Denmark goes to work on lavish welfare perks
Danas are engaged in a debate about whether their beloved welfare state, perhaps Europe’s most generous, has become too benevolent, undermining the country’s work ethic.
The New York Times
COPENHAGEN, Denmark — It began as a stunt intended to prove that hardship and poverty still existed in small and wealthy Denmark, but it backfired. Visit a single mother of two on welfare, a liberal member of Parliament goaded a skeptical political opponent, see for yourself how hard it is.
It turned out that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.
In past years, Danes might have shrugged off the case. But even before her story was in the headlines 16 months ago, Danes were engaged in a debate about whether their beloved welfare state, perhaps Europe’s most generous, had become too benevolent, undermining the country’s work ethic. Carina helped tip the scales.
With little political protest — or notice abroad — Denmark has been at work overhauling entitlements, trying to prod Danes into working more or longer or both. While much of southern Europe has been racked by strikes and protests as creditors force austerity measures, Denmark still has an AAA bond rating.
Denmark’s long-term outlook is troubling, though. The population is aging, and in many regions, people without jobs outnumber those with them.
Some of that is a result of a depressed economy, but many experts say a more basic problem is the proportion of Danes who are not participating in the workforce, be they dawdling university students, young pensioners or welfare recipients such as Carina who choose hefty government support.
“Before the crisis there was a sense that there was always going to be more and more,” said Bjarke Moller, editor-in-chief of publications for Mandag Morgen, a research group in Copenhagen. “That is not true anymore.”
Highest tax rates
The Danish model of government is close to a religion in Denmark, and it has produced a population that regularly claims to be among the happiest in the world. Even the country’s conservative politicians are not suggesting getting rid of it.
Denmark has among the highest marginal income-tax rates, with the top bracket of 56.5 percent kicking in on incomes of more than about $80,000. In exchange, Danes get a cradle-to-grave safety net that includes free health care, a free university education and hefty payouts to even the richest citizens.
Parents in all income brackets, for instance, get quarterly checks from the government to help defray child-care costs. The elderly get free maid service if they need it, even if they are wealthy.
Few experts believe Denmark can long afford the current perks, however. So the nation is retooling, tinkering with corporate tax rates, considering new public-sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits.
“In the past, people never asked for help unless they needed it,” said Karen Haekkerup, the minister of social affairs and integration, who has been outspoken on the subject. “My grandmother was offered a pension and she was offended. She did not need it.
“Now people ... think of these benefits as their rights. The rights have just expanded and expanded, and it has brought us a good quality of life, but now we need to go back to the rights and the duties. We all have to contribute.”
More older people
In 2012, slightly more than 2.6 million people between 15 and 64 were working in Denmark, 47 percent of the total population and 73 percent of the 15- to 64-year-olds.
While only about 65 percent of working-age adults are employed in the United States, comparisons are misleading, since many Danes work short hours and all enjoy perks such as long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching $20 an hour. Danes would rank much lower in terms of hours worked per year.
In addition, the workforce has far more older people to support. About 18 percent of Denmark’s population is older than 65, compared with 13 percent in the United States.
One study, by the municipal-policy research group Kora, recently found that only three of Denmark’s 98 municipalities will have a majority of residents working in 2013. This is a significant reduction from 2009, when 59 municipalities could boast that a majority of residents had jobs. (Everyone, including children, was counted in the comparison.)
Joachim Olsen, the skeptical politician from the Liberal Alliance party who visited Carina 16 months ago in her pleasant Copenhagen apartment, is particularly alarmed. He says Sweden, which is considered generous, has far fewer citizens living on government benefits. If Denmark followed Sweden’s example, it would have about 250,000 fewer people living on benefits of various sorts.
“The welfare state here has spiraled out of control,” Olsen said. “It has done a lot of good, but we have been unwilling to talk about the negative side. For a very long time it has been taboo to talk about the Carinas.”
Reductions at work
Already the government has reduced various early-retirement plans. The unemployed used to be able to collect benefits for up to four years. Now it is two.
Students are next up for cuts, most of which are intended to get them into the workforce more quickly. Currently, students are entitled to six years of stipends, about $990 a month, to complete a five-year degree, which is free. Many take longer to finish their degree, taking breaks to travel and for internships before and during their studies.
In trying to reduce the welfare rolls, the government is proposing cuts to welfare grants for those younger than 30 and stricter reviews to make sure such recipients are steered into jobs or educational programs before they get comfortable on government benefits.
Officials also started to question the large number of people who are receiving lifetime disability checks. About 240,000 people — about 9 percent of the potential workforce — have lifetime disability status; about 33,500 are younger than 40. The government has proposed ending that status for those younger than 40, unless they have a mental or physical condition that is so severe that it keeps them from working.
Instead of offering disability, the government intends to assign people to “rehabilitation teams” to come up with one- to five-year plans that could include counseling, social-skills training and education and a state-subsidized job, at least in the beginning. The idea is to have them working at least part time or studying.
It remains possible that the cost-cutting push will hurt the left-wing coalition that leads the government. But the changes have passed easily in Parliament and been happily endorsed by conservatives such as Olsen, who does his best to keep his meeting with Carina in the headlines.
Carina was not the only welfare recipient to fuel the sense that Denmark’s system has gotten out of kilter. Robert Nielsen, 45, made headlines in September when he was interviewed on television, admitting he had basically been on welfare since 2001.
Nielsen said he was able-bodied but had no intention of taking a demeaning job such as working at a fast-food restaurant. He made do quite well on welfare, he said. He even owns his own co-op apartment.
Unlike Carina, who will no longer give interviews, Nielsen, called “Lazy Robert” by the news media, seems to be enjoying the attention. He said he is greeted warmly on the street all the time.
“Luckily, I am born and live in Denmark, where the government is willing to support my life,” he said.