A Danish welfare miracle? Policies and outcomes in the 1990s.

Danish welfare in the 1990s had a bad start, but a happy end, at least compared with the situation in Sweden and Finland (1, 2). In the early 1990s Denmark still suffered from its economic crisis of the 1980s. Unemployment was high and budget and trade deficits large. From 1994 and onwards the situation improved markedly. Trade surpluses were followed by budget surpluses. And the problem of unemployment gradually made a U-turn so that lack of labour is now perhaps the most pertinent challenge on the political agenda. The favourable economic climate was partly facilitating and partly the result of fundamental changes to Danish welfare policies that underwent a silent revolution in at least four respects. First, the scope of services for children and the elderly was extended quite significantly, although partly at the cost of the quality of these services. Second, the social security system was changed in a twofold manner. More supplementary coverage through collective agreements was introduced in case of, especially, disability and old age. Increased activation also characterized the transformation of the social security system, perhaps most notably in unemployment insurance and social assistance but also in sickness benefit and disability pensions. Third, decentralization marked the decade: the expansion of social services took place at the level of municipalities and increased activation efforts were to a large extent planned and implemented on the regional local level in collaboration between most notably the municipalities, the labour market exchange and the social partners. Fourth, these reforms reflect higher political ambitions, with a greater emphasis on securing everybody a place in society. In Danish political life this has become nearly synonymous with a place in the labour market, whilst providing a decent standard of living for those who are unable to work. However, not everybody found a place in the labour market despite these welfare reforms and despite the positive economic climate. Around 26% or some 900,000 persons of working age (15 – 64) received social security benefits at any one time. As in Finland and Sweden, Danish developments were to a large extent driven by economic considerations. But the policy goals and changes differed. When Finland and Sweden were cutting benefits to ease public budgets, Denmark expanded her policies to get as many people as possible into work, first to fight unemployment and in more recent years to meet the rising demand for labour.