NCPA - National Center for Policy Analysis


June 3, 2008

The nation with the lowest levels of poverty and income inequality in the European Union (EU), as well as the lowest rate of long-term unemployment, is Denmark -- a country with competitive product markets and some of the least restrictive labor laws.  Countries with the worst social outcomes (Greece, Italy and Portugal) all have restrictive product and labor market laws.  Liberalization, it seems, no more threatens social justice than regulation guarantees it, says Philip Whyte, a senior research fellow at the Centre for European Reform.

The reason the Nordics and the Dutch have the most egalitarian outcomes is that they provide the best education.  The correlation between educational and social outcomes across the European Union is striking, says Whyte:

  • People with low levels of attainment at secondary education are most exposed to the risk of poverty.
  • Moreover, the more educated people are, the more likely they are to work.
  • The employment rate for Europeans with tertiary education is 80 percent, whereas it is just 50 percent for those who fail to complete their secondary education.

What makes Nordic education systems special?

  • Partly, it is quality: 15-year-olds in northern Europe have higher literacy and numeracy levels than those in southern Europe.
  • But the length of schooling is equally important; in Denmark, Finland and Sweden, 90 per cent of 25- to 34-year-olds have completed upper secondary education -- and 40 percent have gone on to obtain tertiary qualifications.
  • In Portugal, the respective figures are 43 percent and 19 percent, while in Greece they are 57 per cent and 25 percent.

Source: Philip Whyte, "Why free markets have little to do with inequality," Financial Times, June 2, 2008.

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