April 21, 2013
The NYT appears to be following the pattern of journalism practiced by the Washington Post in openly editorializing in its news section. Today the news section features a diatribe against the Danish welfare state that is headlined, “Danes Rethink a Welfare State Ample to a Fault.” There’s not much ambiguity in that one. The piece then proceeds to present a state of statistics that are grossly misleading and excluding other data points that are highly relevant.
The first paragraphs describe the generosity of the welfare state, then we get this ominous warning in the 5th paragraph:
“But Denmark’s long-term outlook is troubling. The population is aging, and in many regions of the country people without jobs now outnumber those with them.”
Oooooh, scary! Yeah people are living longer in Denmark, that’s something that’s been happening for a couple of hundred years or so. Like every other wealthy country, people live longer in Denmark than in the United States. While they are projected to continue to see gains in life expectancy and further aging of the population, the increase is actually going to much slower than in the United States.
From 2012 to 2025 the percentage of the Danish population over age 65 is projected to rise from 17.8% to 21.2%, an increase of 3.4 percentage points. By comparison, in the United States the share of the population over age 65 is projected to rise from 13.6% to 18.1%, an increase of 4.5 percentage points over the same period, from a considerably smaller base. The impact of aging on the economy and the government budget will clearly be much larger in the U.S. than Denmark, especially since the government first starts paying for health care for people after they turn age 65 in the United States. (Like every other wealthy country, Denmark has national health insurance.)
The concern that, “in many regions of the country people without jobs now outnumber those with them,” is especially touching. In the United States we have such a region, it’s called the “United States.” In March, 143.3 million people were employed out of a total population of 323 million for a ratio of workers to population nationwide of roughly 44.4 percent. In many parts of the country it would be much lower.
The piece then goes on to describe the extent of the Danish welfare state with its 56 percent top marginal income tax rate, telling readers:
“But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits.”
Hmmm, it would be interesting to know what data the experts are looking at. According to the IMF, Denmark had a ratio of net debt to GDP at the end of 2012 of 7.6 percent. This compared to 87.8 percent in the United States. Its deficit in 2012 was 4.3 percent of GDP, but almost all of this was due to the downturn. The IMF estimated its structural deficit (the deficit the country would face if the economy was at full employment) at just 1.1 percent of GDP. Furthermore, the country had a huge current account surplus of 5.3 percent of GDP in 2012, more than $800 billion in the U.S. economy. This means that Denmark is buying up foreign assets at a rapid rate. By contrast, the United States has a large current account deficit.
If there is something unsustainable in this picture, it is not the sort of data that economists usually look at. Is marijuana legal in Denmark?
Then we find the real problem is that no one in Denmark is working:
“In 2012, a little over 2.6 million people between the ages of 15 and 64 were working in Denmark, 47 percent of the total population and 73 percent of the 15- to 64-year-olds.
“While only about 65 percent of working age adults are employed in the United States, comparisons are misleading, since many Danes work short hours and all enjoy perks like long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching $20 an hour. Danes would rank much lower in terms of hours worked per year.”
So in spite of the generous Danish welfare state a higher percentage of its working age population works than in the United States. (Actually Denmark ranks near the top of the world in employment to population ratios.) Yet, somehow this doesn’t really count because people in Denmark get vacations, work shorter hours, and have a higher effective minimum wage.
This ranks pretty high in the non sequitur category, apparently when you want to bash the welfare state, the rules of logic do not apply. Danes, like most Europeans, have opted to take much of the gains in productivity growth over the last three decades in the form of shorter work years rather than higher income. (One interesting result of this practice is that we have some hope to save the planet from global warming — greenhouse gas emissions are highly correlated with income.) Of course Danes still work about 8 percent more hours on average than hard-working Germans, according to the OECD. If there is a problem in this picture, the NYT might want to devote a few paragraphs to telling readers what it is.
As far as the $20 an hour effective minimum wage, isn’t the problem of a high minimum wage supposed to be that it creates unemployment. But the NYT just told us that Denmark has higher employment rates than the United States. (My brain hurts.)
Okay, we get it. The NYT doesn’t like Denmark’s welfare state. It doesn’t really have any data to make the case that Denmark’s welfare state is falling apart and leading to all sorts of bad outcomes, but they can wave their arms really fast and hey, they are the New York Times.
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