Danes rethinking Welfare State

According to a recent NY Times article, the people of Denmark are rethinking their welfare state. In this most generous of welfare states, the common people are asking if work ethic is being undermined.

The article examines a welfare mother who has been receiving $2,700 a month for the last 20 years.

Some of the benefits of this system boggled my mind.

  • Free health care
  • Free university education
  • Students are entitled to six years of stipends, about $990 a month, to complete a five-year degree
  • Hefty payouts to even the richest citizens
  • Parents in all income brackets get quarterly checks from the government to help defray child-care costs
  • The elderly get free maid service if they need it, even if they are wealthy
  • Short work hours
  • Long vacations
  • Lengthy paid maternity leaves
  • A de facto minimum wage approaching $20 an hour
  • 9 percent of the potential work force have lifetime disability status

How do they pay for this? First of all there is a marginal tax rate of 56.8% on incomes greater than $80,000. Yikes! But the system is still not sustainable as the population ages.

The work force has far more older people to support. About 18 percent of Denmark’s population is over 65, compared with 13 percent in the United States.

Only 3 of Denmark’s 98 municipalities will have a majority of residents working in 2013. This is a significant reduction from 2009, when 59 municipalities could boast that a majority of residents had jobs.

This system has to change. Already there are signs of frugality creeping in: The unemployed used to be able to collect benefits for up to four years. Now it is two. Still a long way from the six months we get in the US.

Will this country, like many US states and municipalities, cut costs before they go broke?