Denmark Is Shrinking Its Social Safety Net

Denmark has long held the title of the best place on earth to be laid off. With an expensive, generous welfare state, and the world’s most lavish unemployment insurance scheme, virtually no one falls through the cracks upon losing a job.
But the government unveiled an unpleasant surprise in June, when it halved the country’s whopping four-year unemployment benefits period to help mend its finances after the financial crisis.
The reason: Danish studies show that the longer a person goes without a job, the harder it is to find work. Many people get a job within the first three months of entering the system, but many more wait until just before benefits expire to take anything available.

In addition to halving the unemployment benefits period, the government is pinning high hopes on job activation programs, one of the three pillars in Denmark’s famed “flexicurity” model. Employers have carte blanche to hire and fire, and in turn, the jobless are guaranteed benefits if they attend retraining and job placement programs tailored to prepare them for work where labor is scarce.

More at The New York Times
Reference: Denmark Starts to Trim Its Admired Safety Net

Cradle-To-Grave System Gets Rocky in Denmark

In addition to free education and universal health care, the linchpins of the welfare state model, Denmark provides an extensive list of social benefits enjoyed during a lifetime regardless of income. These include government-sponsored child-care checks, student stipends, unemployment benefits, early retirement funds, elder care and a state-funded pension program.
But in recent weeks, in light of the credit crunch and a growing public debt problem, Denmark’s generous public spending has come under scrutiny. Specifically, the state-funded pension program — which costs 96 billion kroner, or $16 billion, annually, an estimated 5.5% of gross domestic product — has fueled a discussion about the paradox of Denmark’s high earners receiving many of the same social benefits as the very neediest citizens.
The comments come as Denmark, long heralded as a model for economic and social stability, scrambles to reduce a public expenditure that last year surpassed 59 percent of G.D.P., clocking in at over 1 trillion kroner, while working to decrease a public-sector debt equal to 42% of G.D.P.
Mr. Bendtsen has suggested that anyone receiving more than 500,000 kroner annually from a private pension should be excluded from the state-funded program. The Danish Insurance Association, an industry group, calculates that there are only 4,000 people who fall into this category, or 1 percent of the 400,000 Danes who have private pensions.
Mr. Bendtsen’s trial balloon has attracted responses from several quarters of Danish society, and the comments have a similar thrust: Something must be done, but not at the expense of the social model.
Denmark has the highest overall tax burden of all O.E.C.D. member countries, with taxes to G.D.P. reaching 48.2% in 2009. Furthermore, numbers from the O.E.C.D. show that Denmark has one of the highest marginal tax rates for high earners — 67% — when consumer taxes are included.

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The Collapse of the "Swedish Model"

MOTTO: There will be increased competition between countries due to internationalization. But it won’t be the country with the lowest tax rates that wins. It will be the countries wich have the most efficient use of the resources that win.

Knut Rexed

Sweden has held a special place in the academic literature and in the popular imagination for two separate reasons: first, it has often been viewed as the archetypical example of socio-corporatism; and, second, it is even more widely known as the country with the most expansive (and expensive) welfare state in the world.
The Swedish model (which comprises corporatist decision-making institutions, solidaristic wage policies and perhaps even the ‘politics of compromise’) may well now be dead. But the ambition and the political support for a largely egalitarian polity with a very large welfare state (and the taxes to support it) live on quite healthily in Sweden today. The Swedish model as a decision-making system was an historically bounded institutional setup. It did, however, enable the construction of a kind of social welfare state that now has its own political force. In short, though the model may be dead, its legacy is alive and well.
Sweden clearly faces important and difficult political and economic challenges. As in all advanced democracies, the ageing of the population will mean that an increasing share of its workers will be recipients of social benefits instead of contributors. Potentially more troubling is the possibility that the growing ethnic heterogeneity of this nation will one day undermine the traditional ‘nordic’ Swede’s willingness to pay taxes for social programmes that may increasingly go to racial and ethnic minorities. At this point, however, we see little direct evidence of this problem erupting in Sweden to anything like the same extent seen in several other European countries. The sky is not falling in in Sweden, at least not yet.

References:
1. Jason Coronel – Foundations, Decline and Future Prospects of the Swedish Welfare Model: From the 1950’s to the 1990’s and Beyond, DePaul University, 2002 (link)
2. Torben Iversen – The Choises for Scandinavian Social-Democracy in Comparative Perspective, Oxford Review of Economic Policy, vol 14, no.1, 1998 (PDF)
3. Kimberly Earles - The Gendered Effects of the Reregulation of the Swedish Welfare State, Issue #36, Vol 18, No. 2, 2004 (link)
4. Christopher S. Allen – Social Democracy and Capital Investment: A Democratic Left Option in Western Europe?, Department of International Affairs, School of Public and International Affairs, University of Georgia, 2oo4 (PDF)
5. Sven Steinmo – Bucking the Trend? The Welfare State and the Global Economy: The Swedish Case Up Close, New Political Economy, Vol. 8, No. 1, 2003, pp. 31-48 (PDF)

How the Welfare State Corrupted Sweden

Whereas my parents mysteriously seem to have inherited much of the "older" form of morality, most people of their age, and especially those younger, are paradigmatically different from their parents’ generation. They are children of the welfare state and are fully aware of the social security benefits to which they have a “right.” They don’t reflect on where these benefits come from, but are skeptical towards politicians whom they believe might take them away. “Change” quickly became a bad word, since it necessarily implies a change to the system on which people are parasitically dependent.

This is a fragment from How the Welfare State Corrupted Sweden (2006) by Per Bylund. It is a very interesting reading.
In Denmark is the same conception of welfare state. People becomes dependents from the state in all forms.