Upload
meryle
View
32
Download
0
Embed Size (px)
DESCRIPTION
Reassessing the Nordic Welfare Model Kickoff Conference, Oslo, 24-25.Oct,2007 Globalization, Competitiveness and Social Inequality Is Globalization a Threat to the Nordic Welfare model? Or is the Nordic Welfare Model a Key to Global Competitiveness? Jørgen Goul Andersen - PowerPoint PPT Presentation
Citation preview
Reassessing the Nordic Welfare ModelKickoff Conference, Oslo, 24-25.Oct,2007
Globalization, Competitiveness and Social Inequality
• Is Globalization a Threat to the Nordic Welfare model?
• Or is the Nordic Welfare Model a Key to Global Competitiveness?
• Jørgen Goul Andersen• Aalborg University www.ccws.dk
What is the Nordic Welfare Model?
Minimum definition:• Universalism• High priority to services, especially child & elderly care• Equality: Compressed wage structures, High minimum
protection, Progressive taxes• Tax financing• High priority to basic & lower education
What is globalization?• Interaction • Dependence• Across borders, across continents
Economic, Political, Cultural Globalization(and immigration)
Economic globalization:• Trade• Foreign Direct Investments• International Capital Flows
A Few Reservations
• There was a Roman empire once …• There was a globalization once: (1850) 1870-1913• Foreign trade/GDP: 1913 > 2005 (and 1960>2005) in Dk.• Globalization was reversed 1914-45• Not that much intercontinental trade• Small open economies always exposed to comptetition• Most jobs are in the shielded sector• Transportation costs could increase
But:• Capital movements• Dependence; competition is global• Global explosion in education & technology
But why should that
impact on the welfare state?
Previously diffuse arguments:- Nation state building & welfare state was linked- Competitiveness requires less regulation, lower
taxes,etc. (≈ ”Washington Consensus”)- Global competition lead to increased inequality.
And less state capability to do anything about it
More serious arguments
Knowledge- Economic
intensive Globalization
economy (EU) (OECD)
Less room of maneouvre in economic Policy? End of full employment policies?
Trade off between equality and employment?Pressure on low-skilled workers?
Tax competition:”Race to the Bottom”?-Capital taxes?-Income taxes?
Trade-off equality – employment?
Or trilemma: Equality – employment – balanced budget?
Strong theoretical arguments:
Imports/outsourcing = de-industrialization =unskilled surplus population
Many ”systemic errors” in Nordic Countries:- Compressed wage structures / high minimum wages- Small work incentives especially for low-skilled workers
(those who have fewest non-economic work incentives)
Equality – comparative figures
High/increasing inequality
Not unavoidable
P 90 / P 10 Ratio
2000 Mid-1980s
Denmark 2.7 2.8
Sweden 2.8 2.4
Norway 2.8 3.1
Finland 3.1 2.7
Average 2.8 2.7
Netherlands 3.0 2.7
Austria 3.3 2.9
France 3.4 3.3
Germany 3.5 3.2
Italy 4.6 3.9
UK 4.2 3.6
USA 5.4 5.5
Gini-coefficientsDenmark, 25-59 years old
1994 1996 1998 2000 2001 2002
Personal income 38.7 38.3 38.3 38.5 38.6 38.3
Taxes -19.1 -18.8 -18.4 -18.7 -18.7 -18.3
P.Income after tax 19.6 19.6 19.9 19.8 19.9 20.0
Capital income 0.6 0.6 2.5 3.8 4.0 4.0
Disposable income 18.9 19.2 20.5 21.4 21.8 22.4
Increasing inequality in general=
Mainly an effects of capital income + 99th percentile
After 2002: Taxes probably less redistributive = POLITICS
Denmark poverty
Report 23. October 2007/ Danish LO:Increasing poverty in DenmarkEspecially after 2001
Overwhelmingly function of political factors:• MAKE WORK PAY politics
= increasing poverty, especially for families
Necessary/unavoidable? • Empirical evidence shows small/no effects• Denmark has the highest non-financial emploment
commitment in the world
1. Less than upper secondary
2. Upper Secndary
3. Tertiary
(1:3)
% employed among low-
educated men
Denmark 7.2 4.4 4.7 1.5 71.6
Sweden 6.1 5.2 3.9 1.6 73.3
Norway 3.9 3.6 2.5 1.6 71.7
France 12.1 7.5 6.1 2.0 68.3
Belgium 10.7 6.7 3.5 3.1 61.9
Germany 18.0 10.2 5.2 3.5 61.2
UK 6.9 3.9 2.4 2.9 61.9
USA 9.9 6.1 3.4 2.9 68.9
Unemployment, by education (25-64 years old)
What is the secret?
• Flexicurity? (good for Denmark)• Public service sector: (Good) Service jobs• Qualification effort: Denmark lost some 20 per
cent of unskilled jobs – but some 25 per cent of unskilled workers
• High social minima: Avoiding povertyWeaker incentives but more resources?
• High minimum wages: Efficiency requires motivation/Job satisfaction = incentive to work?
At least the Bumblebee seems to be flyingWe need to know more about why
Taxes and GlobalizationCombined income taxes as per cent of
gross wage expenditures, 2004Single person Married, 2 children,
100% + 67 % APW67% APW 100 % APW 167% APW
Belgium 46.9 54.2 60.3 46.0
Germany 45.4 50.7 55.7 42.7
Sweden 46.2 48.0 52.4 43.2
France 32.5 47.4 50.6 37.6
Italy 41.7 45.7 50.5 41.5
Austria 38.6 43.8 49.7 37.5
Finland 38.6 43.8 49.7 37.5
Netherlands 38.1 43.6 40.5 37.3
Denmark 39.4 41.5 49.9 36.3
Spain 33.6 38.0 41.9 34.6
Norway 33.8 36.9 43.4 31.8
UK 26.4 31.2 34.2 24.1
Ireland 15.6 23.8 35.0 14.4
USA 27.3 29.6 34.8 23.6
Income taxes Nordic Countries
• Difficult to speak of a Nordic Model here• Eldorado for most similar design
in studying- effects on labour supply- effects on migration
• (Not very promising for people hoping to demonstrate large effects of taxes on labour supply, it seems … but perhaps we should include Iceland)
Globalization and Taxes
• Corporate taxes: Some indices of race to the bottom, but mostly by widenig tax base
• Income taxes: Somewhat lower marginal taxes in most countries, party by widening tax base
• Are these policy changes necessary adaptations to globalization?
Globalisation and income taxes: The fear of immigration
• Not marginal tax rate that is important here
• It is the total income tax
• It is not only income taxes that are important
• It is the total tax people have to pay
- including VAT
- including property tax for homeowners
Globalisation and income taxes: The fear
of immigration – II.
• Not only taxes are important
• The important calculus includes taxes plus necessary social expenditures (including private insurance)
• For those age groups that are mobile across borders (roughly those aged less than 35)
• Provided people move because of self-interest
Low Taxes mean high private welfare expenses
2000 Public gross expendture
Total net social expenditure
Rank net social expenditures
Sweden 35.1 30.6 3
Denmark 34.2 26.4 5
France 33.0 31.2 1
Germany 30.6 30.8 2
Norway 27.0 23.6 8
Netherlands 24.3 25.0 6
UK 25.4 27.1 4
USA 15.7 24.5 7
Surcey: Adema & Ladaique (OECD, 2005)
Conclusions regardingtaxes
• Probably no economic incentives at all to emigrate• Rather economic incentives to return• This is inconsistent with the suggestions of e.g. the Danish Welfare
Commission 2003-06, • But it is perfectly consistent with the data of the welfare commission
If there are any problems with taxes, it concerns immigration, not emigration; immigrants may also under-exploit welfare
We might exploit intra-Nordic differences to see if there is an effect• Provided that people move because of economic motives to
maximize post-tax consumption possibilities• This doesn’t seem to motivate migrations within the Nordic countries
CONCLUSION• Difficult to claim that Nordic Welfare Model is a Comparative
Disadvantage – or that it is threatened• This is an important lesson internationally• Is the Nordic Welfare Model even a Comparative Advantage?
- Emphasis on care: Yes. Both to avoidunemployment, to increase labour supply, tomaintain fertility- Universalism: Probably. Described as employmentfriendly. But not so strong documentation- Compressed wage structures: Need to know more- High social minima: Need to know more- Progressive taxes: Need to know more- Education: Yes, but probably the most importantchallenge
Beyond ConclusionIt is likely that:• Social capital (which is very high) is (a) causally
related to the welfare state and (b) has an important impact on economic efficiency and competitivenes
• Feelings of influence at the workplace is (a) causally related to the welfare state and (b) has an important impact on innovation
We need to know more about this – but this is highly difficult to document