women who don’t return to work after giving birth, this is because the costs of returning—both financial and psychological—outweigh the benefits.

Here are the factors they’re likely weighing. Since it’s assumed the mother will take a long leave after giving birth, businesses systematically underpay women and skip them for promotions in favor of their male colleagues. Their husbands, therefore, likely have a much higher salary and aren’t eligible to take much more than a few weeks, at most, of paid childcare leave.

So women have little choice but to take many months off work to care for their newborn. Even in countries with robust maternal employment protections, low-skilled women in particular still face pressure to quit their jobs. Many who consider returning to work once their child is old enough for daycare struggle to find a job that pays well enough to cover childcare—or, with their skills now outdated, to find a job at all. Highly educated women, meanwhile, often find that taking a lengthy leave jolts them off the management track. And since this group tends to have wealthier husbands, without the professional motivation, there’s no point in returning.

Much evidence supports this argument. Danielle Kurtzleben summarizes research showing that American employers really do penalize women but not men for having children.

Guilford misses another reason women often drop out of the labor force: most human societies expect women, not men, to care for elderly or disabled relatives who are not able to care for themselves. This contributes to the gender pay gap for similar reasons. Another key issue (which she takes up outside this block quote) is that many women only work part-time after they have a child.

Putting this all together, we're really interested in three statistics--the gender pay gap, or the ratio of men's to women's wages; a comparison of the female and male labor force participation rate (the number of employed people as a percentage of working age adults); and a comparison of percentage of employed women and men working part time.

It's particularly important to keep track of all three because none can fully capture women's opportunities in the labor market. Two examples will make this clear. First, an increase in the gender pay gap can actually mean that the labor market is becoming less discriminatory towards women. Though counterintuitive, this can occur because these three measures are not independent. For example, the Scandinavian social democracies actually have a larger gender pay gap than countries with much more sexist labor markets, like Italy. The gender pay gap in Italy is so low because the Italian female labor force participation rate is very, very low. This low female labor force participation rate occurs because it's so difficult for Italian women to find employment that only the most highly skilled Italian female workers are reliably employed. In other words, most Italian jobs are low skill, but most women who have jobs in Italy are physicians, lawyers, or in other high skill fields where pay is high; there aren't many low skill female workers with jobs because they are unable to find work. Hence, high wage workers are grossly overrepresented in the female labor force, thus artificially decreasing the gender pay gap.

For a second example, the United States has traditionally had a surprisingly high female labor force participation rate. This is certainly due to a much higher poverty rate. Thus, for the United States, the labor force participation and part time work rates alone are likely to be misleading. Clearly, we need to consider all three measures to get an accurate picture.

In any case, in every country on earth, these measures are heavily weighted against women. Guilford summarizes research that suggest that unprecedented rates of economic growth could occur if the female labor force participation rate rose to that of men--there's simply so much bottled up talent and productivity in the world's women that can't be put to use because of sexism.

Using social policy to address economic roots of sexism
It should be very obvious that social policy can address each of the three root incentives for gender discrimination in hiring, pay, and promotions. Parental leave policies can be structured to encourage fathers to take parental leave, diminishing employers' incentives to pay women less. Universal child care services make it easier for women to return to work when babies become toddlers. Universal long term care services ensure that elderly relatives who are no longer able to care for themselves receive competent care even if their adult daughter or daughter-in-law returns to work. This isn't a new idea. Since the 1970's, the social democracies have implemented these policies with the stated intention of maximizing female labor force participation.

But do these policies actually work? Have countries that have implemented these policies actually seen an improvement in our three indicators of workplace discrimination? Let's take a look:

The interests of high skill workers do not align with capital

Image: Meg Whitman, former CEO of eBay (source)



It is frequently assumed that high skill workers don't need labor protections because they can protect themselves. It's only those defective low skill workers who need help from minimum wage laws and unions. This flawed assumption is based on the idea that what is good for employers is also good for high skill workers. According to this logic, employers may indeed benefit from squeezing every last penny of profit out of low skill workers with low pay and zero benefits, but for knowledge-based information work, employers benefit from happy, productive, and well-compensated high skill workers. And anyway, high skill workers can negotiate high wages for themselves due to their skill set. They made all the right choices in life; with the human capital they have accumulated, they now benefit from a better bargaining position with their employer.

This misconception is as wrong as it is toxic to workers generally, both high skill and low skill. Employers use the same tactics to squeeze high skill and low skill workers, though these tactics are indeed more effective with low skill workers. Nevertheless, when high skill workers fail to acknowledge that employers have an incentive to exploit them, they don't realize that the policies that help low skill workers usually help them, too. By assuming that the interests of high skill workers align with their employers, high skill workers often support policies that actually hurt them.

A perfect example of this misconception can be found in Michael Teitelbaum's recent article arguing there is no shortage of college students studying science, technology, engineering, and math (STEM). Though well-researched and articulated, he fails to realize the broader context in which this debate takes place.

Teitelbaum begins by assembling an impressive array of research to argue that there is no STEM shortage (emphasis added):

A compelling body of research is now available, from many leading academic researchers and from respected research organizations such as the National Bureau of Economic Research, the RAND Corporation, and the Urban Institute. No one has been able to find any evidence indicating current widespread labor market shortages or hiring difficulties in science and engineering occupations that require bachelors degrees or higher...All have concluded that U.S. higher education produces far more science and engineering graduates annually than there are S&E job openings—the only disagreement is whether it is 100 percent or 200 percent more...

It is true that high-skilled professional occupations almost always experience unemployment rates far lower than those for the rest of the U.S. workforce, but unemployment among scientists and engineers is higher than in other professions such as physicians, dentists, lawyers, and registered nurses, and surprisingly high unemployment rates prevail for recent graduates even in fields with alleged serious “shortages” such as engineering (7.0 percent), computer science (7.8 percent) and information systems (11.7 percent). 

He actually missed a good one: A 2011 American Chemical Society survey found that 9% of recent graduates of chemistry and chemical engineering PhD programs were unemployed, and a whopping 18% recent graduates of masters chemistry and chemical engineering programs were unemployed. That survey did find that average pay had risen, but this was likely due to the elimination of lower paying positions, not actual pay rises. The survey also found the lowest number of students pursuing advanced chemistry/chemical engineering degrees. Underemployment was an enormous problem: Just 38% of recent chemistry PhD graduates were able to find full time work; just over a third of recent bachelors degree graduates found full time work--and not all of these chemists were actually working as chemists.

How Vermont could have made single payer work

Image: Vermont Governor Peter Shumlin signed Vermont's single payer bill into law in 2011, only to scrap the plan in the final days of 2014. (source)



Vermont's attempt to establish a single payer health care system was killed by irrationality, as Sarah Kliff explains:

Another strike against single-payer systems, compared to other American health-care arrangements: they're financed in an unusually transparent way. And arranging that financing, from scratch, often proves impossible.

Right now, most Americans get their health insurance through an employer. That employer, unbeknownst to us, typically puts thousands of dollars into our policy alongside the money we kick in. According to the Kaiser Family Foundation, employers, on average, pay more than 80 percent of an individual worker's premiums. But Americans usually don't notice their employer subsidy for health insurance; it doesn't show up on their paycheck anywhere.

Or take Obamacare, which is funded partially by taxes on the rich, partially by fees on various players in the medical industry, and partially through cuts to Medicare. The cost is spread across many groups, and many government functions.

But by moving all the financing to the government, a single-payer health plan like the one Vermont considered would lay naked the incredible costs of our health care system. Vermonters would certainly notice the 9 percent income tax hike and 11.5 percent payroll tax that the Shumlin administration concluded would be necessary to raise enough funds.

In so many words, single payer is very expensive. But single payer would have been slightly less expensive than the current system in 2015 and far less expensive in the long run. In other words, single payer was killed because of its cost, even though it would have saved money--and it's difficult to overstate the irrationality of this decision. It would be like spending $100 on a hammer because the $90 hammer is too expensive.

As I've written before, societal resistance to new social policy is inevitable. Even the phenomenally popular Social Security program experienced widespread skepticism and resistance when it was first implemented. Social democratic policy was unpopular even in Scandinavia when it was first implemented. Good social policy anticipates societal resistance and finds a way to work with it. Only policies that can win over a skeptical public survive. And Vermont's single payer--despite its many strengths--was unable to win over enough popular support. In a perfect world, PR wouldn't matter. But we don't live in a perfect world, so having the best policy isn't good enough.

Wikipedia has a useful summary of the efforts of single payer advocates. A bill passed in 2010 provided state funding for a commission to study health care reform. This commission made three recommendations: two of the three explicitly demanded single payer, and one suggested a public option. Then, based on this study, a 2011 bill mandated the creation of Green Mountain Care, single payer health care system for Vermont.

The real problem is that Vermont locked itself into a pure single payer system and didn't allow itself any room to maneuver. The goal of single payer advocates isn't a single payer system, but universal health insurance coverage and cost savings through administrative simplicity. Single payer is the most direct way to accomplish these goals, but it's not the only way.

Obtaining single payer's benefits without single payer
I wrote previously about the many administrative strengths of single payer here and here, and don't need to repeat those arguments on this page. However, throughout those pieces, I kept obliquely referencing a "workaround" used by Germany and Japan to get all the benefits of single payer, even though Germany has over 200 payers and Japan over 2000.