A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia. - NYTimes.com - 0 views
www.nytimes.com/...-leap-in-employment-rate-.html
safety net work subsidies transport children education scandinavia
shared by Javier E on 18 Dec 14
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It is a simple idea supported by both economic theory and most people’s intuition: If welfare benefits are generous and taxes high, fewer people will work. Why bother being industrious, after all, if you can get a check from the government for sitting around
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Some of the highest employment rates in the advanced world are in places with the highest taxes and most generous welfare systems, namely Scandinavian countries.
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The United States and many other nations with relatively low taxes and a smaller social safety net actually have substantially lower rates of employment.
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In Denmark, someone who enters the labor force at an average salary loses 86 percent of earnings to a combination of taxes and lost eligibility for welfare benefits; that number is only 37 percent in the United States. Yet the percentage of Danes between the ages of 20 and 59 with a job is 10 percentage points higher than in the United States.
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In short, more people may work when countries offer public services that directly make working easier, such as subsidized care for children and the old; generous sick leave policies; and cheap and accessible transportation. If the goal is to get more people working, what’s important about a social welfare plan may be more about what the money is spent on than how much is spent.
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There are countless differences between Northern European countries and the rest of the world beyond child care policies and the like. The Scandinavian countries may have cultures that encourage more people to work, especially women.
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In Scandinavian countries, working parents have the option of heavily subsidized child care. Leave policies make it easy for parents to take off work to care for a sick child. Heavily subsidized public transportation may make it easier for a person in a low-wage job to get to and from work. And free or inexpensive education may make it easier to get the training to move from the unemployment rolls to a job.
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In the United States, the major policies aimed at helping the working poor are devised around tax subsidies that put more cash in people’s pockets so long as they work, most notably through the Earned-income tax credit and Child tax Credit.
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There is a solid correlation, by Mr. Kleven’s calculations, between what countries spend on employment subsidies — like child care, preschool and care for older adults — and what percentage of their working-age population is in the labor force.
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Collectively, these policies and subsidies create flexibility such that a person on the fence between taking a job versus staying at home to care for children or parents may be more likely to take a job.
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, it could mean that more direct aid to the working poor could help coax Americans into the labor force more effectively than the tax credits that have been a mainstay for compromise between Republicans and Democrats for the last generation.
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wages for entry-level work are much higher in the Nordic countries than in the United States, reflecting a higher minimum wage, stronger labor unions and cultural norms that lead to higher pay
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The employment subsidies Mr. Kleven cites surely help coax more Scandinavians into the work force, Mr. Greenstein agrees, but shouldn’t be viewed in isolation.
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Every country has a mix of taxes, welfare benefits and policies to promote work that reflects its politics and culture. In the large, diverse United States, there is deep skepticism of social welfare programs and direct government spending, along with a greater commitment to keeping taxes low.