Mike Hosking reviews Oliver Hartwich's NZ Herald article on social insurance lessons from Germany

Dr Oliver Hartwich
Newstalk ZB - Mike Hosking Breakfast
8 December, 2021

On Newstalk ZB, Mike Hosking reviews and reads out parts of Oliver Hartwich's article in the NZ Herald on social insurance lessons from Germany.

In the article, Oliver says New Zealanders who have never worked abroad may not appreciate just how much Europeans contribute to their various insurance schemes. So maybe a quick calculation will help to illustrate this.

Take an average German single earner on an annual salary of €47,000 ($79,800). Income tax is €7,605 ($12,700) – and that is actually a bit lower than what it would be in New Zealand ($17,254). But on top of this income tax, there are social security contributions totalling another €9,505 ($15,900).

So, in total, average German employees pay €17,110 ($28,600) in taxes and social insurance levies. The German net pay on the same salary is thus about 20 percent lower than in New Zealand.

The situation is even worse because the employer pays additional social security contributions. These are not technically part of the salary but extra costs to the employer – in this case, a further €11,500 ($19,200).

In sum, the average employee will cost the employer €58,500, have a gross salary of €47,000 and receive a net income of €29,890. So, once you include employee and employer contributions, the average worker would be about 40 percent better off after tax under New Zealand’s tax laws.

When looking at the Ardern Government’s proposal of a social unemployment insurance, the numbers for New Zealand are lower – for now. It may just cost an extra 3 or 4 percent of tax on income that New Zealanders will be required to pay. Put that against the promise of no new taxes. And the keywords here are ‘for now’.

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