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13 avril 2018

Austria: why the welfare state is competitive

A research report, commissioned by the Austrian Chamber of Labour and published by the economic research institute WIFO, examines the issue of socio-economic systems as a precondition for wealth creation and competitiveness. Empirical findings show that Austria combines economic competitiveness with high social standards.

The Austrian Chamber of Labour commissioned the Institute of Economic Research (WIFO) to examine the link between the welfare state and competitiveness. The outcomes have been published in a report (Sozialstaat und Standortqualität). The authors conclude that competitiveness –the ability of an economic system to develop in a sustainable way – is closely linked to its welfare state. Empirical findings show a positive correlation between net social spending, ecological sustainability, life satisfaction, income equality, etc., and gross value added and vice versa in the EU countries studied. Moreover, within Europe, Austria combines a notably robust level of competitiveness with high social standards.

The discourse of growing global competition very often neglects the role of social policy in a successful economy. WIFO looked at the preconditions for growth in areas such as welfare, social insurance, health insurance, income equality and wealth. Nevertheless, although the outcomes for Austria are positive, the authors criticise the high burden on labour, compared to other factors. This burden can have a negative effect on the competitiveness of a location. Alternative sources of funding, such as the increased integration of environmental or asset-based taxes, would directly increase the quality of a location by easing labour costs and indirectly by improving environmental quality and environmental and social sustainability.

The trade unions have welcomed the outcomes. They stress that the welfare state is a crucial location factor. A well-developed social infrastructure increases the growth potential of an economy. Investments in the welfare state benefits people and the economy: they increase chances and opportunities, promote innovation and thus value creation. Moreover, well-developed welfare states are more crisis-proof. During the presentation of the study at a press conference, a spokesperson of trade union ÖGB said that the pension system and the relatively high level of unemployment insurance ensure that people, even in old age and in bad economic times, retain a large part of their purchasing power. Thus, they can continue to consume, and the economy as a whole is more resilient to crises. Austerity packages in the labour market budget that are currently being threatened would lead to unnecessary social hardship.

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