Sweden is lagging behind in wealthiness
Today Sweden is no 10 in the European wealthiness league and we are worse than both Norway and Denmark. The Swedish GDP is $49,076 per capita today.
Sweden has the ambition to become one of the top 5 countries in the wealthiness league. To get there we need to increase GDP per capita with $8,249 and a number of reforms are required. These reforms were proposed by Svenskt Näringsliv (Confederation of Swedish Enterprise) a year ago and now Jonas Frycklund presented a report that shows what has happened after one year. Not much actually, we are lagging behind. (Original article in Swedish: https://www.svensktnaringsliv.se/fragor/almedalen/sa-ska-sverige-hamna-i... )
The Editor's explanations are within parenthesis below.
The following reforms must be implemented:
A more effective labor market
Not carried through:
- Shorter road into the labor market for immigrants (median 9+ years today),
- New forms of employment (a rigid system today),
- A parental insurance (benefits) that stimulates work (today it stimulates leisure time),
- More modern conflict rules (The ”Swedish Model” originated 1938),
- An Employment Agency exposed to competition.
A competitive tax system
Not carried through:
- Reduced marginal tax (nominal marginal tax is 60% but effective marginal tax is 75% on incomes higher than 651,800 kr [~$75,000 per year](https://timbro.se/skatter/varldens-hogsta-marginalskatt-en-jamforelse-av...). About 300,000 Swedes of ~10 millions have that income or more.)( See also http://www.ekonomifakta.se/Artiklar/2016/december/din-skatt-2017/),
- Lower tax on capital income (30% today),
- Better terms for capital options (today you have to pay income tax when you get them, not when you sell even if they become worthless. There is a government proposal now, but it has been criticized.),
- Extended RUT (RUT is a tax reduction on certain domestic services and described here),
- Extend the special tax reduction on work income to include pensions.
Increased quality and efficiency in welfare
Not carried through:
- Discontinue the 'welfare investigation' (proposes limit on profit for private welfare providers.)
- Increase requirements on providers of welfare services (today it’s too easy for criminal persons to operate welfare services and get paid by public money),
- Improved public procurement (too often taxpayers money are squandered on incompetent procurement)
More human capital, better matching
Not carried through:
- Extended adult education (life long learning),
- Extended right to infant school,
- Make use of the competence of immigrants (labor market rules make it difficult and a majority of the immigrants have very low education),
- Faster flow in higher education (students are spending too long time at universities, but still learn too little),
- Reward higher education which has relevance to the labor market (the marginal tax works in the opposite direction)
General improvement of the business climate
Not carried through:
- Profitable infrastructure instead of high speed railways (Sweden is sparsely populated and the majority of people lives in the Stockholm/Gothenburg/Malmö triangle with already good air links and fast train connections),
- Deregulate rents for new rental flats (Sweden has a severe housing problem in most cities due to the regulated rental market and the capital tax on the profit of the sales of private homes. The tax which is on the nominal profit without regard to inflation means the elderly people don’t move from their houses because they cannot find flats for reasonable prices.),
- Increased limit for audit duty (small companies are not required to engage an auditor, which is a considerable cost, and the current limit is 3 employees and less than 3 million kr (~$350,000) in net sales. The usual European limit is much higher.),
- Replace the ”Surplus target” with a ”Balance target” for the government budget,
- Limit the possibilities to depart from the financial political framework.
Sweden is in a good shape financially now. The economy and the fiscal situation make us in a favorable mode. The responsible act is to use this situation to carry through further structura l reforms to ensure the future prosperity, says Jonas Frycklund.
Editor's comment: Although I agree with most of the reforms above, I’m not so sure we are in a good shape financially right now.
GDP per capita is decreasing, export is decreasing, welfare costs are accelerating, Swedes borrow too much and spend the money on consumption and buy too expensive homes. The municipalities also borrow a lot and spend on buildings and infrastructure, which might be fine but impose a risk when rates go up. The government, however, does not borrow much yet, although we will have to spend more on infrastructure, police, defense, hospitals, schools, and welfare very soon in order not to lower quality and in some cases even to restore the quality to what we had before we got the large increase in population due to the immigration. In certain cases increased efficiency may help but that will require tough decisions and reallocation of staff from administrative tasks to operational tasks and possibly more efficient IT systems.