- The Washington Times - Sunday, September 17, 2006

Denmark is struggling to maintain its cradle-to-grave social welfare system by adapting a series of reforms in an attempt to cope with job losses caused by globalization.

“A welfare state comes with a price, mainly the price of reform,” said Claus Hjort Frederiksen, Denmark’s Minister for Employment, in an address on the future of the welfare state and globalization at the Center for Strategic and International Studies in Washington.

To maintain Denmark’s competitiveness in an era of globalization without jeopardizing social services — which include universal health care, lengthy vacations and child care — the Danish Parliament adopted radical reforms in October last year.

“Our ambition is to stay in the first division, but at the same time, we wish … the workers who are not well-equipped for the challenges of globalization are not left behind,” Mr. Frederiksen told the gathering on Tuesday.

For the past 10 years, globalization has caused the loss of 250,000 jobs each year in Denmark, mainly because of the outsourcing of production from domestic companies to factories in India and China, he said.

In addition to thousands of unemployed workers requiring government welfare assistance, state coffers lost millions of dollars in tax revenues, making it all but impossible to pay for the services Danish citizens require.

As part of the European Union’s Lisbon strategy on growth and jobs, this National Reform Program combines labor flexibility with social security, said Mr. Frederiksen, coining the term “flexicurity.”

He said that in other European nations, flexibility combined with social services has failed.

“In Germany and France, workers are protected by strong central-government agreements and generous social benefits. But the price for the high levels of social security is a low degree of flexibility and high rates of unemployment,” he said.

He said Denmark’s reform was achieved by increasing the labor force, raising the level of training and education, and by focusing on research and innovation. Mr. Frederiksen said this creates new jobs in fields such as the pharmaceutical industry and computer technology.

Unlike the United States, Mr. Frederiksen said, Denmark thinks that the longevity of the welfare state needs involvement from the government.

He said Denmark made “tough political decisions,” such as raising the retirement age — “one of the most unpopular things that politicians can do.” But the reforms were backed by 168 of the 179 members of the Danish Parliament.

He said that despite paying more than 50 percent of their wages to the government in taxes, Danes are the “happiest people on earth.”

With those taxes, the reform allows the Danish government to afford huge investments in education, training and research.

“The Danish reform is a very interesting example for other European countries,” said Mr. Frederiksen. “With welfare reform, Denmark will maintain a strong, competitive power without ruining social cohesion.”



Click to Read More

Click to Hide