In 2015, a convincing American economics paper came to a "hard-nosed conclusion that boils down to the fact that cuts in welfare payments led to a jobs boom, says 'The Economist'. The idea that "lavish welfare benefits discourage work" is commonly accepted. So why munificent?
Denmark has one of the best-functioning labour markets. Danes get more than 80% of previous earnings after six months out of work, Sometimes nearly 100%. Such generosity is the "flip side of its liberal regulation of employment contracts", which allow employers pretty much to "hire and fire" as they please. Yet the Danes are not "feckless drifters".
The unemployment rate is below the rich world average; its employment rate is higher. Danes find new jobs faster than almost anyone in the world. In terms of looking for work and improving employability, the requirements for benefits are however onerous.
Denmark spends the most of any OECD country as a percentage of GDP and more than four times the average on policies to make citizens more employable. The lesson learnt? Those huge investments in training, monitoring and enforcement are required so that generous benefits don't dissuade people from teamwork. "The world's best welfare system does not come cheap."
Source: The Economist
