Wednesday, March 24, 2010

Sweden Made Work More Attractive than Unemployment

Professor Sauer at sent me this, which he found at Stefan Karlsson's blog:

“In Sweden, the centre-right government elected in 2006 has implemented significant income tax reductions (and payroll tax reductions), particularly for low earners while at the same time, unemployment and sick leave benefits have been cut and it has become much more difficult to be able to receive such benefits.

In Denmark, by contrast, even though it too has a formally "centre-right government" it has largely refrained from reducing taxes or government hand-outs, and it has more specifically lacked the focus of their Swedish counterparts in strengthening incentives to work by reducing unemployment benefits and taxation of low income earners.”

Denmark’s employment has fallen 5% in the past year while Sweden’s is unchanged.

CBM: I am embarrassed to report having been too busy in this recession to give much attention to the details of European recessions, but I did make one comparison of European countries that included Sweden (with a 2 percent employment gain over 7 quarters) but did not include Denmark due to lack of GDP data. The same employment data show a -0.6 percent employment loss for Denmark. However, the theme of my article was that countries that allowed employment to adjust downward may, remarkably, enjoy MORE GDP as a result.

Determining whether my article's suggestion is correct, and whether that logic has much to say about the Denmark-Sweden comparison, requires further research.


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