James Fallows has a couple of posts jumping off remarks made by Daimler AG’s Bharat Balasubramanian positing various reasons why northern European countries have more egalitarian income distributions than the United States. Germany’s greater manufacturing orientation gets some play, as does what I believe is an outdated account of the greater use of tracking in Nordic school systems.
I believe the evidence pretty overwhelmingly indicates that the main reason these countries are more egalitarian is that they have equality-generating policies. Northern European countries do much more redistribution through transfer payments than we do:
And they also have higher taxes:
The US has lower taxes. And we spend much more money on non-redistributive military endeavors. And we do a lot of social programs through the regressive method of tax deductions. And on top of that, Medicare is only a weakly redistributive program. Higher taxes to finance more and better public services are the way to curb inequality. Note that if you examine the gini coefficient of individual American states it’s not the manufacturing-intensive ones that are lowest in inequality.