The welfare state and employment

I get postings about the Welfare State from around the world, and part of that is a regular diet of drivel from American conservatives.  A statement by Pat Buchanan caught my eye:

The more liberal the welfare state, the greater the disincentive to work and the more ruinous the impact upon a nation’s work ethic.

This is  easy enough to check empirically. These are the most recent (2012) figures from the OECD; I have only left off those countries which don’t have both sets of figures.

Government  social spending as a % of GDP Employment
Australia 18.8 72.3
Austria 27.9 72.5
Belgium 30.5 61.8
Canada 18.1 72.2
Czech Republic 21 66.5
Denmark 30.8 72.6
Estonia 17.6 67.2
Finland 30 69.5
France 32.5 63.9
Germany 25.9 72.8
Greece 24.1 51.3
Hungary 21.6 57.2
Iceland 17.6 80.2
Ireland 22.4 58.8
Israel 15.8 66.5
Italy 28 57.6
Korea 9.3 64.2
Luxembourg 23.2 65.8
Mexico 7.4 61.3
Netherlands 24 75.1
New Zealand 22 72.1
Norway 22.3 75.8
Poland 20.6 59.7
Portugal 25 61.8
Slovak Republic 18.3 59.7
Slovenia 23.7 64.1
Spain 26.8 56.2
Sweden 28.1 73.8
Switzerland 18.8 79.4
United Kingdom 23.9 70.9
United States 19.7 67.1

It’s possible to make it look as if there’s a relationship by picking some countries and ignoring others.  Choose Iceland, Australia, New Zealand, Slovenia and Italy and it looks as if employment falls when welfare expenditure increases.  Choose Slovak Republic, the Czech republic, the UK, Germany and Austria and it looks as if employment increases when welfare spending increases.  The simple truth, however,  is that there is no consistent relationship between the two.

One thought on “The welfare state and employment”

  1. Paul, I enjoy your posts, usually what I call a reality check! On this occassion I felt the need to reply as the data you provide related to government social spending as a % of GDP could also include payments for people who are unable to work due to disability or illness, to me this could further distort things.

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