|The Hague, January 31 1998
English summary of ‘Werkloosheid en armoede, de oplossing die werkt’
The first copy has been accepted
by professor H.J. Hofstra, former minister of finance.
The Dutch economy is doing well: its companies score big profits and most people see a rise in their take home pay. That is one side of Holland.
But there is another side of Holland too: structural unemployment and increasing poverty. There has been an emotional discussion in the media, with involvement of for example the social democrat Marcel van Dam and the catholic bishop Muskens. But what have been the causes of that unemployment and that rise in poverty ? And what can be done about them ?
The book ‘Werkloosheid en armoede, de oplossing die werkt’ analyses the massive unemployment that has been the scourge of the Western world since the ninety seventies. According to the authors the causes are not to be found in technology nor in increased international competition due to ‘globalisation’. Rather, they argue, the cause is internal to current economic policy. In particular it is the tax policy that is common to all Western nations that causes unemployment in the low income earning groups, which thus also generates poverty.
Tax exemption has a crucial role in the analysis. It is observed that tax exemption in the ninety fifties was about equal to subsistence. In that period the Western world enjoyed full employment. Since then tax exemption has been adjusted only for inflation while subsistence has risen with the general rise of welfare. Subsistence families currently have to pay a huge tax and insurance bill. But if these are to be earned, then wages become too high, and these groups will not find employment.
The authors show that there are attractive ways to reduce the tax and insurance burden on the lowest wages. Minimum wage laws have created a tax vacuum below the minimum wage, where taxes are levied officially but are not collected since people are not allowed to work below that wage. It is possible to abolish that vacuum in a way that is not detrimental to other participants on the labour market, and without an increase in the government deficit. This solution gives surprising new opportunities for useful employment in industry, services, government and independent categories.
It is also argued that unemployment and poverty can only be solved when decision makers and the general public grow aware of a fundamental error in the structure of decision making. Something serious is wrong in the interaction between politicians, government officials, interest groups and academic economic advisors. A structural solution for this problem would be the creation of an Economic Supreme Court.
15 x 21 cm, 118 pages, ISBN 90 5170 447 X, Price DFL 24,90 / Bfr 498
This publication has been made possible by a grant of the
van Houten Genootschap