I’m sure Tim Worstall will get around to this, but I’m going to tackle it anyway.
To combat its ‘throwaway consumer culture’, Sweden has announced tax breaks on repairs to clothes, bicycles, fridges and washing machines. On bikes and clothes, VAT has been reduced from 25% to 12% and on white goods consumers can claim back income tax due on the person doing the work.
Years ago I had a Russian friend who moved from Dubai to Sydney. Within a few weeks of her arrival she told me she found some aspects of living in Australia frustrating. The example she gave was that she needed an old, decrepit wardrobe removed from her house, only to do this she had to call a removal company which could come some time next week and charge $200 for the job. Whereas in Russia, she said, you just find a couple of alcoholics and buy them a bottle of vodka or two and they’d happily do it. They’d probably go on to sell the wardrobe, too.
One of the big differences I noticed while moving between countries as economically diverse as France, Nigeria, Australia, Russia, and Thailand is that the wealthier a country is, the more difficult it is to get simple repair or semi-skilled trade jobs carried out. The reason for this is obvious: as a country gets wealthier and more educated, the value added by each individual in the workforce increases, and a lot of low-value jobs simply disappear. For example, in a poor country a guy can make a reasonable wage repairing bicycles: it might be the best way for him to make money and other people can’t afford to just buy a new one. Whereas somebody living in London can make more money doing almost anything other than repairing bicycles, and he’d anyway have to charge so much that customers would find it easier and possibly cheaper to just buy a new one. Economics, in other words.
You would therefore expect a developed country with an educated population like Sweden to have its workforce employed doing high-value jobs: technology, services, manufacturing, etc. rather than low-skilled jobs like repairing clothes. And funnily enough that’s what they have, but now they’ve decided this ought to change:
The incentives are intended to reduce the environmental impact of the things Swedes buy. The country has ambitious targets to reduce greenhouse gas emissions, but has found that the impact of consumer choices is actually increasing.
They appear to have stumbled on the concept that a low-tech economy in which consumers have fewer choices produces fewer greenhouse gases. Now they want to move to such an economy, which is in the precise opposite direction everyone else is moving. We have the developed world. We also have the developing world. Sweden wants to kick-start the undeveloping world.
The scheme is expected to cost the state some $54 million in lost taxes, which will be more than outweighed by income from a new tax on harmful chemicals in white goods.
Erm, okay. But isn’t the point of this new scheme to reduce the number of new white goods being bought? So if it is successful, this new tax take won’t materialise, will it?
Moreover, Sweden’s economy is growing strongly and the government has an $800 million budget surplus.
My bank account is in surplus. I’m therefore going to quit heart surgery and take a job in McDonald’s.
I interviewed the man behind the scheme, deputy finance minister Per Bolund, a member of the Green party and a biologist by training.
He spoke about nudging people towards better choices; creating jobs for skilled manual workers; and Sweden’s six-hour working day.
Moving workers from skilled to semi-skilled jobs is a better choice? This doesn’t seem to be consistent with the history of the human race.
I think many of us have had a bike standing around broken and we don’t fix it and then start using other modes of transportation.
Which suggests the individuals concerned aren’t so interested in riding a bike, doesn’t it?
This will expand the number of companies giving these kinds of services, so it’ll be easier for consumers to have things repaired.
How many unrepaired bikes are lying around in Sweden, exactly?
And sometimes you can be surprised by how a small change in fees can really change behaviour.
Oh no, we are quite aware of how fees – especially taxes – can change behaviours. For example:
And in white goods, the tax break is actually quite substantial since most of the cost of repair is actually labour, so it can really make a quite big difference.
You’ve taxed labour to the point semi-skilled jobs have vanished. Now you need a tax break to bring them back again.
It’s actually a tax on chemicals. So if the appliance has harmful chemicals in the production process or incorporated in it there will be a levy, but if, on the other hand, you decrease the amount you can actually get a much lower levy, or even a zero increase. So that will give an incentive to producers to decrease the use of harmful chemicals, and we know that appliances are a major contributor to the amount of them in the everyday environment.
Great. But what if by using less of the harmful chemical the appliance becomes less efficient, thus needing more power for the same performance? I’m pretty sure this would apply to a fridge or air conditioner. I’m also pretty sure nobody has thought about this.
The idea is to help the private and municipal sectors use nudges to make it easier for consumers to act responsibly and reduce their environmental impact with everyday choices.
Translation: we’ll make you pay more if you live in ways of which we don’t approve.
We don’t anticipate that this will make people avoid buying things overall, but hopefully it will be easier for people to buy high-quality products because they know it’s affordable to have them fixed if something breaks. So it’s a lessened incentive to buy as cheap as possible and then scrap something.
People generally buy high-quality products because they don’t want them to break. Nobody buys a high-quality product thinking it is a smart purchase because when it breaks, Olaf from around the corner can fix it on the cheap. All people will do is buy the cheaper (and probably less efficient) appliances and get them fixed if and when they break. The high-end appliances, subject to the “harmful chemical” surcharge, will suffer a drop in sales. And I bet the repairs will still be too expensive compared to scrapping and replacing goods made in China.
And we also know that repairs are more labour-intense than production, which has been largely automised, so expanding repairs could actually contribute to an expanding labour market and a decrease in unemployment.
So you want to go from a lower-cost, automated process to a high-cost, manual process to achieve the same result? Progress!
Especially because repair services often require high skills but not very high education,
Highly-skilled jobs requiring no education. I suppose this is the theory underpinning Sweden’s immigration policies.
so we believe there’s a currently unemployed part of the labour force that could benefit.
Why not get them doing jobs that need doing, rather than getting them to do tasks which without meddling with the tax system nobody has a demand for?
Of course it is a boost for the local labour market because repairs are by their nature done near where you live. So hopefully this will contribute to the growth of jobs locally all over the country. Whereas large-scale manufacturing is very centralised and can only happen in a few locations around the nation and internationally.
A blast-furnace in every garden!
We’ve managed quite well to decrease emissions within Sweden – by some 25% since the early 1990s – but we see that the environmental effects of consumption are actually moving in the opposite direction, they’re increasing. And since Sweden wants to be a leader in sustainable development on a global scale, we feel a responsibility to do what we can domestically to decrease the impact of consumption.
No new bike for you, Erik! The government has decided you must get your old one fixed.
What do you think of the six-hour working day, which is being tried in Sweden?
There’s no national scheme, but municipalities and private employers have tried it, and in general found it quite beneficial for the labour force. They experience better working conditions and you can see some effects when it comes to health, you get fewer sick days.
The fewer hours people work, the fewer hours they spend off sick. Who knew?
And what I think will really change consumption patterns is the growth of the sharing economy, which has so many benefits for the individual – getting easy access to things like vehicles without the responsibility of ownership and maintenance. That could be a game-changer.
Oh, it’ll be a game-changer all right. Look at how well the Soviets got on with collective farms which had no responsibility of ownership or maintenance for machinery and vehicles.
I think this is what happens when you make a biologist the deputy finance minister of a country.