2011 May 06 Friday
European Social Benefits Become Cuttable

The taboo against cutting welfare state benefits in Europe is crumbling.

In a measure of the shift, Manuel Valls, a presidential hopeful in France’s Socialist Party, challenged party doctrine recently by declaring that it should not make an issue of preserving the 35-hour workweek if French factories have to compete with Chinese factories where the workweek starts at 60 hours and goes up from there. In Denmark, Prime Minister Lars Loekke Rasmussen rattled many in that icon of Scandinavian cradle-to-grave welfare by suggesting Danes should work longer before retiring, to peel back the deficit by $2.8 billion.

The short work days of Belgians, Germans, and Danes are going to run up against a billion Chinese willing to work longer and harder to afford commodities imports. At the same time, aging populations will make ratios of workers to retirees too low to allow early retirements and shorter work days.

Europeans should automate their personal lives to free up more time for paid work. But one of the distorting effects of taxes is to increases the incentives for manual labor for your own personal needs. Since your own labor isn't taxed when you mow the lawn, paint the house, or repair your car the higher your labor is taxed in your job the greater the advantage that do-it-yourselfers gain from doing their own work. In a nutshell: high labor or sales taxes decrease economies of scale by cutting the use of purchased labor and capital.

I expect Peak Oil to precipitate a crisis in the modern Western welfare states that will force a slashing of welfare state benefits. Necessity is a mother.

Share |      By Randall Parker at 2011 May 06 08:53 PM  Economics Entitlements


Comments
A.Prole said at May 7, 2011 2:36 AM:

Silly little ol' me always thought that the entire justification of 'free trade' with China was to increase incomes in ALL participating nations with the result of increasing welfare and leisure.
Or that's what myriads of 'smart' economists told us.

Snouck said at May 7, 2011 11:42 AM:

There is a book out "A long goodbye to Bismark" dealing with the dismantling of the welfare state in Europe. The welfare state is being scaled down everywhere. It is recognized that the system is unaffordable.

ASPIRANT said at May 7, 2011 12:39 PM:

I suppose I'd be called naive if I suggested that the best way to make up for tax deficits is to preferentially tax those most able to pay...

Randall Parker said at May 7, 2011 1:21 PM:

Aspirant,

Europe already has pretty high taxes. European governments take much larger slices of their economies than the US government does. Perhaps not coincidentally, the US has a higher per capita GDP.

Best way: Depends both on your values and on what you think the effects will be. I'm personally opposed to subsidizing parasites, both for practical reasons (you get more parasitism which makes things worse) and moral reasons (I do not want to be a slave to the spendthrifts, gamblers, lazies, etc).

Snouck,

Think the Euro elites are going to reach the same conclusion about low IQ immigration?

Snouck said at May 8, 2011 3:47 AM:

Randall: "Think the Euro elites are going to reach the same conclusion about low IQ immigration?"

I do not see it happening. I do not see EU olichargs stepping forward and say we need high IQ immigrants and stop low IQ immigrants. The EU is really run by France and Germany. I do not see national politicians of those countries doing it either. Perhaps I am wrong. I hope so.

The smaller countries such as The Netherlands, Denmark and Switzerland have populist parties who are making an issue out of it and who become a part of coalition governments. But the small countries do not call the shots. Unless there is a rise of populism in Germany and France and populist parties get real influence on politics there the EU will continue to pursue liberal immigration policies for low IQ immigrants from the Maghreb and the rest of Africa. I do not see the Front National in France or die Freiheit in Germany becoming so powerful.

But if it happens it will happen fairly quick.

Regards,

Snouck

Clarium said at May 8, 2011 3:59 AM:

Well, peak oil probably would have a gross positive impact on the manufacturing sectors of European welfare states since it would increase the cost of transportation for manufactured goods in China.

Engineer-Poet said at May 8, 2011 8:50 PM:

All it would take is for Thilo Sarrizen to go from pariah to prophet, and Europe's immigration policy could change overnight.

WJ said at May 9, 2011 10:44 AM:

One of the advantages of reducing the European welfare state is that it's a draw for millions of immigrants. Britain is traditionally favored by immigrants because, among other reasons, it has the most generous welfare benefits. Cut the welfare state, and immigrants have to get jobs when they arrive. Cut the welfare state, and unskilled natives who suddenly need jobs will gain a stake in voting for low immigration.

The West needs to reduce dependency of every kind to remain competitive. Youth need to be brought into the job market quickly, by learning worthwhile skills in high school; older adults need to retire later; and those of working age need to be expected to work rather than allowed to be parasites.

I see the growing competition with Asia as in ways beneficial, as it may reverse social decay.

no i don't said at May 10, 2011 2:30 PM:

It's always funny and interesting to see how in a decaying society -like the U.S.- the first thing people do is blame their laziness, their stupidity, their lack of fresh ideas, their lack of courage, their obesity, etc,,, on somebody else. In the case of the U.S. today, the target has become the immigrants.

Americans will always continue to have somebody else to blame but themselves, right? And since it can no longer be Native Indians and blacks (or Jews in the case of late 1930's Germany) , all that hatred has to be directed to the most vulnerable portion of society nowadays: immigrants; while we forget that once upon a time it was immigrants that made the U.S. great.


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