8 July 2015

Scandinavian Unexceptionalism #3: Gender equality


If you want to find gender equality, turn to Scandinavia. In international rankings the Nordic countries tend to outpace the competition. In the Global Gender Gap Index 2014, published by the World Economic Forum, for example, Iceland has the number one spot followed by Finland, Norway, Sweden and Denmark. In the Complete Mothers’ Index 2015, compiled by Save the Children, Norway scores on top followed by Finland, Iceland, Denmark and Sweden. Sweden has the highest score in the European Union Gender Equality Index followed by Denmark and Finland (the two other Nordic countries are not included in this index).

Employment rate of women aged 20-64 across the European Union (per cent)

Nima 3.1

Data given for 2011. Source: Statistics Sweden (2013).

Indeed, Nordic countries have for a long time been, and continue to be, pioneers when it comes to gender equality. Women entered the labour market early and have succeeded on their own merits to reach high political positions. Nordic countries also have uniquely gender equal attitudes. It would thus seem that the egalitarian Nordic nations have the best conditions for women to reach the top. Interestingly enough, this is not the case in the private sector – since welfare services monopolies, high tax wedges and social insurance systems limit women’s career opportunities and enterprise.

Where in Europe would you expect to find the highest share of women reaching top executive positions – in Western, Northern, Southern or Eastern Europe? This is a question I have often amused myself by asking. Most people expect to find the highest share in the Nordics, and the lowest one in Eastern Europe. They are somewhat surprised to see the map below, based on data gathered by Eurostat about the share of executives. The data shows that Nordic countries have the lowest share of women amongst directors and chief executives – and that the Eastern European countries have the highest. Then difference is stark between Bulgaria, where almost half of the executives are women, at one end and Sweden and Denmark, where one in ten executives are women, on the other.

Nima 3.2

Source: Sanandaji (2014).

That Nordic countries struggle with women’s career progress has been noted for some years. In 1998 the International Labor Office concluded that an unusually gender‑segregated labour market had developed in Scandinavian countries, since many women worked in the public rather than the private sector: “in terms of differences amongst industrialized countries, several studies comment on how Nordic countries, and in particular Sweden, have among the greatest inequalities”. A key explanation lies in the nature of the welfare state. In the Nordics, female-dominated sectors such as healthcare and education are mainly run by the public sector. A study from the Nordic Innovation Centre notes: “Nearly 50 per cent of all women employees in Denmark are employed in the public sector. Compared to the male counterpart where just above 15 per cent are employed in the public sector. This difference alone can explain some of the gender gap with respect to entrepreneurship. The same story is prevalent in Sweden.”

The lack of competition reduces long-term productivity growth and overall levels of pay in the female dominated public sector. It also combines with union wage setting to create a situation where individual hard work is not rewarded significantly: wages are flat and wage rises follow seniority, according to labour union contracts, rather than individual achievement. Women in Scandinavia can of course become managers within the public sector, but the opportunities for individual career paths, and certainly for entrepreneurship, are typically more limited compared with in the private sector.

On the other hand, the former planned economies in Central and Eastern Europe are well behind in terms of attitudes towards gender equality. However, during recent years many of these nations have transitioned to market economies which are often freer than the Scandinavian countries, not least when it comes to the issue of welfare monopolies. In these countries, the work patterns of women tend to be more similar to those of men than in Scandinavia. The average employed man in the Nordics works between 16 per cent (Finland) and 27 per cent (Norway) hours more than the average woman. In Lithuania the gap is 13 per cent, and in Latvia and Estonia merely 7 per cent. Bulgaria is unique as the only European Union nation where women actually work more (1 per cent more) hours than men.

So although the Nordic countries seemingly have the optimal conditions for women’s career progress, their welfare state systems in fact limits the chances for women to reach executive positions or run their own enterprises. And although the Eastern European are well behind the rest of Europe in terms of attitudes and women’s labour market participation, the women that do work in this part of Europe often manage to reach the top. Free markets foster women’s career progress where gender equality is lacking, whilst public sector monopolies and high tax wedges hinder women’s career progress where gender equality is prospering.

Dr. Nima Sanandaji is a research fellow at CPS, and the author of Scandinavian Unexceptionalism. The entire book is available through the Institute of Economic Affairs which has published it.