Why is Scandinavia so expensive? | CNBC Explains



Tak! Across Scandinavia, the average price
of everything from a knitted roll neck to pastries from the local bakery are
some of the highest in the world. Scandinavia is a region in northern Europe
that was historically made up of three kingdoms: Norway, Sweden, and Denmark. They’re united by their Viking heritage
but also their shared reputation as one of the most expensive
regions to live and visit. Whether it’s buying a car or a TV,
consumers in Scandinavia pay some of the highest
prices in the world. Even buying groceries is costly with all
three countries’ food and drink prices above the European average. All three countries also have
a standard VAT rate of 25%. Amongst all the European nations,
only Hungary has a higher rate. Heading to the bar is also pretty pricey. In Norway, having a beer or glass of wine
will cost 2.5 times the EU average. Both Norway and Sweden have state-run monopolies
on alcohol which helps keep the prices up. This social market model, rather than
a liberal market model like in the U.S., is common across Scandinavia and helps
explain why the cost of living is so high. Scandinavian countries have large welfare
states with their social expenditures, as a percentage of GDP, among the highest in
the world and this requires high levels of taxation. Sweden has a top rate of
personal income tax of over 60%, while Denmark’s is more than 55%, both of
which are well above the OECD average. In Denmark, if you want to buy
a car you have to pay anywhere between 85% and 150% tax on
top of the cost of the vehicle. And the taxes don’t stop there. Let’s say I want to buy
a sweater in Denmark. I pay 300 kronor for it, but how much of that
money actually goes to the vendor? Well, first there’s the 25% VAT –
leaving the seller with 240 kronor. The clothes shop also has to pay a
minimum 22% of corporate income tax. That means that a big portion of the money I paid
for my sweater goes to the Danish government. Not to mention there’s a hefty
payroll tax on employees' wages and the store still has to pay for rent, electricity,
and cleaning – all of which are taxed, too. These taxes mean that for
Scandinavian businesses to make a profit, they need to charge their
consumers high prices. For some companies, this has proved too
much of a burden for their business model. The world’s biggest furniture company
IKEA was founded in Sweden but has moved its headquarters
to the Netherlands. Through corporate restructuring, the business is
now owned by a non-profit Dutch parent company. In part due to the high taxes in Sweden. But according to some experts,
Scandinavia’s social democrat tendencies have led to a strong social cohesion and
has helped provide political stability. This, in turn, has made their economies safe
havens for outside investors – which is one reason why the Danish, Swedish and
Norwegian currencies called krona are so strong. This can be tough on tourists with the
exchange rate doing them no favors. If the cost of living in
Scandinavia is so expensive, why then are its citizens some
of the happiest in the world? In the past five years, Scandinavian countries
have regularly topped the World Happiness Report. That’s an index that measures overall life
satisfaction based on different contributing factors. Some experts attribute these high satisfaction
levels with Scandinavia’s large welfare state which they say ensures financial security,
job security, and economic distribution. In return for high taxes, citizens get free
state education, very cheap child care, a functioning public transport
and a free health service. But a large and expensive social welfare
state doesn’t necessarily mean the best. For example, Norway is the only
Scandinavian country that ranks in the top 10 for adult education
levels, amongst OECD countries. And yet Scandinavians remain
happy with the status quo, living within a social corporatist economy
that provides reliable economic welfare. Having a beer at the end of the day does
cost a small fortune, but for people living and working in Scandinavia, high prices
provide a quality of life that’s worth paying for. Hi guys, thanks very much for watching. If you'd like to see any more of our
Explainers, then check out these. Otherwise, feel free to comment below the video
for any future videos you'd like us to make. And don't forget to like and subscribe. Tak for watching!




Comments
  1. I have been to Scandinavia several times The one think they have in common is an appalling lack of creativity. There is no real spirit of inquiry. And, most important they are extremely boring. The only places that show any ingenuity are companies that operate with a Capitalistic model

  2. You can keep it, I'll take my individual freedom in the US, rats ass if that pisses some of you off!!!!

  3. Interesting!!! Regardless of expenses, I want to visit Scandinavia one day!!! Greetings from the US. 😃

  4. With the cost of University study and health care paid by taxes, this is a huge burden off of the average citizen. I would have more spending money to buy more expensive goods under that system. Americans like me pay less taxes, but we get socked with tuition costs at Universities and all sorts of health care costs. I don't think that we come out ahead. I borrowed $100k to go to graduate school and I pay over $500/month for health care. Every medical procedure has co-pay fees and other expenses on top of the monthly fee I pay. Is this really better?

  5. My dad live in Denmark for 40 years ( he's 60) and he always told me that Denmark is so expensive , I'm afraid to move on to Denmark ….

  6. But i got paid 15000 dollar for Study 5 years american pays 30000 for college see The whole picture

  7. yea ik here in finland all cafes for example are so overpriced like i saw a tiny fudge cube for 4 euros and a single macaron for like 2 euros

  8. I have to say that in there country it make sense to pay more if the government is giving you more and also including life security

  9. 3:58 – that's a terribly unuseful chart. It's not properly labelled to begin with. Does it show percentage of the population with college-level education? Because if so, than it completely ignores differences in educational systems. Look at Germany f.i. – on this chart it looks like Germans are mostly uneducated. Well, little did you know that a lot of college-level professions simply don't need college in Germany – nurses are a good example of that. So what's the point of a graph like this then?

  10. I love Sweden… nice to live, yeah higher taxes its ok we are helping our government and other people.

  11. Big things this liberal video intentionally didnt mention
    1. Scandinavia is in no wars.
    2. They dont spend a dime on military or defense.
    3. They don't share borders with 3rd world countries.
    4. Their citizens are way healthier than americans.
    5. The US is paying for their defense.
    6. The govt becomes a nanny and a necessity for their own happiness.
    7. America has 300 million more people.
    8. Education sucks when it is free and one size fit all.
    9. Zero medical innovations and breakthroughs in those countries.

  12. I just LOVE how they glossed over the fact that IKEA was sold to a NON-PROFIT so it could stay in business

  13. Too bad you now have so many Third World parasites that have invaded your lovely countries and are leeching off your welfare system. Did I mention that Sweden is now the rape capitol of Europe…..? Praise Allah.

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