Download Net Social Wage Ratio

The fiscal crisis and the social wage in Southern
Europe
• Focus on Greece
• Compare the fiscal structure of Greece, Spain,
•
•
Portugal, Italy, France and EU-15 for 1995-2009
Class aspects of fiscal crisis: Estimate the net
social wage (ratio) in Greece and other
Southern European countries (Are workers/social
policy responsible for the recent economic crisis,
the public deficits and the accumulation of public
debt in recent years?)
Is there a distinct “Southern European welfare
state model”?
Public expenditures, taxes and budget deficits as a percentage
of GDP in Greece and EU15 (1995-2009)
Expenditures- Revenues – Deficit (1995-2009)
EU15
GREECE
DIF
1. Government expenditures / GDP
47.7
45.9
-1.8
2. Government revenues / GDP
45.1
39.4
-5.7
3. Budget deficit / GDP
-2.6
-6.5
+3.9
4. Government employee compensation/ GDP
10.8
11.0
---
5. Education expenditures as a percentage of GDP
5.2
2.9
-2.3
6. Health expenditures as a percentage of GDP
6.4
4.4
-2.0
7. Social protection expenditures / GDP
18.8
17.2
-1.6
8. Interest payments / GDP
3.6
6.7
+3.1
9. General public expenditures / GDP
7.1
10.6
+3.5
10. Defense expenditures / GDP
1.6
2.6
+1.0
Public expenditures / GDP (1995-2008)
Public expenditures, taxes and budget deficits as a percentage of GDP in Greece and
EU15 (1995-2009) (continued)
EU15
GREECE
DIF
1. Government expenditures / GDP
47.7
45.9
-1.8
2. Government revenues / GDP
45.1
39.4
-5.7
3. Budget deficit / GDP
-2.6
-6.5
+3.9
11. Total receipts from taxes and social contributions/GDP
41.3
34.1
-7.2
12. Total tax receipts/ GDP
27.2
21.2
-6.0
13. Total (actual and imputed) social contributions /GDP
14.3
12.9
-1.4
14. Current taxes on income, wealth, etc./ GDP
13.2
8.0
-5.2
15. Taxes on income / GDP
12.3
7.6
-4.7
16. Taxes on individual or household income including
holding gains / GDP
9.7
4.5
-5.2
17. Taxes on the income or profits of corporations including
holding gains / GDP
n.a.
2.9
----
18. Taxes on production and imports / GDP
13.7
13.0
-0.7
Expenditures-Revenues–Deficit (1995-2009)
Taxation / GDP (1995-2008)
Summary of the fiscal structure comparison between
Greece and EU-15 1995-2009
• Greek public expenditures slightly less (1.8%) than
•
•
•
•
•
•
in EU-15 on average
State revenues much lower (6.0%)
Hence, average annual public deficits (6.5%) in
Greece
Wages of state workers the same as in EU
“Welfare state” spending (health, education, social
security) less in Greece
Defense, general services, interest (= annual
deficit) much higher in Greece
Taxes on income (of non-workers) and tax rates on
profits of corporations much less in Greece
Public Education expenditures/GDP Greece and EU-15
1995-2008
education expenditures as a percentage of GDP, 1995-2008, Greece and EU 15
6,0
5,0
4,0
3,0
2,0
1,0
0,0
education exp/GDP
EU 15 Greece
Public health expenditures as a percentage of GDP, Greece and
EU-15, 1995-2008
government health expendituresas a percentage of GDP
7,0
6,0
5,0
4,0
3,0
2,0
1,0
0,0
average 1995-2008
EE15
Greece
Corporate taxes/GDP average 1995-2008 selected EU countries
corporate taxes as a percentage of GDP
France
9,0
Italy
Greece
8,0
Portugal
Spain
7,0
Belgium
Denmark
UK
6,0
Finland
Netherlands
5,0
Czech Rep
Cyprus
4,0
Norway
3,0
2,0
1,0
0,0
1
Average 1995-2008
Public expenditures, taxes and budget deficits as a percentage of GDP in
France Spain Portugal Italy and EU15 (1995-2009)
EU15
Portug
al
Italy
Spain
France
1. Government expenditures / GDP
47.7
43.1
49.1
40.5
53.2
2. Government revenues / GDP
45.1
39.1
45.5
38.3
49.9
3. Budget deficit / GDP
-2.6
-4.1
-3.5
-2.2
-3.3
4. Government employee compensation
10.8
13.0
10.9
10.5
13.3
5. Education expenditures
5.2
6.8
4.7
4.4
6.3
6. Health expenditures
6.4
6.5
6.2
5.4
7.5
7. Social protection expenditures
18.8
14.0
18.0
13.4
21.4
8. Interest payments
3.6
3.2
6.6
3.0
3.0
9. General public expenditures
7.1
6.8
10.3
5.7
7.6
10. Defense expenditures
1.6
1.4
1.2
1.2
2.1
Expenditures- Revenues – Deficit
Public expend/GDP (1995-2008)
Table 1: Public expenditures, taxes and budget deficits as a
percentage of GDP in France Spain Portugal Italy and EU15 (19952009) (continued)
EU15
Portugal
Italy
Spain
France
11. Total receipts from taxes and social
contributions
41.3
35.3
41.9
34.9
45.4
12. Total tax receipts
27.2
23.7
28.9
22.5
27.1
13. Total (actual and imputed) social
contributions
14.3
11.6
13.1
12.9
18.5
14. Current taxes on income, wealth, etc.
13.2
9.1
14.4
10.5
10.9
15. Taxes on income
12.3
8.8
13.9
10.2
9.9
16. Taxes on individual or household income
including holding gains
9.7
5.5
10.9
7.0
7.4
17. Taxes on the income or profits of
corporations including holding gains
n.a.
3.2
2.9
3.1
2.5
18. Taxes on production and imports
13.7
14.6
14.2
11.6
15.8
Taxation / GDP (1995-2008)
Fiscal structure
• Greece, Portugal and Spain spend less than the EU average, Italy more,
•
•
•
•
France much more
Greece, Portugal and Spain collect much less than the EU average in
revenues, Italy the average, France much more
Inadequate state revenues the reason for public deficits in Greece,
Portugal and Spain
Greece, Portugal and Spain lag behind European averages for total and
almost all individual tax categories, and Italy is close to those averages.
Taxation in France is based heavily on indirect taxes (which offset the
lighter taxation on household income and profits bringing tax revenues
equal to the EU average) and much higher than average social security
contributions
France spends more for wages of public workers, social security and social
welfare, Greece and Italy spend more for interest on public debt
Net social wage as the indicator of the class character of the state budget
• Radical/Marxist Political economy: Who pays for
social spending (directed at workers?)
a) Workers themselves b) capital (profits) or c) public
budget deficits?
Examine if net social wage is positive or negative and
its impact on
labor discipline productivity
(post fiscal) distribution – profitability –
accumulation of capital and growth
• Mainstream economics: “welfare programs may lead
to cumulative deficits and mounting public debts”
(Dreze and Malinvaud, 1994, p. 95)
Table 5: Net Social Wage Definitions
===========================================
=========
• Net Social Wage = Labor Benefits – Labor Taxes
nsw = lb – lt
• Benefit Ratio = Labor Benefits / GDP
Lbr = lb / GDP (ec)
• Tax Ratio = Labor Taxes / GDP
Ltr = lt /GDP (ec)
• Net Social Wage Ratio = Net Social Wage / GDP or
= Net Social Wage / Employee Compensation
• nswr = nsw / GDP = Lbr - Ltr
or
• nswr = nsw / ec
• =========================================
========
Allocation of benefits from state expenditures to workers
Categories of Public expenditures classified by Labor benefits
economic function
Α. Public Consumption
1. General Public Services
2. Defense
3. Public Order and Safety
-------
4. Education
Labor Share = workers/total employment
5. Health
Labor Share
6. Social Security and Welfare
Labor Share
7. Housing and Community Services
Labor Share
8. Recreation, Culture and Religion
Labor Share
9. Economic Services
---
10. Other Functions
Labor Share
Allocation of benefits from state expenditures to workers
(cont’d)
B. Subsidies
Subsidies to firms
-------
C. Current transfers to households
1. Pensions
100% or Labor share
2. Unemployment Compensation
100%
3. Family allowances
100% or Labor share
4. Sickness allowances
100% or Labor share
5. Welfare transfers
100%
D. Public Investment
1. General Public services
2. Defense
---------
3. Housing
Labor share
Ε. Property income paid
-------
1.Interest
Allocation of taxes to wage laborers
Tax Categories
Labor taxes
1. Personal Income Tax
Labor Share
2. Local Government Taxes
Labor Share
3. Corporate Income Taxes
---
4. Social Security Contributions (of workers)
100% (or L.S.)
5. Payroll Taxes
100%
6. Property Taxes
---
7.Capital taxes
---
8. Indirect Business Taxes (Consumption Taxes)*
Labor Share = wages /
personal consumption
9.Other Taxes
Labor Share
Labor benefit ratio and labor tax ratio
labor benefit ratio and labor tax ratio Greece 1995-2008
0,270
0,250
tax ratio = 0.234
tax ratio = 0.219
0,230
0,210
0,190
0,170
0,150
benefit ratio = 0.181
0,130
benefit ratio = 0.145
0,110
0,090
0,070
1995
1996
1997
1998
1999
2000
2001
labor benefit ratio
2002
2003
labor tax ratio
2004
2005
2006
2007
2008
The net social wage ratio (nswr) in Greece, 19952008
net social wage ratio Greece 1995-2008
0,010
Average 1995-2008 = -- 6.3%
0,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-0,010
-0,020
Average 1995-2002 = -- 7.1%
-0,030
Average 2003-2008 = --5.2%
-0,040
-0,050
-0,060
-0,070
-0,080
-0,090
nswr
2007
2008
nsw**/gdp
-0,02
-0,04
-0,06
-0,08
-0,10
-0,12
nsw**/GDPr
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
The net social wage ratio (nswr) in Greece, 19581995
nsw**/gdp and nsw**/gdp(rev)
0,08
0,06
0,04
0,02
0,00
Public Debt / GDP
Public Debt / GDP
140,0
Greece
Italy
120,0
100,0
90% of GDP
80,0
EU-15
60,0
Portugal
France
40,0
Spain
20,0
1995
1996
1997
1998
1999
Greece
2000
Spain
2001
2002
France
2003
Italy
2004
Portugal
2005
EU-15
2006
2007
2008
2009
Public Deficits / GDP
Public deficits/GDP
4,0
2,0
0,0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-2,0
-4,0
-6,0
-8,0
-10,0
-12,0
-14,0
-16,0
-18,0
Greece
Spain
France
Italy
Portugal
EU-15
2006
2007
2008
2009
Public Debt / Public Revenues
public debt/public revenues
3,50
Greece
3,00
2,50
Italy
Portugal
2,00
EU-15
1,50
1,00
France
Spain
0,50
1995
1996
1997
1998
1999
Greece
2000
Spain
2001
2002
France
2003
Italy
2004
Portugal
2005
EU-15
2006
2007
2008
2009
Labor Benefit ratios
Labor Benefit Ratios
0,400
0,350
0,300
0,250
0,200
0,150
0,100
1995
1996
1997
1998
1999
Greece
2000
2001
Portugal
2002
2003
2004
Spain
Italy
France
2005
2006
2007
2008
Labor Tax ratios
Labor Tax Ratios
0,400
0,350
0,300
0,250
0,200
0,150
1995
1996
1997
1998
1999
2000
Greece
2001
Spain
2002
2003
Portugal
Italy
2004
France
2005
2006
2007
2008
Net social wage ratios
Net social wage ratios
0,000
-0,010
-0,020
-0,030
-0,040
-0,050
-0,060
-0,070
-0,080
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-0,090
-0,100
Greece
Italy
Spain
Portugal
France
2005
2006
2007
2008
Lbr – Ltr = nswr
Greece
Spain
0.160
0.231 0.236
0.245
0.357
Labor tax 0.223
ratio
0.265 0.260
0.304
0.380
Net social -0.063
wage
ratio
-0.034 -0.024
-0.059 -0.022
Labor
benefit
ratio
Portugal Italy
France
Net social wage ratio in selected countries
Country
Average
Net social wage ratio (nsw/GDP)
USA (1952-1997)
-0.067
UK (1970-1990)
-0.024
New Zealand (1949-1975)
-0.016
Canada (1955-1988)
0.000
France
-0.022
Italy
-0.059
Portugal
-0.024
Spain
-0.034
Greece (1958-1995)
-0.064
Greece (1995-2008)
-0.063
Average values for net social wage ratio, budget deficit and interest
paid on public debt as a percentage of GDP, 1995-2008
Greece
Spain France Italy
Portug
al
Public deficit/GDP
-0.065
-0.022
-0.033
-0.035
-0.041
Interest paid/GDP
0.067
0.030
0.030
0.066
0.032
Net social wage
ratio
-0.063
-0.034
-0.022
-0.059
-0.024
(Public deficit – net
tax on labor) / GDP
-0.128
-0.056
-0.055
-0.094
-0.065
Changes in the net social wage ratio = (nsw / gdp) and in the
wage share = (w / gdp)
Wage
share
Net social
wage rate
=
(nsw /
gdp)
+
= (w /
gdp)
-
+
(a) + +
-
(c)
-
+
(b) +
(d)
-
- -
net social wage ratio and wage share, Greece 1995-2008
net social wage ratio and wage share
0,030
0,670
(b) + -
nswr**
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0,650
2005
2006
2007
2008
-0,010
0,630
-0,030
0,610
-0,050
0,590
-0,070
0,570
-0,090
0,550
nswr**
wage share
ws
0,010
Public debt/GDP Greece 1960-2010