Its budget priorities need rethink: Finance Minister
The Straits Times, 31 Aug 2013
COPENHAGEN - Scandinavia's weakest economy can no longer afford the kinds of entitlements its citizens were raised on, according to Danish Finance Minister Bjarne Corydon.
"We live in a world of global competition for jobs," Mr Corydon, 40, said.
"For any finance minister wanting to be taken seriously, it's something to deal with. That requires a modernisation of the welfare state," he added.
His comments came as Denmark this week cut its economic forecast and predicted a widening budget deficit. With its economy contracting 0.2 per cent in the first half, Denmark will need to contain welfare spending or risk losing the respect of investors, Mr Corydon said.
Danes, who like Swedes and Norwegians, are used to generous jobless pay as well as state-financed education and health care, need to learn that those privileges come at a cost, he said.
"We could spend more if we were willing to pay the price," Mr Corydon said. "But the price would be to create distrust and uncertainty."
Denmark's challenge now is to ensure its welfare habits do not leave it unable to compete with populations that work harder at a lower cost, he said.
From 2000 to last year, average hours worked in Denmark fell 8 per cent, according to the Organisation for Economic Cooperation and Development.
Danes spent 1,431 hours working last year, 24 per cent less than the OECD average, the Paris- based group estimated, leaving the country's workforce less productive. Since 2000, Denmark's unit labour costs have risen 30 per cent, compared with an 11 per cent increase among its trade competitors, according to a OECD study last year.
Denmark's US$320 billion (S$408 billion) economy, which shrank 0.5 per cent last year, is trying to adjust to the fallout of a property boom that started early last decade.
While house prices have slumped about 20 per cent since a 2007 peak, wages have not dropped enough to restore competitiveness, the OECD said.
Though Danes with jobs earn more and work less on average than their rich-world peers, out-of-work Danes in some cases earn even more than those in low-skilled jobs. A report on Tuesday by the Economy Ministry showed that about 250,000 Danes have no economic incentive to give up their unemployment benefits and take a job. That compares with 2.64 million people in full- and part-time jobs, according to Statistics Denmark.
The nation was dragged into a debate on its jobless benefits last September after state broadcaster DR showed an interview with Mr Robert Nielsen - dubbed "Lazy Robert" - who said he was content on welfare and had no intention of taking a job that did not inspire him.
Mr Corydon rejected prophesies that there is no place for welfare in a globalised world in which Danes are competing with Asian nations for jobs, and said the country needs to get better at choosing which services to fund. "The modern welfare state needs to prioritise things in a new way and create the best possible conditions for people to get a job." "We need to prioritise some welfare services over others; we put education and health care first."
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