1. The fiscal crisis and the social wage in Southern Europe
Focus on Greece
Compare the fiscal structure of Greece, Spain, Portugal, Italy, France and EU-15 for
Class aspects of fiscal crisis: Estimate the net social wage (ratio) in Greece and other Southern European countries (Are workers/social policy responsible for the recent economic crisis, the public deficits and the accumulation of public debt in recent years?)
Is there a distinct “Southern European welfare state model”?

2. Expenditures- Revenues – Deficit (1995-2009)
Public expenditures, taxes and budget deficits as a percentage of GDP in Greece and EU15 ( )
Expenditures- Revenues – Deficit ( )
EU15
GREECE
DIF
1. Government expenditures / GDP
47.7
45.9
-1.8
2. Government revenues / GDP
45.1
39.4
-5.7
3. Budget deficit / GDP
-2.6
-6.5
+3.9
Public expenditures / GDP ( )
4. Government employee compensation/ GDP
10.8
11.0
---
5. Education expenditures as a percentage of GDP
5.2
2.9
-2.3
6. Health expenditures as a percentage of GDP
6.4
4.4
-2.0
7. Social protection expenditures / GDP
18.8
17.2
-1.6
8. Interest payments / GDP
3.6
6.7
+3.1
9. General public expenditures / GDP
7.1
10.6
+3.5
10. Defense expenditures / GDP
1.6
2.6
+1.0

3. Expenditures-Revenues–Deficit (1995-2009)
Public expenditures, taxes and budget deficits as a percentage of GDP in Greece and EU15 ( ) (continued)
EU15
GREECE
DIF
Expenditures-Revenues–Deficit ( )
1. Government expenditures / GDP
47.7
45.9
-1.8
2. Government revenues / GDP
45.1
39.4
-5.7
3. Budget deficit / GDP
-2.6
-6.5
+3.9
Taxation / GDP ( )
11. Total receipts from taxes and social contributions/GDP
41.3
34.1
-7.2
12. Total tax receipts/ GDP
27.2
21.2
-6.0
13. Total (actual and imputed) social contributions /GDP
14.3
12.9
-1.4
14. Current taxes on income, wealth, etc./ GDP
13.2
8.0
-5.2
15. Taxes on income / GDP
12.3
7.6
-4.7
16. Taxes on individual or household income including holding gains / GDP
9.7
4.5
17. Taxes on the income or profits of corporations including holding gains / GDP
n.a.
2.9
----
18. Taxes on production and imports / GDP
13.7
13.0
-0.7

4. State revenues much lower (6.0%)
Summary of the fiscal structure comparison between Greece and EU
Greek public expenditures slightly less (1.8%) than in EU-15 on average
State revenues much lower (6.0%)
Hence, average annual public deficits (6.5%) in Greece
Wages of state workers the same as in EU
“Welfare state” spending (health, education, social security) less in Greece
Defense, general services, interest (= annual deficit) much higher in Greece
Taxes on income (of non-workers) and tax rates on profits of corporations much less in Greece

5. Public Education expenditures/GDP Greece and EU-15 1995-2008

6. Public health expenditures as a percentage of GDP, Greece and EU-15, 1995-2008

7. Corporate taxes/GDP average 1995-2008 selected EU countries

8. Expenditures- Revenues – Deficit
Public expenditures, taxes and budget deficits as a percentage of GDP in France Spain Portugal Italy and EU15 ( )
Expenditures- Revenues – Deficit
EU15
Portugal
Italy
Spain
France
1. Government expenditures / GDP
47.7
43.1
49.1
40.5
53.2
2. Government revenues / GDP
45.1
39.1
45.5
38.3
49.9
3. Budget deficit / GDP
-2.6
-4.1
-3.5
-2.2
-3.3
Public expend/GDP ( )
4. Government employee compensation
10.8
13.0
10.9
10.5
13.3
5. Education expenditures
5.2
6.8
4.7
4.4
6.3
6. Health expenditures
6.4
6.5
6.2
5.4
7.5
7. Social protection expenditures
18.8
14.0
18.0
13.4
21.4
8. Interest payments
3.6
3.2
6.6
3.0
9. General public expenditures
7.1
10.3
5.7
7.6
10. Defense expenditures
1.6
1.4
1.2
2.1

9. Table 1: Public expenditures, taxes and budget deficits as a percentage of GDP in France Spain Portugal Italy and EU15 ( ) (continued)
EU15
Portugal
Italy
Spain
France
Taxation / GDP ( )
11. Total receipts from taxes and social contributions
41.3
35.3
41.9
34.9
45.4
12. Total tax receipts
27.2
23.7
28.9
22.5
27.1
13. Total (actual and imputed) social contributions
14.3
11.6
13.1
12.9
18.5
14. Current taxes on income, wealth, etc.
13.2
9.1
14.4
10.5
10.9
15. Taxes on income
12.3
8.8
13.9
10.2
9.9
16. Taxes on individual or household income including holding gains
9.7
5.5
7.0
7.4
17. Taxes on the income or profits of corporations including holding gains
n.a.
3.2
2.9
3.1
2.5
18. Taxes on production and imports
13.7
14.6
14.2
15.8

10. Fiscal structure
Greece, Portugal and Spain spend less than the EU average, Italy more, France much more
Greece, Portugal and Spain collect much less than the EU average in revenues, Italy the average, France much more
Inadequate state revenues the reason for public deficits in Greece, Portugal and Spain
Greece, Portugal and Spain lag behind European averages for total and almost all individual tax categories, and Italy is close to those averages. Taxation in France is based heavily on indirect taxes (which offset the lighter taxation on household income and profits bringing tax revenues equal to the EU average) and much higher than average social security contributions
France spends more for wages of public workers, social security and social welfare, Greece and Italy spend more for interest on public debt

11. Examine if net social wage is positive or negative and its impact on
Net social wage as the indicator of the class character of the state budget
Radical/Marxist Political economy: Who pays for social spending (directed at workers?)
a) Workers themselves b) capital (profits) or c) public budget deficits?
Examine if net social wage is positive or negative and its impact on
labor discipline productivity
(post fiscal) distribution – profitability – accumulation of capital and growth
Mainstream economics: “welfare programs may lead to cumulative deficits and mounting public debts” (Dreze and Malinvaud, 1994, p. 95)

12. Table 5: Net Social Wage Definitions
====================================================
Net Social Wage = Labor Benefits – Labor Taxes
nsw = lb – lt
Benefit Ratio = Labor Benefits / GDP
Lbr = lb / GDP (ec)
Tax Ratio = Labor Taxes / GDP
Ltr = lt /GDP (ec)
Net Social Wage Ratio = Net Social Wage / GDP or
= Net Social Wage / Employee Compensation
nswr = nsw / GDP = Lbr - Ltr or
nswr = nsw / ec
=================================================

13. Allocation of benefits from state expenditures to workers
Categories of Public expenditures classified by economic function
Labor benefits
Α. Public Consumption
1. General Public Services
---
2. Defense
3. Public Order and Safety
4. Education
Labor Share = workers/total employment
5. Health
Labor Share
6. Social Security and Welfare
7. Housing and Community Services
8. Recreation, Culture and Religion
9. Economic Services
10. Other Functions

14. Allocation of benefits from state expenditures to workers (cont’d)
B. Subsidies
Subsidies to firms
C. Current transfers to households
1. Pensions
100% or Labor share
2. Unemployment Compensation
100%
3. Family allowances
4. Sickness allowances
5. Welfare transfers
D. Public Investment
1. General Public services
-----
2. Defense
3. Housing
Labor share
Ε. Property income paid
----
1.Interest
2. Rent

15. Allocation of taxes to wage laborers
Tax Categories
Labor taxes
1. Personal Income Tax
Labor Share
2. Local Government Taxes
3. Corporate Income Taxes
---
4. Social Security Contributions (of workers)
100% (or L.S.)
5. Payroll Taxes
100%
6. Property Taxes
7.Capital taxes
8. Indirect Business Taxes (Consumption Taxes)*
Labor Share = wages / personal consumption
9.Other Taxes

16. Labor benefit ratio and labor tax ratio

17. The net social wage ratio (nswr) in Greece, 1995-2008

18. The net social wage ratio (nswr) in Greece, 1958-1995

19. Public Debt / GDP

20. Public Deficits / GDP

21. Public Debt / Public Revenues

22. Labor Benefit ratios

23. Labor Tax ratios

24. Net social wage ratios

25. Lbr – Ltr = nswr Labor benefit ratio 0.160 0.231 0.236 0.245 0.357
Greece
Spain
Portugal
Italy
France
Labor benefit ratio
0.160
0.231
0.236
0.245
0.357
Labor tax ratio
0.223
0.265
0.260
0.304
0.380
Net social wage ratio
-0.063
-0.034
-0.024
-0.059
-0.022

26. Net social wage ratio in selected countries
Country
Average
Net social wage ratio (nsw/GDP)
USA ( )
-0.067
UK ( )
-0.024
New Zealand ( )
-0.016
Canada ( )
0.000
France
-0.022
Italy
-0.059
Portugal
Spain
-0.034
Greece ( )
-0.064
Greece ( )
-0.063

27. (Public deficit – net tax on labor) / GDP
Average values for net social wage ratio, budget deficit and interest paid on public debt as a percentage of GDP,
Greece
Spain
France
Italy
Portugal
Public deficit/GDP
-0.065
-0.022
-0.033
-0.035
-0.041
Interest paid/GDP
0.067
0.030
0.066
0.032
Net social wage ratio
-0.063
-0.034
-0.059
-0.024
(Public deficit – net tax on labor) / GDP
-0.128
-0.056
-0.055
-0.094

28. + - Wage share Net social (a) + + (b) + - wage rate = (nsw / gdp)
Changes in the net social wage ratio = (nsw / gdp) and in the wage share = (w / gdp)
Wage
share
= (w / gdp) + -
Net social
(a) + +
(b) + -
wage rate =
(nsw / gdp)
(c)
(d) - -

29. net social wage ratio and wage share, Greece 1995-2008

30. Public debt/GDP Greece 1960-2010