Denmark is certainly an outlier in terms of high levels of taxation and public spending, so it doesn’t surprise me that there’s some political momentum in favor of moving in the other direction. But Suzanne Daley’s coverage of this debate in the New York Times seems designed to leave you with the impression that the generous Danish welfare state is depressing employment levels. And perhaps it’s true that if Denmark cut benefits more people would work. But if you look at the World Bank’s numbers, it turns out that Denmark stands out for the high share of the population that’s employed.
As you can see above, both before and after the global economic downturn the share of the Danish population that works is substantially above the OECD average. The United States, which has one of the stingiest welfare states in the OECD is also above average in this regard. But Denmark exceeds even the United States in terms of the share of the population that’s working.
What is true is that the average employed Danish person works about 16 percent fewer hours than the average employed American person. Not coincidentally, GDP per capita in Denmark is about 16 percent lower than in the United States. The median Danish household consequently has less disposable income than the median American household, and in exchange it has more vacation and public services. Debating whether it makes sense to rebalance that tradeoff is healthy and appropriate. But this idea that Denmark is being somehow impoverished by a national outbreak of shiftlessness is totally unsupported. Denmark is a very prosperous and successful country that also has some levels of taxation that would be politically unthinkable in the United States—what amounts to a 200 percent sales tax on new cars, for example.