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5 Countries That Spend The Most On Their Own People

World Money
5 Countries That Spend The Most On Their Own People

Via: europeword.com

Have you ever questioned just how far your tax dollars stretch? We earn our money, pay our taxes, and participate in society as conscientious citizens, but how much do we really know about where our taxes go? It’s important to understand how our financial contributions to our governments make a difference – and how much the government contributes to our well-being.

The International Labour Organisation’s World Social Protection Report for 2014/2015 provides a breakdown of the total government expenditure in selected countries as a percentage of GDP. Our list ranks the governments that proportionately spend the most on their citizens, exploring just how these nations spend money on their citizens. Interestingly, these countries find themselves in varying economic situations, and the reasons behind the spending of large proportions of GDP on ‘social protection’ vary widely. 

Every nation has its own priorities when it comes to social well-being. The level of development of each country is a key factor in determining just how its GDP is redistributed. For the nations struggling the most, government expenditure goes towards meeting basic human needs whereas, in the most economically prosperous nations, complex social protection systems have been introduced, endowing citizens with a sense of security. When looking at how and why the following governments spend the most on their citizens, it’s worth bearing in mind that at the opposite end of the scale, the governments who invest least in their people spend under 16.5% of GDP on social protections – leading us to question exactly where the rest of the money goes.

5. Solomon Islands – 51.2% of GDP

Via mudgeediveandtravel.com

Via mudgeediveandtravel.com

Located in the South Pacific, the Solomon Islands consists of more than 900 islands and 70 language groups. With a Human Development Index of just 0.51, the Solomon Islands ranks 142nd out of 187 countries. This low level of development (based on health, education and income) is of a great concern to the nation’s government. Although just 8.25% of GDP is spent on social protection, the government (supported by the World Bank and the World Health Organisation), is currently spending 25.5% of GDP on healthcare and social improvements for its citizens.

Health is the biggest societal concern in the Solomon Islands. Fortunately, the government is proactive and pumping resources into the healthcare system in an effort to improve its citizens’ health, living conditions, and life expectancy. Improved sanitation is very low (18%) and the urban/rural contrast is stark (77% versus 5%). Public health priorities are supplying water to rural areas, improving health centres, and raising awareness and prevention campaigns addressing tuberculosis, malaria, HIV/AIDS, sexually transmitted infections, and early childhood illnesses.

Moreover, the Solomon Islands’ urbanisation rate is 20% – and is increasing at more than twice the overall rate of population growth. This presents a challenge to the government, faced with the twin difficulties of continuing to service remote communities whilst responding to the pressures of urban growth. Investments are being made in infrastructure, roads and communication ports between the islands and represent another large proportion of government expenditure.

4. Greece – 51.9% of GDP

Via www.telegraph.co.uk

Via www.telegraph.co.uk

Greece was one of the major victims of the economic collapse of 2008, and is still on a long, difficult road to recovery. Numerous changes have taken place over the past years as a result of the privatisation, structural reforms, and austerity measures introduced as conditions for the IMF to provide Greece with a 110 billion euro bailout scheme. Austerity policies have marked a shift in government expenditure priorities: the reform of the social protection system has significantly reduced the country’s social responsibility. Indeed, the Greek government has replaced a large number of existing social benefits (family benefits and disability benefits as well as a minimum pension) with a mere safety net for the poorest – a single targeted guaranteed minimum income scheme providing a relatively low general social benefit.

So although the government is still spending 51.9% of GDP, it will take years for the economy to pick up again and for government spending to be redirected towards a developed, stable system devoted to guaranteeing citizens’ well being. Numerous reforms will be needed to reassert a system guaranteeing social protection and stability.

3. Belgium – 53.3% of GDP

Via sanderdewilde.files.wordpress.com

Via sanderdewilde.files.wordpress.com

In Belgium, the government racked up an expenditure rate of 53.3% of GDP on social protection. Over half of that spending (29.7% of GDP) went towards social protection. The Belgian social security system expanded rapidly in the 1950s and 1960s. The system functions primarily from social contributions drawn from citizens’ incomes: Employers pay between 30% and 40% monthly on top of employees’ salaries into the social security fund, and employees contribute a proportion of their gross salary to social security. This provides allowances in the case of sickness, unemployment, invalidity, work accidents, contractions of industrial disease as well as old age pensions and family allowances.

Supplementary support systems also exist and are financed with government resources rather than by citizens’ contributions. These include income support, an income guarantee for the elderly, a guaranteed family allowance, benefits for the handicapped and benefits for the elderly.

2. France – 55.8% of GDP

The French government’s expenditure in 2013 amounted to 55.8% of GDP. An estimated 32.07% of GDP went towards social protection. The French system, named Sécurité Sociale, covers health care, work injuries, family allowances, unemployment insurance, old age pensions, invalidity and death benefits. Social security in France actually costs more than the value of what the country produces – the social security budget exceeds the GNP. Employee contributions represent approximately 60% of gross pay – of which around 60% is paid by employers (this backfires, however, as it may dissuade employers to hire new staff). With the exception of sickness benefits, social security benefits are not taxed – they are deducted from your taxable income. The French general public is happy with the Sécu and is highly resistant to any changes that might reduce benefits. On the contrary, employers are constantly pushing to have their contributions lowered. The French government, however, faces the problem of an ageing population. Despite high investment the social security system is under severe financial strain, as the ageing population has lead to a huge increase in spending on health care, pensions and unemployment benefits in recent years.

1. Denmark – 57.4% of GDP

Via discoverstudyabroad.org

Via discoverstudyabroad.org

The Danish government’s expenditure in 2013 was an estimated 57.4% of GDP. A significant proportion of that expenditure (30.19% of GDP) went towards social protection. Following the Scandinavian welfare model, all Danish citizens have equal rights to social security. Denmark’s wide-reaching welfare system ensures that all Danes receive tax-funded health care and unemployment insurance as well as secure pensions. Moreover, education is free.

Denmark sustains this huge government expenditure on social protection by having the world’s highest tax rates: a value added tax of 25% is levied on the sale of most goods and services and income tax ranges from 37.4% to 63%. Such huge taxation rates, however, also pose problems and have resulted in warnings from organisations such as the OECD. Media outlets have suggested that abolishing the middle- and top-level income tax brackets would respectively amount to a 2% and 1% reduction of public sector revenue, which amounts to 1.5% of GDP. In 2007, the public sector had a budget surplus of 4.4% of GDP. However, if tax cuts were introduced, it is thought that it would have the negative effect of increasing private consumption and a labor shortage, resulting in a deficit on the trade balance and pressure to increase wages.

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