Income inequality in an industrial city during the great levelling: micro level evidence from malmö, 1900–1950

ABSTRACT

This paper contributes to the debate on historical income inequality, and especially on the decrease in inequality found in industrialised countries during the first half of the twentieth century. We use new archival individual – and household-level data for taxpayers in Sweden's third-largest city, Malmö, from 1900 to 1950. Previous research has established that Sweden had a distinctive downturn in income inequality during the first half of the twentieth century, and explanations have not the least focused on capital incomes and taxes. With our original data we shed light on what happened to working-class and middle-class incomes, and show the importance of job upgrading of the working-class, the decline of domestic service and women's enhanced position on the labour market, and declining market incomes for top income earners in changing Malmö’s income distribution. We compare pre-tax and post-tax distributions, and the distribution on the individual level and the household level. With the new micro data, a richer account of income growth and income distribution in twentieth century Sweden is provided.

KEYWORDS:

• Income inequality
• income
• the great leveling
• tax records
• Sweden
• Malmö

JEL-CODES:

• D31
• N33
• N34
• J30

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In the Malmö tax records deposed at the city archive, after 1931 total income is no longer accounted for but since the income tax was flat (in 1935: 1 percent) and the tax payment is recorded, one can multiply the tax rate to obtain a total income for 1935 and 1950. The total income in 1935 is based on estimating the tax rate in 1931, since this is the last year that contains both income and municipal taxes. For those with very low incomes we have adjusted for their tax deductions: for those who paid 9–12 SEK, the tax paid is multiplied by 150 to get the total income and for those who paid 3–9 SEK, we multiply by 200, and for those who paid less than 3 SEK, 400 times. By 1950 most people paid 8 percent in tax (Malmsten, 1994, p. 227) and therefore the sum of everyone’s tax is estimated by the x sum of municipal tax to /0.08 to obtain total income. To control the payment of 8 percent across the board, the 1948 tax records, which contain both total income and municipal tax, was used. Another unfortunate quirk of the lists at the Malmö City Archive is that only total income can be calculated, without division into labour, business and capital income.

2 According to Henrekson and Stenkula (2015, Figure 1.4), only the very top faced steep marginal income tax rates by 1950. A worker with an income corresponding to 1.67 times the average production worker wage had a marginal tax rate of 28.7 percent. The maximum, however, was 73 percent. In 1935 the corresponding figures were 14.2 and 42.0 percent.

3 As in our strategic sample, some of the people on the taxation lists sampled stated no income and paid no tax. The number of actual taxpayers in the BMP sample is 812 in 1900, 2,809 in 1920 and 6,126 in 1950.

4 The districts are defined by the tax authorities themselves, except for Old town around Stortorget, which is an area within the official district Old town (Gamla stan). However Old town is very varied, with both top-income and low-income areas and therefore the specific top-income area around Stortorget is selected (cf. Häger, 1989, p. 425).

5 Following the Statistics Sweden social classification of three social groups with group I as company leaders, entrepreneurs and professionals, group II as the broad middle class of white-collar employees, small business owners and farmers, and group III as manual workers, in 1948 the composition of Malmö was 4.2% group I, 31.7% group II and 57.1% group III (Järnek, 1971). In our strategic sample for 1950, 11.7% are in group I, 14.4% in group II, and 65.9% in group III. As we can see, group II are under-represented while groups I and III are over-represented, which is beneficial to capture the developments at both ends of the income structure. In the random sample of 1950 6.9% are group I, 26.3% are group II and 66.8% are group III. We see the important difference in the share of group I in the random and the strategic sample. On the importance of the three group taxonomy in Sweden at this time, see Smedberg (2022).

6 The quarters sampled are the following. Quarters in the Old City (around Stortorget): Quarter no.30 Sqvalperup, Quarter no.31 Mercurius, Quarter no.32 Jörgen Kock, and Quarter no.33 Skepparen. Quarters in Södervärn: only Quarter no.1 Abel. Quarters in Möllevången: Quarter no.5 Fanan, Quarter no.6 Gillet, and Quarter no. 7 Hagen. Quarters in Grönvången: Quarter. Grönvången, Quarter. Mariatorp, Quarter. Milano and Quarter. Neapel

7 Bengtsson and Molinder (2022, Table 1) show that in Stockholm, 35% of adults paid the bevillning income tax in 1900, 67% in 1920, and 81% in 1950.

8 Female incomes were in general half the male wage in Malmö (Järnek, 1971, p. 179). However, this was not evenly distributed along the income scale and therefore the female income is only 100 SEK less than 480 SEK, to account for the fact that gender income differences were not as wide in the bottom of the income distribution as they were at the top (Häger, 1989, pp. 418–419).

Additional information

Funding

Bengtsson’s work on this paper has been supported by Swedish Research Council, grant 2018-01853, and Jan Wallanders och Tom Hedelius Stiftelse samt Tore Browaldhs Stiftelse, grant P18-0197.