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Nordic Nations Leading with Lowest Poverty Rates in the World

The Nordic economy prototype combines free-market capitalism and a tax-funded welfare system

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INDIA: Poverty is one of the most despicable banes of humankind and a festering disease afflicting nearly every country across the globe.

While many nations struggle to control poverty rates, currently shooting up in huge numbers, others have an easier time keeping the rates low.

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As per the latest available data from the Organisation for Economic Co-operation and Development (OECD), the top three countries that stand out with the lowest imaginable poverty rates in the world are the two Nordic nations, Iceland and Denmark, and additionally, the Czech Republic.

The Nordic prototype

As is well known, Nordic nations predominantly emphasize on infrastructural facilities relating to civilian safety and welfare, including a high standard of living, access to necessary medical services and free education to boost literacy rates, and a sturdy social safety net, including a strong pension system.

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The Nordic economy prototype combines free-market capitalism and a tax-funded welfare system.


Iceland stands tall at the top of countries with the lowest poverty rates of 4.9% in 2021. Surprisingly, Iceland’s poverty rate even hit a perfect score of 0%, according to data furnished by the World Bank.

Photo Credit: Pixabay/12019
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Some factors contributing to low poverty are:

Work Satisfaction: Out of all the OECD countries, Iceland is the “most highly unionized country” where wages are high and constantly negotiated.

Iceland also thrives on a strong labour market which includes a fully-funded occupational pension system, sickness funds, rehabilitation funds for long-term ill or injured workers, and funds for continuous education of lower-skilled workers and life-long learning.

The Nordic nation has also excelled in bridging even a fraction of gender disparity and the highly controversial wage gap.

The education system in Iceland is an absolute delight to every civilian community as Icelandic schools and universities are free to attend, instilling the spirit of literacy and knowledge in every child and parent.

A high degree of education is one of Iceland’s most precious resources. Moreover, social services like healthcare are mostly covered by taxes.

According to Britannica, welfare services that taxes provide for also include “unemployment insurance, old-age and disability pensions, family and childbearing allowances and sickness benefits.”

There are also several government-funded housing initiatives to ensure that low-income families have easy access to accommodation and shelter.

Although Iceland provides a huge pot of opportunities to its citizens, its welfare system has not been as comprehensive as other Nordic nations.

Moreover, since senior employees retire much later in Iceland, there is less urgency for social safety nets like the fully-funded pension system.

Additionally, Iceland allocates only a minimum amount of GDP on children and families in comparison to its other Nordic counterparts.

Czech Republic

The second country on the list, with a low poverty rate of 8.6% in 2020, is the Czech Republic.

Photo Credit: Pixabay/Jeffrey Czum

Some of the reasons for this low rate include:

Economic Growth: The manufacturing industry in the Czech Republic is one of the key industries in global value chains and is the “third largest share of manufacturing value added in GDP” in 2020, according to the OECD.

Taxes and Transfers: Redistributing tax relief funds and social transfers in the community to benefit the poorest of the poor in the nation, the Czech Republic reduced poverty by about 74%.

Minimum Wage: In 2018, the Nordic nation increased the minimum living wage by 9.6%, pledging to increase it yearly.

The World Bank reports the Czech republic also has a very low rate of income quality, earning a Gini coefficient of 0.25, a measure used to gauge income inequality.

On this scale, zero reflects “complete equality,” and one reflects “complete inequality.”


At number three on the list is Denmark, with a poverty rate of 12.3%, as recorded by the World Bank in 2020. Like the Nordic model, Denmark allots government funds, especially for old age, disability benefits, and healthcare.

Photo Credit: Pixabay/Pexels

Some of the ways the Danish government keeps the poverty rates low are mentioned below:

High Employment Rates and Worker’s Rights: As per OECD’s 2014 data, Denmark’s employment rate was the “7th highest among the OECD countries”.

In 2014, Denmark implemented the Youth Guarantee Implementation Plan that secured for all citizens below the age of 25 the benefit of “training, work experience or a job within four months if they were not in education or employment”.

Trade unions are also strong in the nation; more than 70% of wage workers are engaged in memberships.

Low-income Housing: Danish social housing comprises 20% of housing stock, with housing prices set so low that low-income wage earners can afford accommodation. Denmark gives special priority to the elderly and the disabled.

Low Child Poverty: The child poverty rate in Denmark stood at 3.7% in 2020, with the child and Youth Benefit implemented, ensuring that the caregivers of every child below 18 years of age receive a tax break and almost free childcare for low-income families.

Health Care: Health services in Denmark are astronomically cheap and largely free, even for complex services like surgery.

Nordic countries have placed an enormous amount of government funding in preventing poverty and ensuring easy access to education, healthcare, and other social safety services.

Work is instrumental in bringing wealth and prosperity to the family. Despite being the only non-Nordic country to make the list of countries with the lowest poverty rates, the Czech Republic appears to share similar values.

Also Read: The Lost Generation: Child Poverty in Ukraine amid War with Russia

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