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The Danish welfare state and why it is hard to copy

The support for the Danish welfare state and welfare system has always been strong in Denmark. One important reason is the high level of trust within the Danish society - another important reason goes way back in history.

Around the world, people are curious about the Danish welfare state and welfare system. For many years Denmark has ranked as one of the happiest countries in the world due to its high minimum wage, high quality of life, and good work-life balance. Recently,  Denmark also ranked as the best country in the world in which to raise children and be a woman. Additionally, high social trust, little crime, and strong gender equality are some of the outcomes of the welfare system that push the country into its top rankings. 

But why does the welfare system seem to work so well in Denmark? In order to answer that question, we first need to look at how the Danish welfare system differs from welfare systems in other countries.

Equal access for everyone 

In Denmark, the welfare state is characterised by an extensive social security system and a high degree of income equality. All Danish citizens have equal access to education and health care regardless of their social and financial background. Similarly, every citizen is entitled to a limited compensation for loss of income due to unemployment, disability, or illness – just to name a few of the public services that the welfare system provides.

The guiding principle in this so-called 'universal welfare model' is that all citizens have the right to certain fundamental welfare benefits and services based alone on them being 'citizens'. This stands in opposition to e.g. 'the residual welfare model' where each individual must be self-reliant and where the state provides a minimum of welfare services only for the poorest as is the case in the United Kingdom or the United States of America.

The Danish model also differs from 'the selective welfare model' where free access to welfare services are considered a right but only to those who have a connection to the labour market - either by having a job themselves or via the job of their partner or parents. Welfare under this model is considered a responsibility shared between the state, the employer and the employee who jointly finance compulsory welfare insurances as is the case in France and Germany.

The fact that the Danish state provides and distributes benefits and services, and takes primary responsibility for the social welfare of all citizens, is a main reason why the Danish model is considered so unique. However, it is a general misconception that the Danish welfare model is based on a socialist or communist ideology presupposing a planned economy - on the contrary.  The Danish welfare model is built to facilitate the capitalist market economy in which the Danish society is an integrated part.

Tax-funded benefits and services in Denmark

  • Paid parental leave and child benefits
  • Subsidized daycare centers
  • Primary school, high school, vocational high school, business school as well as further- and higher education
  • Student grants during youth-, further- and higher education
  • Healthcare - general practitioners, hospitals and specialty care
  • Psychological care for youth age 18-24
  • Unemployment-, disability- and sickness benefits
  • Housing allowance (rented housing)
  • Early retirement for persons with disabilities
  • State retirement pension (67+)
  • Elderly care
  • Public libraries
  • Subsidised public transportation
  • Subsidised cultural activities and sports/social clubs
  • Roads and highways without tolls
  • Police, courts and national defense

Happy tax-payers and broad public support

It is common to hear Danes - and foreigners alike - say that education and health care in Denmark is 'free'. However, this is a truth with some modification. 

The Danish welfare system might be 'free of user charge' for e.g. public schools and doctors appointments meaning that free access is provided at the point of entry, but the welfare system in its totality is financed by way of progressiv taxation. This means that citizens and private companies with higher incomes pay higher taxes, and citizens and private companies with lower incomes pay lower taxes, and that these taxes are used to finance the extensive healthcare- and education services.

In this way, the welfare system equalises the economical differences between citizens by ensuring all citizens - regardless of their financial means - free and equal access to fundamental welfare benefits and services. However, reducing inequalities is not the main purpose of the Danish welfare model - it is a mere bi-product - which also in part explains why Denmark is not a class-less society.

The welfare system does indeed benefit each individual citizen but the main purpose of the Danish welfare model is to ensure healthcare and education for all citizens in order to provide high quality human capital/first class employees of great benefit to the taxpaying companies and hence to the Danish economy. 

Currently, the average Danish citizen pays a total of 46 per cent of their income in taxes. But although Danes have the fifth highest tax burden in the world, 88 per cent of the Danes are happy to pay their taxes (Gallup Institute Survey).

“Danes are in general very positive about the welfare system, because everybody benefits from it. If you have children in a public daycare center, you know very well that you only pay a third of the real cost. And in case you get sick or have to give birth, you also know that it is free of user charge to go to the hospital. The system works because everybody feels they get reliable public services of acceptable standards in return from what they pay in tax”, Peter Abrahamson says, professor in sociology at Copenhagen University.

“Even among the wealthy part of the population, there is a general consensus that the Danish welfare system makes Denmark a good place to live”, Peter Abrahamson explains. A high degree of government accountability, and hence of trust in government institutions and public services, is therefore one main explanations of the high level of popular support to the welfare system in Denmark. In other words, the link between paying taxes and what each citizen and company gets in return is very visible and tangible in Denmark compared to other countries where this link might be less obvious.

But to fully understand why Denmark has succeeded in becoming a welfare state, we must look back in history a few hundred years.

Did you know

The average Dane pays a total of 46 per cent in income taxes - and 88 per cent of the Danes are happy to pay their taxes.

Lazy nobility and anti-corruption

In 1660, Denmark was at war with Sweden and had lost several large provinces to the neighboring enemy. On top of this tragedy, the Danish state treasury was almost empty, and the Danish king at the time, Frederik III, understood that if Denmark was to win back what had been lost, he needed more money to finance a stronger army and a larger navy.

In order to overcome this financial obstacle, however, the king had to face and solve the fact that state funds were low because all powerful and public posts were held by the nobility, who were both lazy and corrupt. This meant that majority of the taxes collected amongst the common Danes ended up in the pockets of the aristocracy and not in the state’s coffers.

King Frederik III hence took a bold decision to reform the national administrative system by replacing the corrupt noblemen with skilled civil servants. This decision eventually meant that the administrators of the Danish state affairs were no longer selected based on titles and lineage, but on education and qualifications relevant to the tasks to be fulfilled. In other words, the initial steps taken to fight national corruption and embezzlement also created the first stepping stones for the Danish tax- and welfare system, as it exists today.

Denmark and its high level of trust

Together with the introduction of the civil servant reforms, harsh punishments for corruption were also introduced, successfully stamping out corruption long before the rest of the world. Today, Denmark continues to be among the least corrupt countries at global level which - in addition - partly explains why Danes have such a high degree of trust, not only in each other, but in the justice system and other government institutions.

“The rule of law means that citizens trust that their tax money is invested well, that they can do business together, and that the institutions serve in the interests of the people in a predictable and trustworthy way,” Gert Tinggaard Svendsen explains, professor in political science at Aarhus University.

Elements significant to the Danish welfare state

  • Subsidized childcare from a very early age facilitating equal integration of women and men into the labour force.
  • Broad-based and union driven work negotiations leveling salaries.
  • Flexicurity labour market model: Easy to hire/fire, state funded unemployment benefits and active labour market policies.
  • Stated funded training and skills upgrading of unemployed and people at the margin of the labour market.

Cooperative movements and a flat social hierarchy

In the 1850s, yet another pivotal development took place with regard to the welfare state. A development strongly inspired by the contemporary and influential Danish priest, poet, philosopher, historian and politician, Nikolai Frederik Severin Grundtvig.

At the time, agricultural labourers were the lowest of the low in the social hierarchy of Denmark. Based on strong believes in freedom and folksiness, Grundtvig wanted to improve the status and living conditions of the rural labour force through cooperative movements, expansion of education, and land reforms. He believed that if agricultural labourers owned their own land and became a respected part of society, they would have a greater desire to contribute to and defend Denmark as a nation.

Grundtvig’s ideas of educating the common Danes led to the establishment of the first 'folk high schools' in Denmark. Folk high schools were - and still are - non-formal residential schools offering learning opportunities to common people in almost any subject. With the folk high schools followed the establishment of cooperative movements, associations, and village halls. These community based institutions taught the Danes to cooperate across social boundaries and helped pave the way for present and flat social hierarchy in Denmark.

Sports clubs and social cohesion

Today, the tradition of being able to discuss important issues and come together across social and economic boundaries is an integrated part of daily life in Denmark. Associations and sports clubs runned by volunteers are still scattered all over the country. Children of different social backgrounds go to the same public schools, and youngster and adults alike play football and badminton together in their sparetime without attaching great importance to each other's social or professional backgrounds.

These common points of contact are still important reasons for the social cohesion of the Danish society as well as examples of the core values underlying the Danish welfare state and -system: Humanity, equality, trust, justice, democracy, solidarity, and freedom.

Another important explanation for the success of the Danish welfare state is that Denmark has a very homogeneous population. Not just socially, but also ethnically and religiously, creating and facilitating a sense of affinity and willingness to contribute to 'the common good'. This homogeneity and feeling of affinity might be the main reasons why the Danish welfare state is hard to copy.

Nevertheless, the Danish population is not as homogeneous as it used to be, as globalisation and immigration has implied changes in the societal fabric during recent years. Tangible signs of recent societal changes influencing the welfare system are the introduction of e.g. private health- and -unemployment insurances. These private services were rarely heard of in Denmark just decades ago but is now something an ever-growing share of the population make use of.

“These type of insurances are signs of a growing inequality. More Danes are becoming wealthier and as a consequence have higher expectations to welfare services and access hereto, why they choose to take out a private insurance”, Peter Abrahamson notes.

In this light, the Danish welfare state and welfare system is getting challenged in various ways but the public support to the universal welfare model continues to be strong. Besides from - and perhaps even because of  - a robust welfare system that continues to scores high on security, equality and trust, Denmark can still boast about having one of the happiest populations in the world.

Did you know

Denmark has high public expenditures due to the welfare system and many people employed in the public sector. However, the level of public expenditures is still lower than e.g. France, Finland, and Belgium, when measuring public expenditure in relation to country GDP (gross national product).

Source: OECD