A Successful Danish Social Model

How the bumblebee – with its tiny wings and bulky body – is capable of flying has been a mystery to physicists and mathematicians for years. However, that has not stopped the bumblebee. It just keeps on flying. In 2005, the American bioengineer Michael D. Dickinson proved what the bumblebee had known for a long time: It can fly – and there is a logical, physical explanation to it.

What the bumblebee is to physics and mathematics, the Scandinavian social model is to mainstream economic theory. A society with high taxes, high unemployment benefits, and a large public sector is not supposed to be very competitive. High taxes are supposed to reduce the incentive to work. A high level of benefits is supposed to reduce the motivation for the unemployed to take a job. Also, a large public sector, which is not as exposed to competition as the private labour market, is supposed to be an encumbrance to an effective economy. Nevertheless, the Scandinavian model has proved very competitive in the global economy – and, at the same time, capable of guaranteeing its citizens a high level of security and improved equal opportunities in life.

Denmark is among the wealthiest countries in the world and scores high in various rankings. According to the World Bank Doing Business-index, Denmark is the third-best country for doing business. According to the World Economic Forum, our competitiveness is the 10^th best out of 140 countries in the world. We rank number four on The Social Progress Index, which combines indicators of people's basic needs, foundation for well-being, and access to rights and education. Also, for many years – together with the other Nordic countries – Denmark has ranked at the top in The World Happiness Report, which measures happiness among the world's nations based on a set of variables. In the latest report from 2019, Denmark comes in second on the "happiness barometer," only surpassed by Finland.

Compared to many other countries, Denmark is a great country to live and work in. In Denmark, you are not forced out of your home if you lose your job. You have the opportunity to follow your dreams, even if you were not born with a silver spoon in your mouth. As outlined in the Sustainable Development Goals, our country is fundamentally designed not to leave anyone behind. Denmark is one of the countries which has the lowest unemployment rate, and only a few are unemployed for a long period. And finally, in Denmark poverty is low, and progressive taxes and a well-established welfare state are designed to ensure a good and safe life for the entire population – including those who might have grown up in less advantaged neighbourhoods, often maybe with a negative balance on the bank account at the end of the month.

All in all, Denmark, the bumblebee, is flying high. Despite high taxes, high unemployment benefits, and a large public sector, Denmark is – together with our Nordic neighbours – among the best-performing countries in the world when looking at both economic and business indicators as well as various social and welfare parameters.

We must have done something right in the way that we have designed our society and labour market in Denmark and the Nordic countries. In this publication, we zoom in on the essential pillars of the Danish welfare and labour market model. We take a closer look at the elements that are essential to the Danish success – and what we, as a country, need to hold on to and invest in.

Even though things are going quite well for Denmark, our country is not without its challenges. Even when it comes to the most fundamental elements of the Danish welfare and labour market model, cracks are starting to show in its foundations. Big holes in the safety net in the labour market are starting to occur; we save billions on what we need to live off in the future, namely education; we have a tax system moving in a less progressive direction, and a welfare state pressured by cost-cutting and an increase in citizens who are in need of care. Consequences are starting to show in the form of less flexibility in the labour market; an influx of private offerings – within healthcare, education, and private insurance; a rise in inequality and poverty and reduced social mobility for children growing up with a plastic spoon, and not a silver spoon, in their mouths.

There are cracks in the social model that we need to beware of and act on. At least, if we want to sustain and expand the social model, which, until now, has greatly profited the Danish people, as well as the Danish economy and Danish businesses.