Thu, Apr 25, 2013 - Page 9 News List

Denmark rethinks its
out-of-kilter welfare state

Danes pay the highest income tax in the world in exchange for extravagant benefits that lead to some people getting more money on welfare than when working. Many say this situation has become untenable

By Suzanne Daley  /  NY Times News Service, COPENHAGEN

Illustration: Mountain People

It began as a stunt intended to prove that hardship and poverty still existed in this small, wealthy country, but it backfired badly. 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.

However, 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 US$2,700 a month and she had been on welfare since she was 16.

In past years, Danes might have shrugged off the case, finding Carina more pitiable than anything else. However, even before her story was in the headlines 16 months ago, they were deeply engaged in a debate about whether their beloved welfare state, perhaps Europe’s most generous, had become too rich, undermining the country’s work ethic. Carina helped tip the scales.

With little fuss or 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 its 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 of the country people without jobs now 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 at all — be they dawdling university students, young pensioners or welfare recipients, like Carina, who lean on hefty government support.

“Before the crisis there was a sense that there was always going to be more and more,” said Bjarke Moller, the editor-in-chief of publications for Mandag Morgen, a research group in Copenhagen. “That is not true anymore. There are a lot of pressures on us right now. We need to be an agile society to survive.”

The Danish model of government is close to a national religion 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 in the world, with the top bracket of 56.5 percent kicking in on incomes of more than about US$80,000. In exchange, the Danes get a cradle-to-grave safety net that includes free healthcare, 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 childcare costs. The elderly get a free maid service if they need it, even if they are wealthy.

However, few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, 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 Danish Minister of Social Affairs and Integration Karen Haekkerup, who has been outspoken on the subject. “My grandmother was offered a pension and she was offended. She did not need it.”

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