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Comments on 'APW - calculations' for 1997 compared to 1996
DENMARK
The net replacement rates in the Danish cases decreased somewhat from 1996 to 1997. The
main reason is that the relative increase in most benefits (mainly flat rates) was smaller
than the relative wage increase from 1996 to 1997, this, again, is due to the regulation me-
chanism for most benefits being based upon former wage changes (partially) and adapta-
tion to the tax reform from 1994, which will be fully implemented in 1998.
The only exception is injuries from work, 1/3 loss of working capability, where the relative
impact was the same in 1997 as in 1996. This is the only real income related benefit in the
Danish system.
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SWEDEN
Nearly all net replacement rates, except in the cases with injuries from work, decreased in
1997 compared to 1996. One main reason was, that major flat rate benefits stayed no-
minally unchanged from 1996 to 1997, this was e.g. the case for the maximum unemploy-
ment benefit from the insurance scheme, the alternative unemployment benefit (KAS) as
well as the child benefits. Furthermore, the basic rate
basbeloppet' is price indexed, and
only partially, and falls behind the wage development, this is of importance for pensions.
Finally, the compensation for maternity was reduced for the first month for each of the
parents, from 85 to 75 per cent of the former wage.
The only increase in net replacement rate was for the couple where the part time working
spouse is unemployed for the whole year. The reason is, that the compensation was raised
from 75 to 80 per cent of the former income for the last quarter of 1997 (her income is not
high enough to reach the unchanged U.B. maximum). The comments above are based upon
the
correct' data calculation for Sweden, 1996. For a more comprehensive coverage of the
changes in the Swedish tax/benefit schemes, cf. chapter 3.
FINLAND
The flat rate component of the unemployment compensation was nominally unchanged
from 1996 to 1997 indicating falling net replacement rates in 1997 in case of unemploy-
ment. In the earnings related U.B. scheme a larger part of the income was compensated
with the lowest percentage, i.e. 20, in 1997 than in 1996. This also contributes to lower net
replacement rates in 1997. The increased waiting period pulls in the same direction.
Replacement rates for pensioners with a former work history have decreased, primarily
because the tax reduction in 1997 was most important for people with income from work.
The reduced net replacement rate for the minimum pension is also due to a small increase
in pension rates.
The family allowances were nominally unchanged from 1996 to 1997, implying a smaller
positive impact in 1997. For injuries from work there were only minor changes. The same
was the case for maternity leave benefits. The comments above are based upon the
correct'
data calculations for Finland 1996. For a more comprehensive coverage of the changes in
the Finnish tax/benefit system, cf. chapter 4.
AUSTRIA
No former calculations to refer to.
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GERMANY
Most relative impacts on disposable income are very stable from 1996 to 1997. The tax
and social contribution burden increased from 1996 to 1997 implying higher net replace-
ment rates for tax free benefits based upon gross wage e.g. compensation for industrial
injuries. Pensions also came out with higher net replacement rates in 1997 than in 1996.
This is especially due to the fact that the disposable income for the APW and APW-couple
in work was lower in 1997 than in 1996. The no former work record case for pensions is
now covered by social assistance, previously it was just zero pension. The child benefits
were increased from 1996 to 1997 implying a higher relative positive impact from this
component in 1997.
The NETHERLANDS
The relative impacts on disposable income from the events are very stable from 1996 to
1997. Most are unchanged, a few have a marginally larger negative impact and one has a
marginally smaller negative impact.
GREAT BRITAIN
There are, generally speaking, only minor differences between the impact on disposable
income from the selected 'events' in 1996 and 1997. The negative impact from most events
was somewhat larger in 1997 than in 1996 because the indexation (price based) of benefits
is smaller than the wage development. The positive impact from family allowances was
slightly lower for the same reason. The improved situation in the 100 per cent loss of
working capability case from industrial injuries is because long term Incapacity Benefits
can also be received. They are included in 1997 and should also have been in previous
years. Old-age pensions (former work record) had somewhat lower net replacement rates
in 1997 than in 1996. The price indexation of national pensions contributes and the SERPS
component is only an estimate. The no former work record case for old-age pension is now
based upon
income support' which is not comparable with previous years' cases. The most
important increase in negative impact is for the couple where the spouse usually working
part time, is unemployed. She will only receive JSA (C) for ½ year. Her JSA (IB) will be
tapered away by her husband's income. In 1996 she received U.B. for the whole year.
Taxation was lower in 1997 than in 1996.
CANADA
The APW estimated in
Elements' for 1996 was too high. The comments below are there-
fore based upon a
correct' data calculation for Canada. Most negative impacts on dispos-
able income were a little higher in 1997 than in 1996 mainly because flat rate benefits did
not follow the wage development. The positive impact from family benefits was, for the
same reason, somewhat smaller in 1997 compared with 1996. For income related benefits,
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primarily from Employment Insurance, the negative impact was slightly smaller in 1997
that in 1996, the benefits replace the same share of the income in the two years, but a larger
share of the income was taxed in bracket 2 (higher rate) in 1997 that in 1996.
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