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Balancing inclusiveness, work incentives and sustainability in Denmark

Author

Listed:
  • Caroline Klein

    (OECD)

  • Louise Aggerstrøm Hansen

    (OECD)

Abstract

The generous Danish welfare state relies on a high degree of labour force participation both for financing and in order to ensure social cohesion. This underlines the need for getting work incentives right and improve the employability of vulnerable groups of workers, in particular migrants. Many benefit recipients also face high marginal tax rates for returning to work, creating a barrier for inclusion. Likewise, as the population ages, the need for longer working lives becomes a central aim. In Denmark, much has been done to keep older workers in the labour market, but there is further scope for reducing barriers to work for this group, including through the design of the pension system. Cost pressures at social institutions could be addressed by better reaping the effects on municipal reform, more coordination between different service providers, and open the market for social services, for instance old age care, for private suppliers under a strict quality monitoring framework. Concilier inclusion, incitations au travail et soutenabilité au Danemark Le système danois de protection sociale, généreux, repose sur des taux d’activité élevés, que ce soit pour son financement ou pour garantir la cohésion sociale. Aussi est-il d’autant plus nécessaire de trouver le bon système d’incitations au travail et d’améliorer l’employabilité des actifs les plus vulnérables, en particulier les migrants. Par ailleurs, de nombreux bénéficiaires de prestations sont imposés à des taux marginaux élevés lorsqu’ils retournent au travail, ce qui crée un obstacle à l’insertion. Dans le même ordre d’idée, avec le vieillissement de la population, la nécessité de prolonger la vie active constitue un objectif central. Beaucoup a été fait au Danemark pour maintenir les travailleurs seniors au travail, mais les barrières à l’emploi de ce groupe peuvent être encore réduites, notamment dans la conception même du système de retraite. Les contraintes financières des institutions de protection sociale pourraient être allégées en tirant un meilleur parti des effets de la réforme budgétaire sur les municipalités, en assurant une meilleure coordination entre les différents prestataires de services et en ouvrant le marché des services sociaux, notamment les soins aux personnes âgées, à des prestataires privés, moyennent un strict contrôle de la qualité des soins dispensés.

Suggested Citation

  • Caroline Klein & Louise Aggerstrøm Hansen, 2016. "Balancing inclusiveness, work incentives and sustainability in Denmark," OECD Economics Department Working Papers 1338, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1338-en
    DOI: 10.1787/5jln042kcjjg-en
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    Cited by:

    1. Chih-Mei Luo, 2020. "Answering economic inequality other than with populism and protectionism: the Danish formula of inclusive capitalism," Asia Europe Journal, Springer, vol. 18(1), pages 139-155, March.

    More about this item

    Keywords

    disability benefit reforms; immigration; labour markets; pensions; social assistance;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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