Thursday, April 25, 2013

Denmark retooling welfare system

Apr 24, 2013

Welfare state with cradle-to-grave safety net spirals 'out of control'

COPENHAGEN (Denmark) - It began as a stunt to prove that hardship and poverty still existed in this small, wealthy country.

Visit a single mother of two on welfare, a liberal Member of Parliament goaded a sceptical rival from the Liberal Alliance, and see for yourself how hard it is.

But it backfired. Life on welfare was not so hard after all.

A 36-year-old Danish single mother of two, given the pseudonym "Carina" in the media, had more money to spend than many full-time workers. She was getting about US$2,700 (S$3,350) a month, and she had been on welfare since she was 16.

But even before her story made the headlines, Danes were engaged in a debate over whether their beloved welfare state, perhaps Europe's most generous, had become too rich, undermining the work ethic.

And Carina was not the only person to fuel the debate.

Mr Robert Nielsen, 45, dubbed "Lazy Robert" by the news media, made headlines last year when he was interviewed on TV admitting that he had basically been on welfare since 2001.

Mr 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.

"Luckily, I am born and live in Denmark, where the government is willing to support my life."

In past years, Danes might have shrugged off such cases. But with little fuss or political protest, Denmark is now overhauling entitlements, trying to prod Danes into working more or longer.

The country's long-term outlook is troubling. The population is ageing, 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 in the workforce at all - be they university students, young pensioners or welfare recipients like Carina on hefty government support.

"Before the crisis there was a sense that there was always going to be more and more," said Mr Bjarke Moller, editor-in-chief for research group Mandag Morgen.

"That is not true any more."

But even conservative politicians are not suggesting getting rid of welfare.

Denmark has among the highest marginal income tax rates in the world, with the top bracket of 56.5 per cent 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 health care, free university education and hefty payouts even to the rich. Parents get quarterly cheques from the government to defray childcare costs. The elderly get free maid service if they need it, even if they are wealthy.

Few experts believe that Denmark can afford the current perks.

So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and trying to wean more people off state benefits.

Many Danes work short hours and all enjoy perks like long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching US$20 an hour.

"The welfare state here has spiralled out of control," said Mr Joachim Olsen, the sceptical politician from the Liberal Alliance.

"It has done a lot of good, but we have been unwilling to talk about the negative side."


No comments: