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Danish unemployment benefit reform around the corner

| Text: Marie Preisler

Denmark's more than century old unemployment benefit system is being modernised. Considering the reactions to the proposal for a more flexible system from the commission on unemployment benefits, political negotiations will be tough.

There will be changes to unemployed people’s access to unemployment benefits, giving them a greater incentive to accept short term jobs. And for three days every year there will be no access to benefits at all.

These and a range of other proposals for how to reform Denmark’s unemployment benefit system were presented to the Danish government by the commission on unemployment benefits on Monday 19 October 2015. The government is expected to begin political negotiations within days to agree on an unemployment benefit reform based on the commission’s work. 

Considering the reactions from political parties and the social partners to the commission’s proposals, the negotiations will be anything but easy. The commission was established by the former government, and has consisted of leading experts and representatives from the social partners. For a full year they have worked towards presenting joint proposals for a more flexible unemployment benefit system.

The commission members agree on nearly all points, and the proposals are therefore expected to be taken very seriously when the Danish parliament soon starts negotiating a political agreement. Yet the commission on unemployment benefits disagreed on one central point; the proposal to introduce eight days a year when no benefits are paid out at all. That was too much for the commission’s two trade union representatives. They presented a minority statement recommending three days. 

A few years ago only a few thousand Danes each year experienced running out of unemployment benefits. In 2013 the number suddenly rose to more than 30,000. Source: The commission on unemployment benefits

A few years ago only a few thousand Danes each year experienced running out of unemployment benefits. In 2013 the number suddenly rose to more than 30,000. Source: The commission on unemployment benefits

No benefit days are also expected to be one of the major obstacles during the coming negotiations. Some within the trade union movement and in the opposition Socialist People’s Party (SF) feel even three such days are three too many. SF has even signalled that the party believes this to be a broken promise if the Social Democrats and the government coalition member the Liberal Party (Venstre) enter an agreement on no benefit days. During the election campaign the two parties’ leaders publicly shook hands promising not to make cuts to unemployment benefits.  

Whether no benefit days is the same as cuts to unemployment benefits is up for discussion, and that debate is already well underway. When presenting the commission’s proposals, the commission chair, economist Nina Smith, called no benefit days “a kind of benefit cut”, while the Minister for Employment, Jørn Neergaard Larsen from the Liberal Party, denies that no benefit days equal a cut to unemployment benefits. The group chairman for the Social Democrats, Henrik Sass Larsen, shares that point of view. He praises the commission’s report in principle, but says three days of no benefits is “more palatable” than eight.

There is also disagreement on how to finance the new unemployment benefit system. The Red-Green Alliance, SF, the Alternative, the Social Democrats and the Danish People’s Party would agree to an increase in funding, while neither the Liberal-led government coalition, the Conservatives, the Liberal Alliance nor the Danish Social-Liberal Party want to increase spending on unemployment benefits. 

The unemployment benefit system was adjusted as late as in 2013, when the maximum period anyone could receive the benefit was halved, from four to two years — to great protest. At the same time the number of months you needed to work in order to regain the right to claim unemployment benefits were increased from six to 12.

The commission on unemployment benefits

Dagpenge report

Established to propose a system which would see fewer unemployed people using their right to unemployment benefits, without impacting on employment rates or public finances.

Main elements:

  • Maintain the existing demand for one year of employment in order to qualify for full unemployment benefit, but proposing to introduce a flexible qualification which would mean even just a few months of work could extend the benefit period. This should increase the incentive for accepting a job — including short term ones.
  • A new calculation of the benefit level, based on hours not weeks.
  • No benefit days, during which you would not receive unemployment benefits.
  • Maintaining a two year unemployment benefit period.
  • The commission was made up of four representatives from the social partners and five experts.
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