We looked at social spending as a percentage of GDP in OECD countries last week.The following chart shows public social spending as a percentage of GDP. France is the biggest social spender and most of developed Europe spends higher than the OECD average on public spending because of highly liberal social benefits. The US ranks higher than Canada but below than the OECD average.
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Source: OECD
Labor productivity is an important factor that is used not only by economists but also by successful companies. The measure shows how productive labor is for a given hour, day, month, etc. Higher the productivity better the performance of a company or in the case of a country the higher the GDP.
According to OECD, Ireland is the most productive country based on GDP per hour worked followed by Luxembourg and Norway. This is surprising since Ireland is not generally considered as a great economy and Ireland is not a leader in world-class industries in technology, defense, electronics, etc. The U.S. ranks lower than Germany in labor productivity. All the countries that are better than the US in terms of labor productivity are European.
The lowest productive country among OECD members is Mexico. Others such as Hungary and Chile are also poor in productivity.Japan and Korea are famously known for their workaholic cultures where workers toil away long hours every day without taking a vacation in a year. But unfortunately they are not as productive as others that work less hours.
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Source: OECD
The corporate income tax rate in the most European countries range between 19 and 25 percent according to OECD data. France has the highest corporate income tax rate at 34.4% while Hungary has the lowest at just 9%.
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Source: Corporate Income Tax Rates in Europe, Tax Foundation
European member countries in the OECD are some of the big spenders on social spending. France tops the ranking in terms of gross public and total net social spending as a percentage of GDP. This is not surprising as the country has some of the best safety net systems in the world. It is not uncommon to see unemployed people in France go on vacations that are funded by liberal unemployment and other social benefits.
The US is the 2nd largest social spender after France. This may be shocking to many readers since the US is the world’s top capitalist country and any social spending by the government is considered as wasteful and is hated by some sections of the society. However the US has some of the biggest social spending in the planet with programs such as Medicare, Medicaid, VA and thousands are others where the state tries to protect and offer a safety net to the poor and the disadvantaged. While Medicare and other social programs are totally unnecessary in a pure capitalist system, the society as a whole has come to the realization that such programs are needed in modern times since in the land of the largest number of billionaires and millionaires it would be disgrace if millions of other suffer in abject poverty or even face starvation if left to the market forces. In after defense, the Medicare program that offers free health care to senior citizens is the biggest expenditure in the Federal budget.
Countries such as Mexico and Turkey spend the lowest on social spending as a percentage of GDP.
The following chart shows the gross public and total net social spending as a % of GDP for OECD countries:
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Source: OECD