Swedish welfare scandals call for profit review

Another welfare scandal has hit Sweden. This time, it comes after reporters from Sveriges Television (SVT) investigative news programme Uppdrag Granskning approached publicly-financed and privately-managed free schools under the presence of being parents of two 12-year-old children. One of the fictional children was a girl with good marks whilst the other was a boy with bad marks and social problems. According to the law, students and their parents can choose schools, whilst schools cannot choose away students that they do not want. As shown by Uppdrag Granskning however, the girl received a positive admission response twice as often as the boy.

An even more shocking revelation was found when a reporter visited a school under the presence of seeking the job as a music teacher. The head of the free school exclaimed during a conversation captured by a hidden camera that children with ADHD were gangsters, comparable to rotten apples, and cancerous growths. Education Minister Jan Björklund, leader of the Liberal Party (Folkpartiet), is among many who have expressed anger over the situation.

Why are there so many scandals, centered on for-profit players in the welfare sector? One possible answer is that journalists are more prone to criticizing private enterprise rather than public sector players, and are thus perhaps not always being fair in the stories they tell. There is certainly some support for this notion. Arguably the greatest welfare scandal in recent years is the case of Koppargården, a nursing home in Järfälla near Stockholm. The private firm Carema was accused by the Dagens Nyheter (DN) newspaper of weighing diapers to use “the full capacity” of the diapers and thus save money. Hundreds of critical articles followed in various Swedish media, harshly criticizing Carema and other private firms of exploiting the elderly.

However, according to a study the National Board of Health and Welfare (Socialstyrelsen), the quality of care provided by private nursing homes is not lower than in those of publicly-run nursing homes. Dagens Samhälle, a newspaper owned by the Swedish Association of Local Authorities and Regions (SALAR), has through extensive work shown that much of the criticism against Koppargården was simply wrong. Diapers are not weighed to save money, but rather to give the best help to the elderly. Following the scandal, the nursing home in question turned public again, and one of the first actions was to buy 24 new scales for weighing diapers. An inquiry done by the request of the labour union Kommunal confirms that the scandal was to large extent based on erroneous reporting that failed to capture the nuances of an infected relationship between doctors and nurses.

Many supporters of school-choice have criticized Uppdrag Granskning for being too hard on free schools. And it is possible that they also have a point when it comes to the recent scandal. But even if media is overly critical of private firms in the welfare sector, there is reason to be concerned. Private companies tend to be good at following economic incentives and being innovative. This can be both a good thing and a bad thing. Today much of the competition for elderly care is centred on who can offer the lowest prices. And thus the market presses prices, but does not necessarily raise quality. Similarly, much good can be said about privately-run free schools. But they clearly have incentives to hand out overly generous grades as a way of attracting students, as well as discouraging students with lower initial grades, a troubled past, or with symptoms such as ADHD, from seeking admission.

The systems have to be changed so that the schools that select students are punished. Similarly, schools that admit students with greater learning difficulties should always be given extra resources, and perhaps also rewarded if they manage to encourage and enable the students to attain better results. Grading should not be done by the same schools that teach the students, but rather in a centralized fashion, and with the same criteria for schools across Sweden. These reforms would be beneficial even if free schools did not compete with public ones. In a situation where competition and profit-motives are involved, we need even more clever thinking about the best institutional framework.

Creating choice and encouraging entrepreneurship within the Swedish welfare sector is a good idea overall. The alternative, public monopolies, entails many problems. There is indeed support for the notion that competition from free schools works as it should, raising quality in nearby public schools as well. But the system is far from optimal and we clearly should change it to the better. Even if media criticism can be biased sometimes, there is nevertheless point to be made alongside the scandalous headlines.

Nima Sanandaji, a Swedish writer of Kurdish origin with a PhD in polymer technology, has written numerous books and reports about subjects such as integration, entrepreneurship, and women's career opportunities. His recent book, published by Sweden's Reforminstitutet think tank, is entitled Krympande eller växande städer ('Shrinking or growing cities'). He is a regular contributor to The Local.