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Are plush welfare states killing Europe?
YES
says Rosie Carr. America might be top dog when it comes to warfare, but Europe's
watchword is welfare. From the cradle to the grave, you'll be looked after
in Europe.
If you can't work because you're ill, or have a disability,
or because no employer wants you, the state (via highly taxed workers) will pay
you enough money to live on for as long as it takes you to find another job or
to recover. It will provide a roof over your head, food to eat and a pension
when you retire. You will not be asked to pay medical bills or dental bills and
nor will your dependants.
It all sounds idyllic, and indeed it would be if everyone stuck to the spirit
of the welfare state and only called on it as a last resort rather than in the
first instance. And that's the problem: too many people think it is their
right to lean on the state whether or not they really need to.
OPEN TO ABUSE
The welfare system is too easy to abuse, and generous enough to tempt the bone
idle into living off benefits quite happily. As a result Europe is now supporting
millions of workers who simply won't, rather than can't, work.
In some parts of Britain as many as one in three people of working age live off
state benefits, and in the UK's old industrial heartlands it's
typically one in five.
Why work if you don't have to? In Germany, the unemployed are entitled
to half their former salary—a clear disincentive to hurrying up and finding
your next job. Why move to where there is work if you don't have to? And
why worry about your financial future if someone else is prepared to shoulder
the burden?
The problem of the benefits culture is particularly acute in Germany and the
UK. In Germany more than five million people are out of work and rely on the
state to look after them. In Britain, more than three million people are in the
dole queue with almost as many again claiming to be too sick or disabled to work.
Yet at the same time employers complain bitterly to the media that they cannot
persuade Britons to take what jobs are on offer, forcing them to resort to bringing
in foreign labour (usually from countries whose workforce have not 'given
up on the work ethic'.) Even the Labour government in Britain, welfare's
number one fan, admits that at least one million people claiming incapacity benefit
should be working.
ENCOURAGING ABUSE
Significantly, the long-term unemployment rate is far higher in the UK and Germany
than in the United States, where welfare support barely exists. The total number
of long term unemployed Americans (that is, unemployed for six months or more)
is 1.6 million.
No one can help being made redundant, but they can help what happens afterwards.
They can help how quickly they get back into work (by accepting any job) or how
quickly they decide to use their own initiative to create work. There may not
be jobs for everyone, but the original aim of the welfare state was to get people
through a crisis—not to cushion them for the rest of their lives if they
don't fancy returning to the workforce.
Another group draining the state are those claiming to be too ill to work.
Westerners have probably never been healthier and so many diseases have never
been so curable, but, oddly, the numbers of people in Europe claiming sickness
benefit is climbing steeply. Britons who claim sickness benefit (which covers
a broad range of conditions) for a year tend to end up claiming the benefit for
eight years, which does not fit with the pattern of most illnesses. Many stay
on the benefit until they die or 'retire'. Clearly, a cancer sufferer
should be offered the full support of the state, but should someone with a bad
back for 17 years be treated so compassionately? In the UK the government has
recognised that the system of benefits paid to the ill offers a 'perverse
incentive' not to look for a job because the longer you stay on 'incapacity
benefit', the more you get.
In his book, The Welfare State We're In, James Bartholomew argues powerfully
that Britain would be better off without the welfare state. He shows how the
welfare state's good intentions have led to horrible results and an extraordinary
deterioration in the quality and character of British life.
Whatever the social consequences of unconditional and lenient welfare, we
cannot ignore the economic effects.
The cost to Britain each year of benefits and employment programmes is more
than £109 billion. Known fraud costs about £3 billion a year. And
the cost to the taxpayer of every nurse, policeman and GP in Britain each year?
Just £35 billion. The consequences of burying our heads in the sand over
this issue are clear: we are creating states weighed down with taxes to pay spiralling
benefits bills in which a dwindling number of increasingly highly taxed individuals
actually work.
Rosie Carr is deputy editor of Investors Chronicle magazine and a contributor
to the Daily Express and Financial Times.
NO
says Stephen Spurdon. For some people any form of active government is anathema.
They moan about nanny states and expensive bureaucracies. Such folk rail at any
perceived failing in a welfare state, where the state uses general taxation to
fund its role in providing healthcare, education, unemployment benefit, housing
and other social provisions. Taking this loose description, we can see that Europe
has some of the most highly developed 'welfare states' in the world.
Perched at the top of this welfare state mountain is Sweden: the model for any
country that wants to be serious about social provision.
So if Sweden is the model welfare state, then there should surely be a nasty
smell of decomposing society coming from the land of ABBA. But actually Sweden
smells quite fresh and shows remarkable signs of life. This is despite the fact
that Sweden and its neighbouring welfare state Denmark have effective tax rates
of around 50% to run their welfare states.
With all the wonderful benefits of the Swedish welfare state, one might expect
Swedes to lounge about, but in fact their unemployment rate is roughly comparable
with that of the US, currently around 5%. But at this point, it has to be stated
that unemployment figures are not collated in the same manner in both countries.
When out of work Americans lose their right to unemployment benefit, they are
simply taken off the register! So what happens to these people, where do they
go? 'Who cares,' comes the reply from across the Atlantic.
WHO CARES, WINS
One thing that cannot be disputed is the fact that Americans actually work more
than Europeans. Figures from the Organisation for Economic Cooperation and Development
(OECD) show that typical employed Americans worked 1,877 hours in 2000, compared
with 1,562 for the French—and that was before the infamous 35 hour week
was introduced by the French government. Also, holidays are much longer in Europe,
with at least 20 days a year. Swedes get more than 30 paid days, but Americans
get between four and 10.
But if Americans work more, are they more productive? Well, not exactly. The
latest estimates from the EU's statistical service Eurostat indicate that
between 1992 and 2002 the US lost ground against most European economies in terms
of Gross Domestic Product (GDP) per hour. By 2002 eight EU economies had higher
workplace productivity than the US
Of course, the US has a lot of rich people, and these people have access to
the best medical treatment in the world. However, 45 million Americans have no
health insurance at all. So while the US is number one in the world in terms
of health spending per head of population, it is 37th in terms of the overall
quality of its service, according to figures from the World Health Organisation
(WHO).
HAVING A WELFARE STATE IS A CONSCIOUS POLITICAL CHOICE. IT IS ONE THAT SAYS
THERE IS NO VALUE IN PERSONAL WEALTH IF IT IS SURROUNDED BY PUBLIC SQUALOR.
Far from killing us, the European welfare state medical services appear to
be making us more healthy than Americans, who have a lower life expectancy than
Western Europeans. Also, the US is 26th amongst industrial nations in infant
mortality, with a rate that is double Sweden's. And yet some 15% of the
US's GDP is spent on health care, while Sweden spends just eight per cent.
Similarly, the US has higher per capita spend on education. And what effect
does this have? Well, according to the OECD's 2003 PISA report (Programme
for International Student Assessment) for every dollar the US spends on education
it gets worse results than any other industrial nation. American children consistently
under-perform their European peers in both literacy and numeracy.
EFFICIENT SPENDING
Such statistics emphasise just how effective the European welfare state 'safety
net' actually is in terms of getting value for money against the American
privatised state model.
Having a welfare state is a conscious political choice. It is one that says
there is no value in personal wealth if it is surrounded by public squalor. It
is also an acknowledgement of the fact that if you let people fall through the
net, the consequences for society as a whole can be dire.
But, at the same time, Europe's welfare states are being adapted to
modern realities and not just pretending that it is alright to maintain structures
that were formed more than half a century ago. Elsewhere, the choice is restricted
to private or nothing.
So, people living in Europe's welfare states live longer, are healthier
and better educated than Americans who live in a country that believes welfare
states lead to economic sclerosis. Far from killing Europe, welfare states literally
keep Europe alive.
Stephen Spurdon writes for The Independent, The Sunday Telegraph and Investors
Chronicle, among others.
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