tax policy and employment considerations nordic lessons and latvian constraints welfare conference,...
TRANSCRIPT
Tax policy and employment considerationsNordic lessons and Latvian constraints
Welfare Conference, 15 November 2012, SSE Riga
Morten HansenHead of Economics Department
Stockholm School of Economics in [email protected]
Outline
Four bullet points to be addressed
Idea: There are some valuable lessons from the Nordic
countries but there are also some Latvia-specific
constraints not allowing for a blanket adoption of
Nordic ideas
Latvia – not a Nordic country by government spending
Latvia – not a Nordic country by taxation
Latvia – not a Nordic country by income equality
Latvia – not a Nordic country by labour market participation, employment rate or unemployment rate
Total government revenueshare of GDP, 2011, Nordics and Baltics
Norway Denmark Finland Sweden EU27 Estonia Latvia Lithuania0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Latvia (and Baltics in general):Low tax & small state countries
Norway
Denmark
Finland
SwedenEU27
Estonia
Latvia
Lithuania
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
Government revenueGovernment expenditure
Ranking: Wastefulness of government spendingWorld Economic Forum, Global Competitiveness Report 2012-13
Norway Denmark Finland Sweden Estonia Latvia Lithuania0
10
20
30
40
50
60
70
80
90
100
Constraints in terms of taxation…
A progressive tax is:
”an absurd ideology and the People’s Party will never
support it”
Mareks Segliņš, (then) Minister for Justice
July 2009, Latvian TV
- but reducing the non-taxed minimum during the crisis was brutal
- high incomes and wealth (e.g. property) still taxed very lightly
Gini coefficient, 2010
EU27
Slovenia
Sweden
Finland
Iceland
Austria
DenmarkM
alta
Germany
Poland
Estonia
United Kingdom
Ireland
Portugal
Latvia
15
20
25
30
35
40
Gini coefficient, 2000 – 2010 Latvia and the Nordic countries
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201015
20
25
30
35
40
45
LatviaFinlandSwedenNorwayDenmark
Activity rates/participation rates, 15 – 64 yearswhere the Nordics shine…
Norway Denmark Finland Sweden EU27 Estonia Latvia Lithuania66.0
68.0
70.0
72.0
74.0
76.0
78.0
80.0
82.0
Employment rates, 15 – 64 years, 2011- where the Nordics shine again…
Norway Denmark Finland Sweden EU27 Estonia Latvia Lithuania50.0
55.0
60.0
65.0
70.0
75.0
80.0
Women Men
Unemployment rates, Baltics and DenmarkTwenty years later, still high structural unemployment! Risk of
bottlenecks
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q10.0
5.0
10.0
15.0
20.0
25.0
DenmarkEstoniaLatviaLithuania
Just a few observations at the end…
• Latvian spending on active and passive labour market measures is low by EU27 standards. Should be many useful lessons from the Nordics.
• A Guaranteed Minimum Income (GMI) of 45 LVL per month cannot be enough to keep recipients from remaining structurally unemployed. Lowering GMI to 35 LVL will make matters worse.
• High level analysis and many recommendations in the World Bank report:
https://openknowledge.worldbank.org/bitstream/handle/10986/3009/567470v20ESW0P00disclosed0110280110.pdf?sequence=1
Thank you for your attention!Questions and comments are welcome
Stockholm School of Economics in Riga
Founded 1994