Denmark: A Welfare Society-Betsy

It has been a fantastic two weeks in Copenhagen! I want to use this post to give a quick overview of Danish culture because there are quite a few differences to highlight between Denmark and the United States. I’ll leave it to Carlyn to fill everyone in on what we have been up to in the next post.

It has been only twelve days since Carlyn and I arrived here, but I feel like I have already learned a lot about Danish culture. Overall, the Danish people are liberal and open-minded, and it seems that the primary goal of the government is the equality of its citizens. In many ways, I completely admire their forward-thinking nature. For example, the Danes are huge supporters of gay rights, and Denmark was one of the first countries to legalize same-sex partnerships in the 80s. Also, Denmark is a traditionally secular country. Only 20% of the Danes consider religion to be important in their lives, compared to 80% in the United States. Clearly, the United States as a whole leans much farther to the right on these issues.

 Another interesting topic to touch upon is gender norms in Denmark. In the United States, men and women do technically have the same rights under the law; however, one could argue that American culture does not necessarily treat the two genders as equal. For example, most would agree that women are just as capable as men, but women still expect men to hold doors open for them and pay for dinner. Sometimes it’s considered a tad strange if the man in the family is the stay-at-home dad. Is this really equal? In Denmark, men and women are equal politically and culturally. During one of the first days of orientation, a professor chatted with us about how to successfully befriend Danes. “Don’t expect anything but negative attention from Danes if you think that you are different because you are a woman,” she stated. In Denmark, everyone is treated equally and with respect. It does not matter if a woman chooses to pursue a career or if a man decides to stay home and care for the children. In my opinion, no country is necessarily is right or wrong on this issue, we simply have different sets of traditions. The important thing is that the law ensures equal rights.

 However, the aspect of Denmark that truly puzzles me is its status as a universal welfare state. The economist in me cannot fully comprehend that fact that this country can remain competitive. I’m going to attribute most of my initial shock to the fact that I grew up in the capitalist United States, but the tax rates in Denmark are still astounding. Total taxes in Denmark make up 48% of GDP, making it the highest percentage in the world. The United States falls around 24%. The highest marginal tax rate in the United States is between 35-37%, and in Denmark it is 63%. If this isn’t mind-blowing enough for you, take this fun fact into consideration. To pay the highest tax bracket in the United States, a person must make 12x the average income. In Denmark, YOU SIMPLY HAVE TO BE AVERAGE. That mean’s that the average joe on the street is giving up 63% of his income to the government. Even if you are in the lowest tax bracket in Denmark, you still give up one third of your income (around the same percentage as the highest marginal tax in the US).

 There are some obvious benefits to this type of system. Many people have heard the fact that the Danes are “the happiest people in the world.” A few studies, called the World Map of Happiness and the World Database of Happiness, have come to this conclusion. During my internship over the summer at Lockton Companies, I met a university student from Copenhagen who was spending the summer working at various companies around the states. I asked him why the Danes were so happy. His response: “Why would anyone be unhappy or stressed? Everything is taken care of. Education is free, healthcare is free, and there is little pressure to be ambitious.” I guess he kind of has a point. Denmark has some of the best healthcare and education systems in the world, so the Danes are happy, healthy, and well educated. The boutique owner I befriended the other day had similar things to say. He told me that Copenhagen was a nice place to live because he did not have to work too much or too little, just the right amount.

 I do see one extreme problem with this system: how can these high taxes incentivize any type of productive, entrepreneurial, and competitive behavior? The idea ingrained into the minds of American citizens is that we can work hard and climb the ladder. In Denmark, where you basically cannot climb at all, why would people every work hard? It’s a simple Laffer curve demonstration. There is an optimal tax percentage where government revenue is optimized. After a certain point, the incentive to work decreases. I’m going to take a wild guess and say that 63% is definitely past the optimal taxation point.  I took the opportunity to ask the Danish student his stance on the subject. What were his post-grad plans? Did he plan to stay in Denmark or move somewhere else? He told me that if you wanted to succeed in business, you do not live in Denmark. He described his vision of the United States as a land of opportunity where he could actually reap the benefits of his successful business ventures.  The American capitalist culture provided him with the incentive to be ambitious and productive. This Dane’s critical view of his welfare state is very rare I have come to find. Most Danes are very proud of it. Similarly, my international advertising professor owns a business in Denmark and described his decision to move his manufacturing plants and warehouses just across the border in Germany. The high wages and taxes in Denmark made it unprofitable to produce within the country’s borders.

  Overall, it is clear that these countries have completely different values. Neither one is right or wrong. I simply think that capitalism works for the United States, and the welfare state works for Denmark, but the differences are undeniably fascinating.