Welfare reforms target young benefit recipients

Proposed changes shift focus from lifelong benefits to rehabilitation

A vast welfare reform spearheaded by the political left is gaining broad support among such diverse interests as social workers, economists, mayors and leaders of the political far-right.

Socialdemokraterne (S) are behind the proposed reforms which aim to reduce the number of people under 40 on permanent welfare benefits and revolutionise the way the state assists people with mental and physical illnesses.


“We’re working to make it so that nobody under 40 will be given permanent disability status. Of course, there are exceptions,” the prime minister, Helle Thorning-Schmidt (S), said in her weekly press conference on Tuesday.


Some 245,000 people – approximately 9 percent of the potential work force – have permanent disability status (førtidspension), which means they have a full state pension for life. Of those, one in seven – or 33,500 – are younger than 40.


In a written plan laid out by the social minister, Karen Hækkerup (S), and the employment minister, Mette Frederiksen (S), on Tuesday, the government proposed to end lifelong disability benefits for people under 40, unless they are so physically or mentally compromised that it is “absolutely obvious that they will never be able to work”.


Instead, benefit recipients under 40 will have their cases assigned to multi-disciplinary “rehabilitation teams”, which will create individualised rehabilitation plans, that may include, among other things, psychological counselling, social skill training, education, job training, a mentorship and – initially – a state-subsidised job.


Rehabilitation periods will last up to five years and will be renewable. During the five-year periods, individuals will be allowed both to collect welfare benefits and work, if they can, in order to incentivise working.


A second part of the reform aims to re-engineer the part-time disability job programme (fleksjobordningen), under which an additional 53,000 Danes currently receive full-time salaries for part-time work, because they are considered too sick to work full-time, but not sick enough for permanent disability.


The state currently subsidises a set percentage of their full-time salaries, but there is no ceiling on how much the state will pay. As a consequence, critics note, the programme currently rewards high earners and their employers, while sticking taxpayers with half the bill for some individuals who earn 60,000 kroner per month for working 15 hours per week.


The reform calls for a five-year, renewable limit on a person’s part-time disability status and for the state’s contribution to taper off gradually as salaries rise and to stop completely when their salaries surpass around 35,000 kroner per month.


The government emphasised that people already in the programme would be unaffected by the reform.


Finally, the government is proposing to reduce welfare benefits to individuals on permanent disability who move out of the EU while continuing to collect welfare checks from Denmark.


Today, Denmark has the largest percentage of people in the EU on permanent disability benefits due to mental illnesses, including chronic stress, anxiety and depression.


Moreover, an estimated 20 percent of Denmark’s working age population, between the ages of 18 and 66, are on some form of welfare today – whether it be cash benefits, unemployment, early retirement, permanent disability or partial disability.


A research study from 2009, reported by Politiken newspaper, determined that with effective rehabilitation, one in five people on permanent disability would, in fact, be capable of holding down a normal, unsubsidised job.


With state welfare outlays for the permanent disability pensions alone topping 40 billion kroner in 2010, the savings from “rehabilitating” just 20 percent of the people under 40 in the programme are considerable.


Economists and local politicians said that without such reforms, more drastic and widespread cuts in welfare spending would be necessary.


“We need a new balance. If we don’t get more people off public benefits, we’ll be forced to fire thousands of people who do a great deal of work in our nurseries and schools and for our seniors,” Jan Trøjborg (S), the chairman of KL, the national association of local councils, told Jyllands-Posten newspaper.


Over the weekend, KL announced its own reform proposal, which largely mirrors the government’s. In addition to ending permanent disability for those under 40, and reducing the state subsidy for part-time disability jobs, KL challenged the government to end SU education stipends for master’s degree students, and instead offer them student loans, as Sweden and Norway do. The councils’ final recommendation was to peg welfare and pension rates to inflation, not to average salary increases, as is currently the case.


“Never before have I seen such a strong proposal from KL on the broader economic issues,” Torben M. Andersen, an economics professor at Aarhus University and the chairman of the government-appointed welfare reform commission, Velfærdskommissionen, told Jyllands-Posten. “They put their finger precisely on the central problems with the economy and indicated constructive suggestions for solutions.”


Also backing up the welfare reforms are business leaders from employers’ association Dansk Arbejdsgiversforening, lead economists from the government’s economic advisory panel, Det Økonomiske Råd, social workers’ union Socialrådgiverforening and the government-appointed labour reform commission Arbejdsmarkedskommissionen. Even the far-right opposition party Dansk Folkeparti announced that it was ready to support the left-of-centre government’s plan, thus securing the majority needed to pass the reforms.


The more centrist opposition parties Venstre and Konservative also indicated that they were positive about what they had seen of the government’s welfare reform proposal, but said they would need more details before giving it their support.