social welfare
By the same Author Økonomisk vækst i håndværket, 1976 Håndværkets økonomiske historie, 1979 Dansk byggeri, myter og realiteter, 1982 Håndværkets kulturhistorie, Vol. IV, 1984, og redaktør for hele arbejdet 1982-84 "Byggeri også for ældre, om ældreboliger" i Du kan ikke skyde det fra dig, 1985 Når få har for meget – en moderne nordenshistorie, om de nordiske folks velfærd i moderne tid, 1988 "Den skandinaviske velfærdsmodel" i Festskrift for Vagn Dybdahl, 1987 Systemeksport, den lille virksomheds interesse, 1983, Vores Danmark, 1994, Contemporary Danish Society, Akademisk Forlag 1995 "Nye tanker og nye systemer, om nye tanker og nye systemer i forhold til fordelingen af opgaver i den offentlige sektor". I Fordelingen af opgaver i den offentlige sektor, opgavekommissionen, 1998 “The old guard“ In: Elderly in Denmark, who’s responsibility, Gyldendal, 2001 Den sociale kontrakt mellem generationer, Multivers 2002 Global Denmark, Multivers, 2005 Vær et Menneske, 2008 – Multivers The Social Contract – Between the Generations, Multivers, 2010 EU – and the Social Policy, Multivers, 2010 "The History of the Danish Welfare Society". In: The Danish Economic Society Journal nr. 148, 2010 Det mangfoldige liv. Bjarne Hastrup og Lone Hertz, Kristelig Dagblads Forlag, 2012 Den Som Kæmper, Strandberg Publishing, 2015 Hovedstrømninger i dansk og international velfærd i begyndelsen af det 21. århundrede, Multivers, 2017 Major Trends in Danish and Global Welfare, at the Dawn of the 21.th Century, Multivers, 2020 Senior Cool, Gyldendal, 2022
bjarne hastrup
s o c i al we lfare The Danish Model 2nd. edition 2023
Social Welfare — The Danish Model, 2nd edition By Bjarne Hastrup In English by: Charlotte Valentiner, revised (2nd edition) by Christiane Bird © Multivers, 2011, 2023 Publisher: Multivers ApS (multivers.com) Printed in Poland, 2023, by Totem ISBN 978–87–7917–604-1 Mecanical, photographic or any other form of reproduction of this book or parts of it is only permitted in accordance with the agreement between the Danish Ministry of Education and Copy-Dan. Any other use of it without permission from Multivers ApS (multivers.com) is prohibited under the relevant Danish copyright law. Exceptions to this are short extracts quoted in reviews.
I dedicate the book to Daneage (Ældre Sagen)
C ontents
preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 introduction . . . . . . . . . . . . . . . . . . . . . . . . .
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the danish kingdom . . . . . . . . . . . . . . . . . . . . . . 32 Denmark and Her Neighbors . . . . . . . . . . . . . . . . . . . 33 The Social Welfare Nation . . . . . . . . . . . . . . . . . . . . 40 The Resources of Denmark . . . . . . . . . . . . . . . . . . . . 51 Trade and Power . . . . . . . . . . . . . . . . . . . . . . . . . 59 Denmark’s Economic Condition . . . . . . . . . . . . . . . . . 69 Denmark and the Danes Today . . . . . . . . . . . . . . . . . 77 the danish social welfare model . . . . . . . . . . . . . . . 88 Policy Stakeholders and Funding Sources . . . . . . . . . . . . . 89 The Universal Principle . . . . . . . . . . . . . . . . . . . . . . 93 The Social Welfare System . . . . . . . . . . . . . . . . . . . . 98 Main Components of the Model . . . . . . . . . . . . . . . . . 101 The Five Waves of Social Welfare . . . . . . . . . . . . . . . . 106 Public Sector Growth . . . . . . . . . . . . . . . . . . . . . . 127 Public Sector Organization . . . . . . . . . . . . . . . . . . . 135 The 98 Local Municipalities . . . . . . . . . . . . . . . . . . . 138 The 5 regions . . . . . . . . . . . . . . . . . . . . . . . . . . 140 The Municipal Subdivision (2007) . . . . . . . . . . . . . . . . 141 Local Municipalities . . . . . . . . . . . . . . . . . . . . . . . 142 The Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Government . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Government Revenues and Expenditures . . . . . . . . . . . . 144 Cost Distribution Controversy . . . . . . . . . . . . . . . . . 147 ·7·
Government Revenues . . . . . . . . . . . . . . . . . . . . . . 152 The Social Safety Net . . . . . . . . . . . . . . . . . . . . . . 161 Taxes and Cash Transfers . . . . . . . . . . . . . . . . . . . . . 164 Cash Transfers from Birth to Death . . . . . . . . . . . . . . . 168 Support for Families . . . . . . . . . . . . . . . . . . . . . . . 170 Student Financial Assistance . . . . . . . . . . . . . . . . 173 Unemployment Benefits . . . . . . . . . . . . . . . . . . . . . 174 Vacation Benefits . . . . . . . . . . . . . . . . . . . . . . . . 175 Sick Pay Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 176 Public Pension and Retirement Subsidies . . . . . . . . . . . . 177 Voluntary Early Retirement Pension . . . . . . . . . . . . . . . 178 Senior Pensions and Early Retirement . . . . . . . . . . . . . . 184 Senior Pension . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . 184 Disability Pension . . . . . . . . . . . . . . . . . . . . . . . . 185 Cash Assistance . . . . . . . . . . . . . . . . . . . . . . . . . 186 Options for Appeal . . . . . . . . . . . . . . . . . . . . . . . 188 The EU and Danish Social Policy . . . . . . . . . . . . . . . . 189 Low-income Families in Denmark . . . . . . . . . . . . . . . . 193 Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Education and Enlightenment . . . . . . . . . . . . . . . . . . 207 The Labor Market . . . . . . . . . . . . . . . . . . . . . . . . 221 Flexicurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Flex Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Trade Unions . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Immigrants and Refugees . . . . . . . . . . . . . . . . . . . . 239 Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Energy and the Environment . . . . . . . . . . . . . . . . . . 248 The Danish Model Performance . . . . . . . . . . . . . . . . . 261 ·8·
The Future of the Social Welfare State . . . . . . . . . . . . . . 269 Social Welfare Technologies . . . . . . . . . . . . . . . . . . . 279 Solidarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 organized denmark . . . . . . . . . . . . . . . . . . . . . 283 An Organized People . . . . . . . . . . . . . . . . . . . . . . 285 The Historical Roots . . . . . . . . . . . . . . . . . . . . . . 286 Membership in Organizations . . . . . . . . . . . . . . . . . . 290 The Practical Work of Organizations . . . . . . . . . . . . . . . 293 Labor Organizations . . . . . . . . . . . . . . . . . . . . . . . 296 Organized Agriculture . . . . . . . . . . . . . . . . . . . . . . 309 Humanitarian, Political and Recreational Organizations . . . . . 311 Public Sector Organization . . . . . . . . . . . . . . . . . . . 316 commercial denmark . . . . . . . . . . . . . . . . . . . . 320 Business Sector Resource Areas . . . . . . . . . . . . . . . . . 335 The Services Sector . . . . . . . . . . . . . . . . . . . . . . . 373 Domestic and International Services . . . . . . . . . . . . . . 375 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Research, Development and Innovation . . . . . . . . . . . . . 382 Business Sector Policy . . . . . . . . . . . . . . . . . . . . . . 386 Consumer Protection Policy . . . . . . . . . . . . . . . . . . . 393 The Need for New Entrepreneurs . . . . . . . . . . . . . . . . 394 power and democracy . . . . . . . . . . . . . . . . . . . . 398 The Constitution, the Monarchy and Government . . . . . . . 401 The Political Parties . . . . . . . . . . . . . . . . . . . . . . . 411 New Political Parties . . . . . . . . . . . . . . . . . . . . . . . 420 The Velvet Revolution of 1848 . . . . . . . . . . . . . . . . . . 420 Danish Democracy at Work . . . . . . . . . . . . . . . . . . . 426 The People and Their Democracy . . . . . . . . . . . . . . . . 437 ·9·
denmark and the world . . . . . . . . . . . . . . . . . . . 449 Human Rights and Democracy . . . . . . . . . . . . . . . . . 463 Foreign Development Policy . . . . . . . . . . . . . . . . . . . 464 Climate and the Environment . . . . . . . . . . . . . . . . . . 468 Foreign Policy Actors in Denmark . . . . . . . . . . . . . . . . 470 European Affairs . . . . . . . . . . . . . . . . . . . . . . . . . 472 New Challenges in Danish Foreign Policy . . . . . . . . . . . . 473 danish values . . . . . . . . . . . . . . . . . . . . . . . . . 476 Foreign Observers’ Views of the Danes . . . . . . . . . . . . . 478 Lifestyles, Values and Attitudes . . . . . . . . . . . . . . . . . 485 Social Capital: Trust and Tolerance . . . . . . . . . . . . . . . 487 Danish Identity and Self-Understanding . . . . . . . . . . . . . 496 appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 supplement to sources . . . . . . . . . . . . . . . . . . . . 535 bibliography and other data sources . . . . . . . . . . . . 540 index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545
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preface
Denmark has achieved an acknowledged star status among the Western social welfare states. In a book about the history of Danish social welfare, the authors write: “The concept of the social welfare state is one of the first things that come to mind when one wants to explain Denmark to a foreigner.” The social welfare state is one of the major Danish national symbols. Denmark today has by far the world’s most equitable distribution of income and national wealth, and a public sector that is one of the largest in the world. It also has the forth largest tax burden. Although the demand for a comprehensive English-language presentation of the Danish welfare model has been great, none has been available to date. Social Welfare — The Danish Model meets a long-standing need to describe the Danish social welfare state, its history and the challenges it faces in an increasingly globalized world. The Danish social welfare state has created a community of interests between rich and poor, and a uniting of destiny among the country’s social classes; the universality of the Danish model means that everyone, including the affluent, is included in the country’s social welfare provisions. With its large public sector, government indirectly affects the private sector — although the private sector is based on a free market in a global economy. Many successful companies have been created or have grown from the indirect support generated by the public sector. The Danish model of democracy has also grown exponentially, and the population’s active participation in the process of democracy is strong — a prerequisite for a dynamic and progressive society. ·11·
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The result of the Danish welfare model is a society where the gap between rich and poor is among the narrowest in the world although the gap has been widened like the rest of OECD the last three decades. The country is also among the richest in terms of per capita wealth of GDP. But there are many challenges to be faced in the future. Some of these are actively being met through modifications of the social welfare model; others are still being debated. The acute labor shortage is one of the biggest challenges to the welfare model, so dependent is it on skilled labor. At the same time, the number of dependent elderlies, disabled and uneducated people will increase. On top of that, Denmark, along with many other countries, faces climate challenges, global unrest and a lack of sufficient energy sources. But Denmark has an advanced production structure and export system that help provide it with a pleasant surplus on its balance sheet. Denmark produces and exports exactly what the world needs — food, medicine, medical devices, energy products (e.g., windmills) and shipping services — which has brought the country to the top in per capita income. Social Welfare — The Danish Model has been written for use at the many universities that teach or are beginning to teach courses in social welfare. But the book is not only intended for professors and students; politicians, civil servants or indeed anybody with an interest in social welfare — the “faring well” of a society and its citizens — may also find this book of value. I wish to thank several institutions; without their help this book could not have been written. First and foremost, I thank the San Cataldo · 12·
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retreat in Scala, Italy, and the Maison Danice in Nice, France, for their hospitality while I was writing this book. A special gratitude is directed to Copenhagen University, which encouraged me to teach “The Danish Welfare Model” and “Economics of Social Welfare,” courses for which this book was also written. In addition, I wish to thank Malene Leisten for her great work in providing and updating the statistics used throughout the book. Bjarne Hastrup, Copenhagen, 2023
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introduction
Social Welfare — The Danish Model is about Denmark. It covers both business and social welfare. And it pins down the critical interplay between Denmark’s economic results and its social welfare model that aims to improve the population’s living standards in order to support the country’s progress and competitive business advantage. Perhaps surprisingly, Denmark is far ahead of its European partners when it comes to reforming the social welfare state to better tackle the four big challenges that face all societies in the industrialized world today: 1) The demographic development toward an ageing population, which has already begun to put pressure on state finances; 2) The growing globalization that continues to add to the demands on businesses, trade and technology 3) A psychological shift toward stronger individualism, which challenges the social welfare state’s roster of standardized solutions and 4) a tremendous lack of labor in all business and special in public service. Simultaneously, for Denmark, falling behind in productivity as compared to other nations is a serious threat. In the last few years, too, Denmark, like the rest of the world, has had to deal with the economic and health fallouts of the damaging coronavirus pandemic. During the last twenty years of the 20th century, the Danish economy was in deep trouble. In the beginning of the 21st century, however, that situation changed drastically. The participation rate in the workforce rose steadily between 2000 and 2009 and the number of people in the labor market in 2022 rose to more than three million. Since the Dan·14·
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ish employment model has a great degree of flexibility, there was also a fairly sufficient safety net in place for those who found themselves unemployed. The Organization for Economic Cooperation and Development (OECD) praised the economy as “exemplary.” So did the International Monetary Fund (IMF), the European Union (EU) and the United Nations (UN), and for a while Denmark was the darling of world economists. However, Denmark was hit hard by the economic crisis and financial panic of 2008–2009 and only after five years did the country regain a solid financial footing. At the beginning of 2022, the Danish economy was booming, with full employment, significant export surpluses, high per capita income and a future-proof welfare program established through comprehensive reforms carried out in 2006 and 2011. The country was therefore well equipped to handle the unpredictable coronavirus pandemic without it undermining the Danish welfare foundation. At the same time, Danish production and exports were adjusted to meet the needs most in demand from the people of today: food, energy, medical products, robot technology and maritime transport. The country also became one of the most comprehensively digitized societies in the world. The large European nations, in particular Germany and France, wanted to transfer the Danish “flexicurity” employment model to their own countries. The Danish social welfare model was studied by countries around the world, including developing countries, as an alternative to largely unregulated capitalism, which around 2008 clearly showed that · 15·
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it could create, but apparently not prevent, a global financial crisis. At that time, disaster spread from the unhealthy parts of the U.S. financial world to the European financial markets, including Denmark, with shockingly strong affect, and the free-market forces did not have sufficient resources to rise above the crisis on their own. The Danish social welfare model showed its strength in many ways by continuing to provide a surplus in the balance of payments and internal demand was supported by the model’s inherent “crisis-softening” feature — i.e., the automatic stabilizing transfer of state funding to make up for lost citizen income. But weaknesses in the model also became very apparent, and it was not possible to sustain full employment during the crisis. The Danish economy had become fatally dependent on the international economy. Public finances began to show significant signs of failing and they drained at a faster rate than would have been expected from a strong economy. The balance sheet went from a surplus of DKK 60 billion in 2007 to a deficit of DKK 95 billion in 2010, a reduction of 7-8% measured to the gross domestic product (GDP). This clearly showed that at a full level of employment, the Danish economy can maintain a strong balance sheet, but it is not able to sustain this stability if there is any significant blow to the international economy. Before the pandemic began in Denmark in 2020, the Danish welfare system stood strong globally. Subsequently, Denmark and other welfare nations, such as the Nordic countries, fared much better through the early period of the crisis and the following recovery than did other highly liberal or cooperative economies in North America and Europe. With a population nearing six million (5.9 million, as · 16·