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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.
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