A common assumption in debates about wealth inequality is that gains for the rich must come at the expense of the rest of society. This view underpins many arguments that rising numbers of billionaires inevitably lead to greater inequality.
Yet a new Swedish study suggests the picture is more nuanced. Despite a dramatic increase in the number of billionaires, Sweden has maintained high levels of wealth equality, indicating that growing fortunes among the richest households do not necessarily come at the expense of the wider population.
The findings are particularly striking given the scale of wealth creation at the top of Swedish society. According to the 24 May study, wealth equality remained broadly stable between 1999 and 2020 even as the fortunes of the richest 0.1% grew substantially. Sweden now has the highest number of billionaires per capita in the EU and the second-highest level in Europe, behind Switzerland.
The study, titled Rising Gaps, Falling Inequality: Wealth in Sweden, 1999-2020, suggests that equality has been maintained due to growth in financial security brought about by pension funds and property ownership.
Wealth rose “sharply” across the country, according to the study’s authors, Olle Hammar and Paula Roth of the Stockholm School of Economics, and Felicia Stokke and Daniel Waldenström of the Research Institute of Industrial Economics.
However, their study also shows that the median earner remains vulnerable to economic shocks compared with the top 10%, due to a lack of access to liquid assets such as cash or other easily convertible resources.
Rapid Wealth Growth Globally
The study notes that wealth has grown “rapidly” in developed economies over the past two decades, but the evolution of wealth inequality has “not been uniform”.
The authors argue that while some countries, such as the US, have seen top wealth concentration increase, others have produced stable wealth equality – and even seen inequality decline.
The authors state that Sweden is a “particularly informative” case because its economic and institutional structures create “conflicting expectations” about how wealth inequality should evolve as wealth rises.
Sweden’s economic policies are shaped by a “strong egalitarian welfare-state tradition” on the one hand and by a large, globally competitive corporate sector on the other.
Over the 21-year period that the authors studied, they found that wealth rose “substantially” across society. Average real wealth tripled and median wealth increased five-fold, from €24,000 ($28,000) in 1999 to €120,000 ($140,000) in 2020, while the number of billionaires also rose five-fold.
While the wealth gap grew in absolute terms, meaning the difference in net wealth between the richest 0.1% and the median earner, relative inequality appears to have narrowed over the same period.
Traditional measures of relative wealth inequality, such as the Gini coefficient, also point to a marked improvement in Sweden, with the score falling from 0.87 in 1999 to 0.77 in 2020. The coefficient measures wealth distribution across society and is used by the World Bank and the OECD.
Pension Funds Drive Wealth Equality
The authors argue that this apparent conflict is explained by examining patterns of asset ownership, with the decline in relative inequality “closely associated” with the spread of funded pensions. Sweden reformed its pension system in the 1990s and early 2000s, combining public contributions with the investment of a fixed share of earnings in financial markets within a state-administered framework.
Housing wealth, particularly in the form of tenant-owned apartments, has also grown in importance for those higher up the economic ladder.
By contrast, unlisted business wealth is the driver behind the largest fortunes and has increased top wealth concentration. This business growth is itself driven by new industries, particularly the tech sector, and the entry of new individuals into the top-wealth bracket. The study suggests that the trend is therefore not merely a matter of increased wealth concentration among select individuals, but part of a broader pattern.
Another trend identified by the study, which combines publicly available information and private company records to collate an overall economic picture, is the decrease in “asset-poor” individuals, down from 21% to 15%.
However, a statistically significant segment of the population still suffers from both income and asset poverty. The authors say this cannot be explained by age alone, meaning that the relative poverty of younger people at the start of their working lives does not fully account for the pattern.
Finally, the study notes that wealth accumulation across generations remains strong in Sweden, with younger Swedes wealthier than older generations were at comparable ages.
This contrasts sharply with countries like the United States and the United Kingdom, which have seen stalled progress in the growth of wealth across generations.
Housing and Demographic Crisis
Given the importance that access to housing plays in wealth equality, the study raises the possibility that the housing crises facing the US and the UK are contributing factors to the stalled progress in generational wealth growth.
Similarly, while not directly covered by the study, the importance of pension funds for maintaining wealth equality could become an increasingly significant issue over the next few decades as Europe faces a demographic crisis.
Collapsing birth and fertility rates have alarmed politicians and policymakers, who warn that aging populations will leave economies with a shrinking base of taxable workers. The result could be a future in which countries struggle to meet their obligations to pensioners or are forced to raise the retirement age.
