Welfare system in Denmark


Denmark follows a societal model in which the state assumes primary responsibility for the welfare of its citizens. This responsibility (in theory) is comprehensive as all aspects of welfare are considered to be universally applied to people living and working in Denmark since receiving the benefits of the welfare state is the citizens' basic right.

In this model, the state implements pension schemes, supports maternity and paternity leave, provides benefits for the unemployed and supports those living with disabilities. Countries with a generous welfare system such as Denmark impose income taxes up to 60% along with other social taxes. The VAT amounts to 25%. These taxes, however, are redistributed by the state to the needy such as the unemployed. This type of welfare system is usually referred to as the Nordic Model.

The Nordic Model


The Nordic Model is implemented in Norway, Sweden, Denmark, Iceland and Finland. The social democratic Nordic model advocates a highly developed and government-funded welfare system which provides generous unemployment benefits among other resources for the general public. The model differs from country to country; in Denmark a flexible system of the so-called easy firing and hiring is in place.

The equality of the Nordic model is achieved through higher taxation of the greatest earners of the nation. As a result of the policy, Sweden, Denmark and Norway have the lowest difference in income in the world. The Nordic model is generally more decentralized than the continental model focusing more on local governance.

Flexicurity - security and flexibility

Denmark has introduced a model that combines the hiring and firing approach with a very generous welfare system. Flexicurity is the simultaneous presence of both flexibility and security in the labour market. This model focuses on employment protection provided by the free-market with minimal regulation and flexible employment laws. In Denmark it is now easier to lose one's job but at the same time employers are more willing to hire new staff. The unemployed are provided through unemployment benefit schemes which include the availability of numerous training programs.

The unemployment benefits are combined with free educations programs, therefore, those unwilling to participate or accept suitable positions can find their benefits withdrawn, a significant element that the system relies greatly upon. However, outstanding welfare benefits mean high taxes, the Danish taxes are currently the highest in the world.

Job security - the Danish way

Danes are prone to voluntarily change jobs relatively often. In fact, about 250,000 Danish jobs are demolished annually but at the same time there are just as many created. The turnover rate is also high; 800,000 people change their jobs each year.

The high turnover in the job market can be closely related to the Danish Flexicurity Model. This type of approach developed a labour market model that appears to meet the challenges of globalisation. The Danish example shows that labour market flexibility and job security are not contradicting terms but in fact can go hand in hand. Companies can adapt to changes while employees retain a feeling of security. The Danish labour market is renowned for its flexibility. International surveys by the World Bank and OECD have for years ranked the Danish labour market as one of the most flexible in the world.

Job security is social security

In short, the level of employee-security in the Danish labour market is high. In addition to the system that comes into force at the event of people being hit by unemployment, the security aspect is highly linked to the ability of getting a new job should one lose or quit their old job.