Redstate

By Pejman Yousefzadeh Posted in Economy | Employment Market | taxes — Comments (3) / Email this page » / Leave a comment »

We have internalized, to a relatively effective degree, the lesson that once taxes higher than a certain point, they end up having negative consequences when it comes to the influx of revenue to a government's coffers. Now we learn--or more accurately, are reminded--that a similar phenomenon can be found when it comes to the labor market.

Consider Denmark:

As a self-employed software engineer, Thomas Sorensen broadcasts his qualifications to potential employers across Europe and the Middle East. But to the ones in his native Denmark, he is simply unavailable.

Settled in Frankfurt, where he handles computer security for a major Swiss corporation, Sorensen, 34, has no plans to return to the days of paying sky-high Danish taxes. Still, an unknowing headhunter does occasionally pass his name to Danish companies.

"When I get an e-mail from them, I either respond negatively but politely," Sorensen said. "Or I don't respond at all."

Born and trained at Denmark's expense, but working - and paying lower taxes - elsewhere in Europe, Sorensen is the stuff of nightmares for Danish companies and politicians searching for solutions to an increasingly desperate labor shortage.

Why are people like Sorensen so completely uninterested in remaining in Denmark? Here's why (Psst! Read on!):

Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income tax rate, which can reach 63 percent.

"Our young people are by nature international," said Poul Arne Jensen, chief executive of Dantherm, a maker of climate-control technology. "They are used to traveling and have studied abroad."

"They are no longer 'Danes' in that sense - they are global people who have possibilities around the world," he said.

Denmark is the home of "flexicurity," the catchy name given to a system that pays ample unemployment and welfare benefits but, unusually in Europe, imposes almost no restrictions on hiring and firing by employers. The mixture has served Denmark well, and its economy barreled ahead in 2006 by 3.5 percent, one of the best performances in western Europe. The country is effectively at full employment.

But success has given rise to an anxious search for talent among Danish companies, and focused attention on émigrés like Sorensen. The Organization for Economic Cooperation and Development, which is based in Paris, projects that Denmark's growth rate will fall to an annual rate of slightly more than 1 percent for the five years beginning in 2009, reflecting a dwindling supply of a vital input for any economy: labor.

Read the whole thing. Those who present themselves to the public as friends of labor and the working man/woman would do well to remember that in their quest to enhance and strengthen the labor market, lower taxes are their friend. Indeed, lower taxes may very well be one of the best friends they have.

If those people either ignore the lesson or don't appear to understand it, one has to wonder whether they are hostile to the underlying facts of the lesson. And as such, one has to wonder whether they really are friends of labor.