how well is the nordic model functioning? lars calmfors nordic council: press lunch 28/10-2014
TRANSCRIPT
How Well is the Nordic Model Functioning?
Lars CalmforsNordic Council: press lunch
28/10-2014
Background
• Study for the Nordic Council co-ordinated by ETLA in Finland: The Nordic Model – Challenged but Capable of Reform
• Not so easy to define the Nordic Model
Combinations of average living standard and equality
Employment rate, percentage of population 20-64 years old
Employment rate, percentage of females 20-64 years old
Sources of income equalisation relative to the US
Trade union density, percentage of employees
Net income replacement rate for short-term unemployed (first year), per cent
Total tax revenue, percentage of GDP
R&D expenditure, percentage of GDP
Public expenditure and education outcomes
Organisational change and new technology
GDP per employed person, 1991 = 100
Challenges for the Nordic model
1. Maintain high productivity growth - lower productivity growth during the international crisis - falling productivity in Sweden and Norway already before the crisis - international debate 2. Financing of public services - ageing population - Wagner’s law - Baumol’s disease
Challenges for the Nordic model cont.
3. Employment - technological change reduces demand for low- skilled - globalisation - non-European immigrants4. Income distribution - increasing inequality from a low level5. Adjustment capability - Finland: Nokia, steel industry, forest industry
Total 8,0
15-19 år 32,1
20-24 år 14,0
25-34 år 5,6
35-54 år 3,7
55-64 år 3,8
Education
Primary 13,4
Secondary 5,1
Tertiary 3,8
Country of origin
Outside Europe 16,0
Europe outside Sweden 8,7
Sweden 5,2
Unemployment in Sweden 2013
How can challenges be met?1. Productivity - combination of selective and general policies - subsidisation of researchers and researchers in the business sector rather than of research
per se2. Financing of public services - longer working life - retirement age should be indexed to life expectancy - earlier labour market entry for young people: graduation bonus dependent on age3. Employment - school system: focus on weak pupils - higher wages for teachers and more wage dispersion in the profession - accept larger wage differentials (education cannot solve all problems)4. Trade-off between efficiency and income distribuation objectives - wage differentials - tax system - Swedish Earned Income Tax Credit
Requirements on policy
• Improvements can be made in tax policy - property tax - equal taxation of capital income - uniform VAT• Active labour market programmes - earlier focus: weak groups - new focus employers and matching
Differences in wage and PISA results(90/10)
Källor: PISA 2014 och Eurostat Structure of Earnings Survey 2010
121008060402009896
2.20
2.00
1.80
1.60
1.40
1.20
2.20
2.00
1.80
1.60
1.40
1.20
P90/P10P50/P10P90/P50
Wage dispersion in Sweden
Percentilkvoter
Real disposable income for employed and non-employed in Sweden, respectively
The degree of trust