Seven Things the U.S. Can Learn From Switzerland

The United States could learn a thing or two from other countries; pragmatism, an American philosophy, dictates that we try ideas or policies that are demonstrated to work. Where better to learn new things from than Switzerland, a country with a surprising number of similarities to the U.S. — a long, robust, and proud history of constitutional democracy; strong values of civil liberty and rule of law; and a positive attitude towards capitalism, entrepreneurship, and economic freedom.

Over at Vox, Chantal Panozzo recounts her experience working and living in the Alpine country for almost a decade, making, at most, minimum wage — yet finding herself (and most others around her) enjoying considerable quality of life. Utilizing both years’ of anecdotes and quite a bit of data, Panozzo outlines seven characteristics of Swiss society, culture, and government policy that the U.S. would do well to considered.

Below is a summarized version, so I recommend you read the entire article to get the full breadth of what Switzerland — consistently ranked as one of the world’s most developed and prosperous nations — has to offer.

1. Work-life balance is crucial.

According to the OECD, a grouping of the world’s most developed nations, the typical Swiss worker enjoyed an annual income of around $91,500 in 2013 — compared to about $55,700 for the average American worker — despite working 219 hours less. The Swiss take free time and recreation more seriously.

Lunchtime is sacred time in Switzerland. When I was on maternity leave, my husband came home for lunch to help me care for our daughter. This strengthened our marriage. Many families still reunite during weekdays over the lunch hour.

Weekends in Switzerland encourage leisure time, too. On Sundays, you can’t even shop — most stores are closed. You are semi-required to hike in the Alps with your family. It’s just what you do.

All this leads to another crucial point…

2. All kinds of work should be valued.

The Swiss have a culture of professional part-time work, and as a result, part-time jobs include every benefit of a full-time job, including vacation time and payment into two Swiss pension systems. Salaries for part-time work are set as a percentage of a professional full-time salary­ because unlike in the United States, part-time jobs are not viewed as necessarily unskilled jobs with their attendant lower pay.

[…]

One married couple I knew each worked 80 percent, which meant they each spent one day a week at home with their child, limiting the child’s time in day care to three days a week while continuing full professional lives for both of them. According to a recent article in the New York Times, “Why U.S. Women Are Leaving Jobs Behind,” 81 percent of women in Switzerland are in the workforce, versus 69 percent in the US. I believe attitudes toward professional part-time work — for both men and women — have a lot to do with this.

3. Unemployment benefits should (and can) be generous yet sustainable.

…In Switzerland, being on unemployment meant you received 70 to 80 percent of your prior salary for 18 months. The Swiss government also paid for me to take German classes, and when I wasn’t looking for jobs, I could afford to write a book.

In the United States, on the other hand, unemployment benefits generally pay workers between 40 and 50 percent of their previous salary, and these benefits only last for six months on average. However, thanks to the American Recovery and Reinvestment Act in 2009, some unemployed people now receive up to 99 weeks of benefits.

Moreover, the Swiss government pulls this off while managing to spend the least amount of public funds proportional to GDP of any country in Europe — 33.6 percent. This also compares favorably to the U.S. rate of 41.6 percent.

4. Taxes can be both fair and cost effective.

A big reason why the Swiss can get away with a generous welfare system without racking up debt is their highly efficient way of raising revenue.

Compared with taxes in the United States, Swiss taxes are easy on the average worker. For example, a worker earning the average wage of $91,574 would pay only about 5 percent of that in Swiss federal income tax. Instead of taxing salaries at high percentages — a practice that puts most of the tax burden on the middle class, where most income comes from wages and not from capital gains — Switzerland immediately taxes dividends at a maximum of 35 percent and also has a wealth-based tax.

[…]

The Swiss taxation method leaves money in the pocket of the average worker — and allows them to save accordingly. The average adult in Switzerland has a net worth worth of $513,000 according to the 2013 Credit Suisse Wealth Report. Average net worth among adults in the US is half that.

Yet again, the Swiss get the best of both worlds: a sustainable tax rate that burdens as few of its citizens (and by extension the economy) as possible, while still managing to raise enough revenue for governance and public services.

5. Paid vacations should be politically and socially encouraged.

This pretty much follows from the first lesson: employees and employers alike benefit when workers can enjoy periodic time off — especially if it is paid, so as to ease the burden and increase the likelihood that one will actually use it. Time with loved ones or for one’s self is good for morale and productivity, and is thus as practically beneficial as it is socially responsible.

That is why the Swiss legally require businesses to provide at least four weeks paid vacation — not including various holidays, in which most businesses close. (Panozzo’s husband enjoyed a total of six weeks off a year, showing that many Swiss companies genuinely take this matter to hear, regardless of government directive.) Most importantly, neither employers nor workers shame anyone for wanting to enjoy to make the most of their hard earned time off — if anything, one is shamed for not using it in the first place!

Moreover, despite this “burdensome” requirement, Switzerland ranks fourth in the (conservative) Heritage Foundation’s 2016 Index of Economic Freedom.

6. Offer world-class public infrastructure.

By supporting an efficient, extensive, and accessible network of public transportation, Switzerland frees its citizens from the expense and environmental pollution of car ownership — hence why about one in five Swiss households do not bother to own a car, compared to a little over 9 percent of U.S. households.

The Swiss train connects to the bus that connects to the cable car to get you on the slopes in the middle of nowhere at the scheduled second. From Zurich, I could also take a high-speed train to Paris in three and a half hours. Now I can barely get from the western suburbs to the north side of Chicago in that amount of time — let alone have the option to do it carless. This means I’m turning down jobs instead of taking them. This isn’t good for the American economy or for me.

And let’s be clear: Living in a city suburb is no excuse for having bad transit options. I lived exactly the same distance from Zurich that I now live from Chicago (15 miles) but shared none of the public transport frustrations.

It is not that people should be discouraged from having a car, but rather that providing cheaper and more convenient alternatives can be beneficial to urban life (by easing congestion, noise, accidents, and pollution) as well as the environment. Reliable infrastructure is great for business, too, as Panozzo’s account shows.

7. Support universal healthcare, especially for mothers.

In Switzerland, healthcare is both humanely affordable and widely accessible, providing a boon to both society and the economy.

When I gave birth in Switzerland, I was encouraged to stay five days in the hospital. So I did. The $3,000 bill for the birth and hospital stay was paid in full by my Swiss insurance. As was the required midwife, who came to my apartment for five days after I came home from the hospital to check on both my health and my baby’s.

Had I been in the U.S. for my delivery, the cost would have been much higher — and the quality of care arguably lower. The average price for a vaginal birth in the U.S. is $30,000 and includes an average of less than a two-day hospital stay.

Swiss law also mandates a 14-week maternity leave at a minimum of 80 percent pay. I was lucky enough to receive 100 percent pay. Compare that with the US, where new mothers aren’t guaranteed any paid time off after giving birth. In Switzerland, it’s also common to choose how much work to return to after having a child. Since my Swiss job at the time had been full time, I chose to return at 60 percent.

Other American friends in Switzerland who gave birth also chose to return to their careers part time: My engineering manager friend chose 70 percent, and my lawyer friend chose 80 percent. We had great careers, we had balance, and we also had a Swiss government that paid a monthly child stipend whether we needed it or not. For Americans like me, Swiss Reality was privilege.

To be sure, while it is cheaper by American standards, the Swiss spend a lot more on healthcare than their European counterparts. Nevertheless, at least they get results, while companies enjoy healthier and more highly motivated and productive workers.

Now, it should go without saying that Switzerland is no paradise. Like every country, it has its problems, albeit far fewer and less severe than almost anywhere else in the world. And at least some of its success can be attributed to its small size both geographically and demographically.

But with its rugged mountainous terrain; considerable ethnic, linguistic, and religious diversity; strong regional and local identities; and a dearth of natural resources, the Swiss prove that it is possible to create social, political, and economic conditions that are conducive to human flourishing — especially a nation with as much ingenuity, wealth, and resource as the U.S. Do Americans have the will to implement such changes? Should they? What are your thoughts?

Study Finds That Unemployment Benefits Don’t Discourage Work

It’s a persistent canard, particularly in the U.S., to claim that unemployment benefits exacerbate joblessness by creating a disincentive to work — e.g. people will feel less inclined to find a job because they’re getting by just fine on government dole).

But a new multinational study conducted by sociologist Jan Eichhorn of the University of Edinburgh found that even generous unemployment assistance has little to no impact on people’s drive to find work (the report was published in the October issue of Social Indicators Researchwhich has a paywall). 

Eichhorn used data from the 15 core members of the European Union and Norway; notably, most of these countries offer their citizens far more substantial benefits than jobless Americans receive. Although he found that the well-being of the unemployed varied from country to country, ultimately the generosity of unemployment benefits had no impact on job-seeking, as determined by European Values Study, a large-scale database of public opinion that tracks various social and ideological trends of Europeans.

Eichhorn wrote:

This means that claims about unemployment benefits resulting in complacent unemployed people who chose the situation and would be satisfied with it cannot be retained uncritically.

His finding is consistent with 2011 study conducted by the Joint Economic Committee of Congress, which found that among the long-term unemployed, those eligible for benefits spent significantly more time looking for jobs than those who didn’t qualify. In other words, contrary to conventional wisdom, you’re more likely to go looking for work if you receive benefits than if you don’t: three times more likely, according to the committee. 

As Alex Seitz-Wald of Think Progress observed:

Federal unemployment insurance requires recipients to actively look for new work, and also gives them more flexibility to do. Someone with no job and no UI benefits will likely have to focus first on paying bills on a day-to-day basis before finding a job for the long-term.

To top it all off, unemployment benefits also offer a nice return on investment, despite the other persistent misconception that they’re a drain on public revenue. Aside from the ethical benefits of keeping millions of people from falling into deeper poverty, such benefits lessen the economic impact of widespread, long-term unemployment by giving people disposable income with which to drive demand (consumption is considerable fuel for our economy).

In fact, the Congressional Budget Office estimates that extending unemployment benefits for the long-term unemployed past the new year would increase growth and add 200,000 jobs to the economy in 2014. With job growth still painfully sclerotic, and consisting mostly of low-wage and unstable work, it makes both practical and moral sense to support the millions of people who are constrained by external factors from finding decent work.

Of course, unemployment assistance on its own is no way to support or fix the economy, but it would be a good mitigating factor. That’s a different discussion for another day.

Hat tip to Bill Moyers for originally reporting on this study.

Finnish Students Don’t Do Homework Or Take Tests

I’ve spoken at length about Finland’s education system before (here, here, and here) and I believe it deserves all the attention it can get, especially since much of this success is due to policies that are applicable in the US (if not elsewhere) — professionalizing the teaching industry, promoting smaller class sizes in conjunction with more student-to-teacher interaction, and so on. I think the following image breaks it down rather nicely, but if you want more information and sources, visit the hyperlinks above.

The Canadian Model

Canada has distinguished itself as one of the few countries in the world, especially among developed nations, to have weathered the recession virtually unscathed. It accomplished this unique feat through comprehensive financial regulation, fiscal prudence (including the paying down of government debt over the last decade), and economically sound policies, such as promoting the immigration of skilled and educated people, or providing cash transfers that boost spending power for the unemployed (which thus drives demand and, subsequently, economic growth).

NPR offers a brief but interesting report (the transcript of which I’ve posted below).

As Europe works to solve its financial problems, closer to home and with a little less fanfare, America’s biggest trading partner is thriving. Canada has built an impressive track record throughout the recession. It’s got low unemployment, little government debt and some of the healthiest economic growth in the industrialized world. Brian Mann traveled to Toronto for WBEZ’s Chicago’s Front and Center project and has this story.

BRIAN MANN, BYLINE: It’s early morning and Toronto’s central business district is in high gear with people crowding into street cars, heading to work.

MANN: This city of five million people sits just a few hours’ drive from America’s rust belt – from Buffalo and Detroit. While those cities have shed population and are struggling to reinvent themselves, Toronto is on fire. Matthew Mendelson heads the Mowat Center for Policy Innovation.

MATTHEW MENDELSON: Our financial sector, our financial institutions are the healthiest in the world. And so that creates enormous opportunities.

MANN: Canada has some of the strictest banking rules in the world. While hundreds of banks failed in the U.S. during the recession, this country hasn’t seen a single major bank failure – not one. In fact, banks here are posting record profits. There’s also no mortgage crisis in Canada. And while U.S. politicians feud over government spending, Mendelson says political parties on this side of the border have done the hard work of balancing budgets.

MENDELSON: The last decade has been one of Canada paying down debt, while it’s been one of the United States ratcheting up debt. And so that creates much more flexibility for Canada to invest and make choices when a recession arises.

MANN: It’s a huge turnabout for a country that in the 1990s was an economic basket case. In those days, the Canadian dollar was so weak that it was known as the northern peso. Now, Canada’s dollar trades on par with American greenbacks and economic growth here is a third higher than in the U.S. Unemployment remained relatively low during the recession and people who do lose their jobs in Canada can expect to be out of work for half as long, compared with jobless workers in the U.S. Economists credit Canada’s prosperity to a wide range of factors, including the rapid expansion of the country’s oil industry and a very different approach to immigration.

MARIO CALA: We’ve instituted a managed, point-based immigration system.

MANN: That’s Mario Cala, head of a nonprofit that runs a network of immigrant welcome centers for the Canadian government. While the U.S. grants most of its green cards on the basis of family connections, Cala says Canada actively seeks out immigrants who can bring money, high tech skills or new businesses to boost the economy.

CALA: Canadians understand that while these people coming from other countries may be very different from us, they’re coming with great talents and skills.

MANN: As a consequence, Canadian cities have emerged rapidly as high tech international hubs with deep ties to China and India. Not everything here is perfect. Canada has seen government debt creep up during the recession, and there’s a growing environmental debate here and in the U.S. over the impacts of Canada’s booming oil industry. But many economists in Canada say their biggest economic vulnerability long-term may be an over-reliance on the United States, which now buys more than 70 percent of Canadian exports. Matthew Mendelson with the Mowat Center says Canada is racing to diversify.

MENDELSON: We are in the process of a historical pivot. Our future can not only be tied to exports to the United States. It also has to be tied to the emergence of Asian economies.

MANN: That pivot will take decades, and for now, Canadian exporters are watching nervously to see if the American economy and American consumers will continue to bounce back. For NPR News, I’m Brian Mann.

Of course, Canada isn’t all idyllic – no country is. Canadians are  pretty indebted individually, and there seems to be a growing housing bubble that may burst in a few years, which may adversely affect the economy. But given the government’s track record, and the fact that neither Canadian society nor its politicians are paralyzed by partisanship and polarization, they seem far better suited to handling future issues than they otherwise would be. The US could certainly try to learn something from it’s banking rules or socioeconomic policies.

Germany, Australia, and South Korea are other developed nations that have done well through this recession, and offer valuable lessons to consider (Scandinavia, Singapore, and a few others have remained economically healthy, but I’m focusing on comparatively larger countries). Each had stringent but fair rules for banks, practiced sound spending and taxation policies, and undertook innovative programs to address economic contagion. The Korean government, for example, funded pubic works programs that kept people employed while also improving infrastructure (which helps economic growth); Germany, meanwhile, had it’s politicians, employers, and workers unions come together to hash out compromises that demanded sacrifices from each, yet kept unemployment low and economic growth high. The Australians, meanwhile, practiced fiscal integrity by maintaining a rainy day fund of cash reserves in the event of an economic slowdown.

Perhaps most importantly, their politics, like Canada’s, haven’t become so partisan and ideological so as to obstruct vital decision making. The civil service of each country is largely competent, technocratic, and un-politicized.  Laws governing taxation, lobbying, and fiscal policy, among other things, are relatively more streamlined and less exploitable. Public discourse is more conducive to compromise and dialogue, which are vital in forging the national unity needed to better the economy.

To be sure, these examples, and any other, are hardly perfect. These countries have numerous socioeconomic and political problems as well. They too contend with creeping cynicism and indifference towards politics, and looming economic and fiscal threats. Furthermore, each of them have different societies, political systems, and demographics, which renders some comparisons unfair.

But my point isn’t to copy them entirely, or hold them up as perfect models to naively glorify. We simply need to look closely at alternative models and approaches, and see what we can learn and implement. What are these nations doing that we aren’t? How are they running things more effectively? What are the pros and cons of any given policy or system? Given the persistence of economic malaise, and the dearth of either leadership or sound ideas, it’s seems like the sensible thing to do. We wouldn’t have to look to far either.

Another Interesting Ike Quote

Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.

-Dwight Eisenhower, in a letter to Edgar Newton Eisenhower, his brother November 8, 1964

How times have changed. It used to be broadly accepted by both parties, and most of the public, that some measure of social assistance be provided to Americans, especially the neediest. There was always a debate about how to do this, or to what degree, but never was the principle of it question.

Indeed, Ike continued many of the New Deal policies that were begun under FDR, with little question or controversy. That had been the basic standard of politics. Today, it’d be unthinkable for opposing sides on any issue to agree on anything solid, despite high-minded but ultimately vacuous claims to the contrary.

To be sure, I’m highly critical of this government and all it’s programs and institutions, from welfare to the military. I know that soaking the rich won’t be enough, and that many government initiatives are inefficient. Reform is not just needed, but inevitable: otherwise, we’re in for some serious socioeconomic problems of disastrous proportions.

However, the idea that we should do away with any or all these once established principles is equally troubling. Our infrastructure is crumbling, our public schools remain dysfunctional, and the poor and middle-classes are getting squeezed, to name just a few of many major national problems. People aren’t getting hired, are seeing benefits get cut or made more expensive, and are getting paid stagnant wages that aren’t keeping up with the cost of living, let alone education and healthcare costs.

Obviously, lavishing money on all these issues won’t solve them, nor will any centralized management by political bureaucracy (if anything, either of those will likely make matters worse). But slashing away at the foundations of a developed polity goes too far into the other extreme. We need smarter government, a simpler tax code, and sensible regulations. We need more science to guide policy, and performance evaluations to regularly audit government actions and programs. We’ll likely need many public-private partnerships as well, bringing the best of both.

All that is easier said then done of course, and we could have many debates about how we should go about reaching them. But at least we could start from somewhere other than amputating a limb over a few broken fingers. At the very least, we could come up with non-government alternatives that are viable and tested, rather than assuming that shrinking government in and off itself will automatically engender an economic renaissance. That’s just as naive and damaging as believing that government could solve all our problems.