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Saturday, June 18, 2011

9 Countries That Do It Better: Why Does Europe Take Better Care of Its People Than America?


The world's wealthy democracies have somewhat different priorities, leading to some very different outcomes for their citizens.

An abiding belief in American exceptionalism is more or less ubiquitous across the political spectrum. But in many ways, what makes America different from other advanced democracies are relatively modest differences in priorities. While all wealthy democracies share the same basic model --they derive the bulk of their economic activity from the private sector while offering some form of social safety net for those who fall through the cracks -- even slight differences in priorities can have a huge impact on the lives of their people.

Here are 9 countries that do a better job providing for their citizens than we do.

Taking Care of the Ill: France

If you have access to the best health care in the United States, then you have some of the best care in the world. But that comes with an extremely steep price, and not everyone has that kind of access.

In 2008, the U.S. spent 16 percent of its economic output on health-care and covered 85 percent of its citizens. It was the only OECD country other than Mexico and Turkey to cover less than 90 percent of its people. We have the 37th longest average life expectancy, and a recent study found that American “life expectancy has been stagnant for much of the country and is actually decreasing over much of the Southern portion of the United States.”

France, which has a health-care system ranked number one in the world by the WHO, spent 11.2 percent of its economy to cover everyone.

There are a number of drivers of health-care costs, but one statistic stands out: in the European (and European-style) economies, upwards of 70 percent of the total health-care bill is picked up by the government, meaning that people are insured in large pools with lots of bargaining clout to hold down providers' costs. In the U.S., less than half of our health care is in the public sector, resulting in a patchwork system of private insurers with much higher administrative costs. When you plug what France pays per person for health care into our own government's fiscal projections, you get balanced budgets by around 2014, which then turn into surpluses after 2040.

Collective Bargaining: France

At around 12 percent (in 2008), the United States doesn't have the lowest unionization rate among the wealthy countries. That distinction goes to France, where under 8 percent of the workforce belongs to a union.

But union membership isn't important, collective bargaining is; and around 90 percent of non-managerial French workers – union members or not -- are covered under collective bargaining agreements.

Honorable mention goes to the Scandinavian countries – with 53 percent of its workforce in a union, Norway comes in dead last among them; 68 percent of Swedes belong to a union, topping the list.

Inequality: Denmark

A large body of research shows that higher union density correlates with less inequality. The U.S. is the most unequal society among the wealthy countries – in the OECD, only three middle-income countries (Turkey, Mexico and Chile) have a more lopsided distribution of wealth.

Denmark leads the way, with the flattest distribution among the high-income countries in the OECD.

Poverty: Denmark

Inequality is a measure of how much income those at the top of the pile take in compared to what those at the bottom grab. So, in countries with equal wealth, more inequality means more poverty – the piece of the economic pie shared by those at the bottom end of the scale will be smaller by definition.

Not surprisingly, Denmark, at 5.4 percent, has the lowest poverty rate among the European-style countries.

The OECD uses a different standard of poverty than does the U.S. government. It counts anyone making less than half of the median income as living in poverty. By that standard, we are plagued with a poverty rate of over 17 percent, higher than all the OECD countries other than Mexico, Israel and Chile. (The average among OECD countries in general is 11.1 percent.)

Child Poverty: Denmark

One of the most tragic comparisons for America, among the richest countries in the world, is that more than one in five children live in poverty, as measured by the OECD (PDF). The OECD average is under 13 percent, and Denmark again comes in last, with childhood poverty at around 4 percent. (Following it are Finland, Norway, Austria and Sweden.)

Gender Gap: Italy

Because women are disproportionately represented in lower paying jobs, and people at the bottom of the wage ladder get the most benefits of union membership, high unionization rates are also correlated with lower gender pay-gaps – it's one of several factors, but it's a key one.

Italy has the second highest union rate outside of Scandinavia, and also boasts the smallest gender gap. A female worker in the middle of the pack makes just 1.3 percent less than her male counterpart in Italy. Compare that with American women, who earn more than 20 percent less than American men. (The OECD average is 16 percent, and we're not the worst – that distinction goes to Japan among the European-style economies.)

Taking Care of the Young

At 6.7 deaths per 1,000 live births, the U.S. had the highest infant mortality rate among the high-income nations in 2006. Iceland, with 1.4 deaths/ 1,000 live births, had the lowest.

Among high-income countries, only Canada spent a lower share of its economic output on family benefits, services and tax breaks than the U.S., which devoted about 1.25 percent of GDP. France, which has battled low fertility rates for years, spends almost 4 percent.

The U.S. is the only advanced country that doesn't offer paid maternity and/or paternity leave.

Sweden offers the longest paid leave – 16 months – at about 80 percent of one's income. Denmark allows the parents to divide a year off, with full pay.

Early childhood care and preschool programs confer long-lasting benefits on children who participate in them. About a third of American kids aged 3-5 were enrolled in such programs in 2008, compared with about two-thirds of kids in Denmark.

Taking Care of the Old: Luxembourg

Conservatives paint more progressive countries as being mired with chronically high unemployment. But there's a bit of sleight-of-hand at work: looking only at workers in their prime years, the U.S. has a low employment rate relative to most European countries. Ten of them -- as well as Australia, Canada and Japan – had higher employment rates for people in their prime working years.

But we work our elderly a lot harder than they do in other countries. Among those aged 55-64, over 60 percent of Americans work, compared with just 35.3 percent in Belgium.

The Social Security system in the U.S. replaces 42 percent of the median salary – only the UK is stingier among the wealthy countries (but it pays a bigger share of the wages of lower-income workers). Iceland replaces 109 percent of the earnings of someone in the middle of the economic pack; Luxembourg and the Netherlands replace about 90 percent. The OECD average is 60 percent.

Among the wealthy countries, only Norway and Iceland have a higher retirement age (67) than we do in the U.S. (66). People in Luxembourg can retire with full benefits at 57, and the Italians join them just three months later.

Taxing Corporations Versus Individuals: Luxembourg

The U.S. government collects less in taxes than the other rich countries, on average, but that doesn't tell us who pays what.

It's worth noting that the U.S. is tied for the OECD country that collects the lowest share of the economy in corporate taxes, at 1.8 percent of GDP (in 2008), or about half the group's average.

That means that more of the burden falls on individuals and households. Americans fork over more in personal income taxes than the OECD average as a result – we pay 9.9 percent while the OECD as a whole pays 9 percent.

Denmark leads the world in corporate taxes, and the Slovak Republic has the lowest personal income taxes, but the most “balanced” system (an admittedly arbitrary standard) is arguably Luxembourg's, where corporations were taxed at 5.1 percent and individuals and families at 7.7 percent in 2008.

Aren't They Taxed to Death in General?

What about the “economy-killing” taxes under which those crazy European socialists suffer? Well, in 2007 we paid 7.5 percent of our economic output less in taxes than the average of OECD countries, but citizens of the other wealthy countries got a lot more for their tax dollars than we did – free or very low-cost health care, college educations, better unemployment benefits, job training and the list goes on.

In the United States, we paid the equivalent of 8.2 percent of our economy more in social spending out of our own pockets than the people in other rich countries did that year. So the savings we enjoyed on our tax bills were more than offset by what we paid for those things our counterparts bought with their taxes. When private and public spending on our social welfare are added together, Americans pay just a little bit more than the other citizens of the world's leading economic powers.

But What About the Debt?

Perhaps these countries just ran up piles of debt in the course of taking better care of their people?

That's not the case; among the world's wealthy democracies only six – Japan, Greece, Ireland, Iceland, Belgium and Italy – had a higher ratio of debt to GDP than the United States last year.

Denmark's debt level was less than half of our own.

Much has also been made of the Europeans' supposedly slower growth and lower average incomes. It is true that over the last decade, gross domestic product grew by about 1 percentage point more annually in the United States than in the core countries of the EU-15. But when we talk about “growth,” we mean a growing population as well as increasing productivity: more people making stuff means more total stuff.

The differences in population growth between the United States and the EU are stark. Since 1980, the population of the United States has increased by more than a third, compared with 7 percent in the EU (as a whole). Adding people, however, doesn’t necessarily make countries more affluent. A better standard is the growth of GDP per person. As Paul Krugman pointed out, “Since 1980, per capita real G.D.P.—which is what matters for living standards—has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.” That’s essentially a rounding error.

The Wall Street Journal’s editorial board got terribly excited a few years back when a study by a right-wing think tank in Sweden “found that if Europe were part of the U.S., only tiny Luxembourg could rival the richest of the 50 American states in gross domestic product per capita.” A “rising tide still lifts all boats,” the Journal reminded us, “and U.S. GDP per capita was a whopping 32% higher than the EU average in 2000, and the gap hasn’t closed since.”

As far as the raw data go, that’s true. (But several individual European states have GDP per capita that are either higher than, or comparable to, that enjoyed in the United States.) The thing is, those data tell only part of the story about a country’s economic health. We do have different priorities, and European workers expect six to eight weeks of vacation, paid sick days, and fewer hours of overtime—Europeans simply don’t work themselves to the bone as we do. American men and women worked an average of 41 hours per week in 2005, while European men averaged 38 hours and European women only 30. As the OECD noted, “As for holiday and paid leave entitlements, the striking differences between Europe and the United States (including sickness and maternity) obviously explain some of the transatlantic gap in annual working hours.”

When you factor in the difference in time spent on the job, the income gap essentially disappears. Now, is this simply a matter of Americans’ having a superior work ethic, unblunted by the perfidy of the nanny state? Well, no. Overworked Americans are miserable. According to research cited by Boston College’s Sloan Work and Family Research Network, four in 10 workers who work a lot of extra hours say they “feel very angry toward their employers,” versus 1 percent who work only a few extra hours. Just 3 percent of two-income couples who work long hours said they were content with the effort, and nine out of 10 U.S. workers said either, “My job requires that I work very hard,” or “I never seem to have enough time to get everything done on my job.”

So, again, what we see is merely a difference in priorities.

Note: Unless linked above, all data are from the OECD's downloadable Excel files found here. A correction was made to this article after publication.

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