Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom

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Fiscal competition and economic freedom

Government employees win, private employees loose

The economic crisis is far from having created only victims. In France and all abroad, government employees didn’t suffer from the recession at all.

The last data from Eurostat are evidencing that during the crisis the share of government payments for salaries became a bigger part of government spending. Thus, government employees have actually seen their revenues increase.

In 2009, public sector revenues represent in average 11.7% of GDP for the euro zone and 11.9% for EU 27. The rating is headed by Denmark (19.3%), Sweden (15.4%), Finland (14.9%) and France (13.2%). To draw a parallel, in Germany government employee’s salaries represent only 7.3 GDP points. France, on the other side, is champion on social security spending, with 26.2% from GDP, far beyond Denmark (18.8%) and the EU 27 average (19.5%). France and its social model is definitely welfarist…

The gap between public and private sector thus has increased. In France, government employees reached 2% of the working population in 2009, at the core of the crisis, while private employee’s number decreased. On the average, a private employee wins 2 900 € less per year than a government employee. Those differences are even greater abroad. Last year in Romania, the wage of a government employee was 132% higher than the wage of a private employee. Even in the United States, those gaps are huge – in 2009, wages in the private sector decreased by 6% while those in the public sector increased by 2.6%. Today, after the crisis, American government employees win 22% more per hour.

Furthermore, since December 2007, the private sector lost 7.8 billion jobs, while the public sector “created” 64 000 jobs. The crisis doesn’t have the same consequences for everybody and the increase of public spending will not help the economy.

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