Welfare does not come cheap The hour of reckoning has come for the Nordic welfare model. We have to choose between a cheaper, leaner welfare system or enlisting more people to carry the burden. – The pressure on welfare benefits is going to rise in the future as baby boomers, born in the 1940s, not only become pensioners, but also grow older and more infirm, states Joakim Palme, professor in the Department of Government at Uppsala University. He claims it is necessary to choose between implementing welfare cuts and getting more people to contribute financially. Dr Palme believes that increased tax revenue is the key to maintaining a highly-developed welfare state. – It isn’t enough to carry out pension reforms or reorganise services for the elderly, Dr Palme says. He believes bolder measures are needed. Reducing tax evasion Several approaches can lead to higher tax revenues, Joakim Palme states: – We must become more efficient at collecting taxes and we need to get more people into employment to increase tax revenues, he says. Estimates in Sweden indicate that as much as five per cent of gross domestic product (GDP) is not reported to the tax authorities each year. There is good reason to believe that the percentage is similar in all Nordic countries. Dr Palme also believes that tax contributions must increase through the inclusion of more groups in working life:
– We have done this before to increase tax contributions in Nordic countries, for example, when women began entering the workforce, he explains. Childcare and services for the elderly were expanded to make this possible. According to the professor, the Nordic countries need to focus on the weakest groups in the labour market in order to provide them with more stable employment and, thus, an extended economic life cycle. Young people need to work To bring in more tax money, Dr Palme says it is necessary to implement measures aimed at employing young people: – Young people need support today in order to give something back in the future, he states. Connected to NordForsk’s Nordic Centre of Excellence NordWel, Dr Palme has been researching welfare issues pertaining to investments in the economic life cycles of the members of society. – To a varying degree, we represent a financial burden on the state from the time we are born until the age of 25. A period of productivity follows and we contribute tax income to the state until age 65 or so. Then we become a burden once more, says Dr Palme. – We can increase tax contributions over time by channelling resources between different groups in society during different periods of their lives, he states. Education the key We live in a knowledge-based economy in which expertise is a decisive factor and learning is the most important process of all. According to Dr Palme, research shows that a nation’s investments in its educational system have a positive impact on GDP.
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Professor Joakim Palme from Uppsala University. Photo: Terje Heiestad
– Education is a young person’s ticket to the future, he claims, adding, regardless of background, education will provide the opportunity to secure a good job. Political courage a must – The Nordic welfare state has been immensely successful, says Joakim Palme. For this to continue, we have to think long-term while taking integrated action. He believes that politicians are not daring enough: – Bold decisions must be taken in order to alter our current course, he says. – Politicians must also dare to ask critical questions about the institutions we have today, Dr Palme believes. This involves questions such as: Does the educational system promote good performance among our pupils? Is current integration policy a barrier to segregation? Does family policy encourage more women to work fulltime? Dialogue essential between researchers and politicians Joakim Palme believes that dialogue between researchers and politicians on welfare issues is crucial: – Policy is not always based on research and knowledge. Political solutions must extend beyond stop-gap solutions to crises so that we can avoid making the same mistakes we’ve made before, he asserts. – Researchers need to help politicians to find viable answers to the challenges we face, concludes Joakim Palme.