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Associated Press
A homeless man sleeps in Townhall Square in Copenhagen. Denmark’s sturdy social safety net helps keep the wealth gap low.

Taxes, welfare keep Danish gap narrow

– This is what it’s like to live in Denmark, a nation with a narrower wealth gap than almost anywhere else: You’ve been jobless for more than a year. You have no university degree, no advanced skills. You have to pay a mortgage. And your husband is nearing retirement.

You aren’t worried.

If you’re 51-year-old Lotte Geleff, who lost her job as an office clerk in January 2013, you know you’ll receive an unemployment benefit of $1,902 a month after taxes for up to two years. You’re part of a national system of free health care and education for everyone, job training, subsidized child care, a generous pension system and fuel subsidies and rent allowances for the elderly.

And high taxes.

Denmark’s sturdy social safety net helps explain why its wealth gap – the disparity between the richest citizens and everyone else – is second-smallest among the world’s 34 most developed economies, according to the Organization for Economic Cooperation and Development, surpassed only by the much smaller economy of Slovenia.

Behind its slender wealth gap are factors ranging from the highest tax burden in the European Union to a system that helps laid-off workers find new jobs and re-training.

They are factors that depend on a level of government involvement – financial and otherwise – that would be politically unacceptable in some areas of the world.

Cause and effect would be impossible to prove, but Danes appear more content than people in most other industrialized nations. Eighty-nine percent of Danes reported having more positive experiences in an average day than negative ones, according to the OECD – the highest figure among the organization’s 34 countries.

“We don’t have steaks on the table every night, but we’re OK,” says Geleff, who has a house near the city of Roskilde.

While the gap between the wealthy and everyone else is widening in much of the industrialized world, a large chunk of Danes remain firmly middle class. Forty-two percent of the working population of 4.6 million have annual disposable incomes between $36,700 and $73,300. Just 2.6 percent earn more than $91,383.

According to the OECD, the top 20 percent of Danes earn on average four times as much as the bottom 20 percent. In the United States, by contrast, the top 20 percent earn about eight times as much as the bottom 20 percent.

The idea of a generous government-provided cushion for ordinary people is deeply rooted in a nation with few outward signs of a pampered elite. Members of the royal family often bike to drop off their children at a public day-care center. Last winter, Prime Minister Helle Thorning-Schmidt was seen shoveling snow outside her home in Copenhagen.

With a solid safety net in place, the government has persuaded unions to accept a flexible labor market. Under a model known as “Flexicurity,” companies can quickly lay off staffers during downturns. Laid-off workers, in turn, receive training and guidance in pursuing new careers.

Such training is part of Denmark’s approach to education, which is free for everyone of all ages in this country of 5.6 million. Students of any age over 18 who live on their own can receive a stipend of $1,028 a month. Those living with their parents can receive about half that.

So widespread is education that one byproduct has been something unfamiliar elsewhere: A shortage of unskilled labor. Denmark has no mandated minimum wage. But unions and employers’ organizations have agreed on a minimum of $20.30 an hour.

Torben Andersen, an economics professor at Aarhus University, sees political unity as a factor in Denmark’s narrow wealth gap.

“There are not the same strong conflicts and very strong parties and views like you will see, for instance, in U.S. politics,” he said.

Despite the heavy tax burden, public support for the social security system remains high. In a Gallup poll published this month, 38 percent of people who were asked whether they were happy to pay their taxes said they “fully” agreed.

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