Germany began reforms nearly 15 years ago, and it is doing well. There are many other variables, and Germany is not America — or even Canada — but it is shifting towards a more flexible labor market and less "generous" social programs. Now, it seems Denmark is following the German lead. That's a big shift in thought, and one driven by the stark realization that the social safety-net is unsustainable.
Consider this article from the New York Times:
Danes Rethink a Welfare State Ample to a Fault
COPENHAGEN — It began as a stunt intended to prove that hardship and poverty still existed in this small, wealthy country, but it backfired badly. Visit a single mother of two on welfare, a liberal member of Parliament goaded a skeptical political opponent, see for yourself how hard it is.
It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym "Carina" in the news media, had more money to spend than many of the country's full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.Yes, a Danish "Welfare Queen" living on the work (and money) of others since she was a teenager. Think about how the above is worded: "getting about $2,700" is not the same as "earning" or "deserving" by any stretch. Getting implies nothing but being a drain on productive citizens too kind to say "No!" to the lazy.
And yes, I would call many people on lifetime handouts "lazy" — and I'm not alone, as the Times' article demonstrates. Even the Danes are starting to call people, accurately, lazy.
The warning sign is an inverted employment pool. Fewer people in Denmark work than receive government benefits. You don't need to be an economist to realize the math won't work. When you have more non-workers than workers, resentment is unavoidable, too.
Part of the problem is the natural graying of Europe, but that's only part of the problem. Why is Europe graying? Because young people see little reason to marry, have families, and look forward to the better future. Birthrates fall during recessions, for example, because (most) people realize financial security is important when you plan a family. The residents of many European nations have "given up" and are almost proud of their lack of engagement.
…Denmark's long-term outlook is troubling. The population is aging, and in many regions of the country people without jobs now outnumber those with them.Some in the United States point to Europe and suggest we should emulate the tax models of European nations. Higher taxes, including a VAT (value-added tax on all transactions), would allow us to offer similarly wonderful benefits. The problem is, European nations are dying (literally) as one side-effect of these higher taxes. And, the taxes in Europe are oddly circular. Yes, you pay high taxes, but you get a lot of the money right back in strange ways, minus administrative overhead. The result is lower productivity, along with some simply stupid benefits.
Some of that is a result of a depressed economy. But many experts say a more basic problem is the proportion of Danes who are not participating in the work force at all — be they dawdling university students, young pensioners or welfare recipients like Carina who lean on hefty government support.
Denmark has among the highest marginal income-tax rates in the world, with the top bracket of 56.5 percent kicking in on incomes of more than about $80,000. But in exchange, the Danes get a cradle-to-grave safety net that includes free health care, a free university education and hefty payouts to even the richest citizens.Do the elderly have a "right" to maids? Does every child deserve daycare and more? People need to start understanding that "rights" cannot require other people providing services. For example, what if nobody wanted to be a maid? Would the government start conscripting maids? When you abandon the free market in favor of supposed "positive rights" to anything and everything that sounds wonderful, you end up with a dysfunctional economy.
Parents in all income brackets, for instance, 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.
But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits.
Because the government pays so many benefits, "Carina" is happy to collect welfare. If the welfare were to end, thousands of Carinas might be willing to work as affordable maids. Instead, the Danish system is paying more than the going rate for maids and it is paying people to not work. Time to yank a bit of the safety-net out from under people.
No, I'm not suggesting some people don't need help. But, do the wealthy need taxpayer support for maids? Do rich families need the same childcare benefits as the working poor? No. I've long argued for means-testing of benefits in the United States, and I would apply that same belief in means-testing to Europe.
Denmark doesn't need to look far for better ideas. It might come as a shock to some readers, but Sweden has already successfully reduced government benefits and limited the expansion of other benefits.
Joachim B. Olsen, the skeptical politician from the Liberal Alliance party who visited Carina 16 months ago in her pleasant Copenhagen apartment, is particularly alarmed. He says Sweden, which is already considered generous, has far fewer citizens living on government benefits. If Denmark followed Sweden's example, it would have about 250,000 fewer people living on benefits of various sorts.Too many "liberal" (progressive) American politicians are unwilling to discuss the negatives, too. While their intentions might be good, the Democratic party has largely mistaken handouts for the hand-up they once claimed to support. What happened to personal responsibility? The president and others still talk about making good choices, but they are also quick to embrace all sorts of expansions of government aid.
"The welfare state here has spiraled out of control," Mr. Olsen said. "It has done a lot of good, but we have been unwilling to talk about the negative side. For a very long time it has been taboo to talk about the Carinas."
Where are we headed? I hope we never reach the point at which Denmark now finds itself.
Carina was not the only welfare recipient to fuel the sense that Denmark's system has somehow gotten out of kilter. Robert Nielsen, 45, made headlines last September when he was interviewed on television, admitting that he had basically been on welfare since 2001."Why work?" I've had people on disability ask me that. I've had someone who belongs to three bowling leagues and participates in other city sports programs ask me why he should work, since he receives disability payments for social anxiety. Think about that. Social anxiety… so he bowls daily.
Mr. Nielsen said he was able-bodied but had no intention of taking a demeaning job, like working at a fast-food restaurant. He made do quite well on welfare, he said. He even owns his own co-op apartment.
Unlike Carina, who will no longer give interviews, Mr. Nielsen, called "Lazy Robert" by the news media, seems to be enjoying the attention. He says that he is greeted warmly on the street all the time. "Luckily, I am born and live in Denmark, where the government is willing to support my life," he said.
Some Danes say the existence of people like Carina and Mr. Nielsen comes as no surprise. Lene Malmberg, who lives in Odsherred and works part time as a secretary despite a serious brain injury that has affected her short-term memory, said the Carina story was not news to her. At one point, she said, before her accident when she worked full time, her sister was receiving benefits and getting more money than she was.
"The system is wrong somehow, I agree," she said. "I wanted to work. But she was a little bit: 'Why work?' "
I work with disabled students and realize many people who want to be independent will always need some support from fellow citizens. But, we need to recognize that generous benefits can have unintended consequences.
If you want a better social democracy to emulate, look northward, not across the Atlantic. U.S. politicians need to look to Europe as a warning, not for inspiration.