By the 1990’s output faltered and debt soared and unemployment increased. The Scandinavian countries started reforms such as reduced taxes and benefits. - By the 1990’s output faltered and debt soared and unemployment increased. The Scandinavian countries started reforms such as reduced taxes and benefits.
- VII. Reforms
- “Remodeling Scandinavia” (The Economist, 8/23/97)
- Reduced taxes and benefits
- Sweden has cut benefits and marginal rates of income tax
- Denmark has cut top tax rates.
- 2. Unemployment benefits have become less generous.
- Denmark -unemployed youths must join vocational-training programs
- Norway has cut the duration of unemployment benefits (to a still-generous 3 years).
- 3. Pension costs
- Norway is salting away a big chunk of its oil income in a State Petroleum Fund to help pay the pensions of its ageing population when oil and gas production tails off
- Finland raised the retirement age (from 65 to 67).
- 4. Wages and working conditions are still largely set by centralized agreements among powerful trade unions, employers and the state (keep minimum wages high and, in the name of equality; narrow the variation between low- and high-wage jobs and industries. Unskilled workers cost too much and the talented have too little incentive to invest in their education, or to switch from lackluster industries to booming ones.
- 5. Job-creation programs
- Sweden's 4year job-creation program relies heavily on getting adults into higher education, upgrading infrastructure and early retirement.
- Germany:
- Reform process begun by Christian Democrats under Helmut Kohl (became Chancellor in 1982): tax reductions, deregulation of labor markets, and privatization (Volkswagen, Deutsche Telecom)
- continued by Social Democrats under Gerhard Schroder - reduced expenditure including state pensions and other welfare benefits; commitment to reduce public debt
- Tax reforms (July 2000) - cut in top rate of corporate tax and income tax
- France
- Tax Cuts:
- Lower income tax rates in all brackets; remove disincentive at bottom end for seeking work
- Lower social security contributions from the low-paid
- cut in corporate profits tax
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