Transcript Critique of the National Reform Program of Denmark

Denmark’s National Reform
Programme
European Social Conference, Brussels
19th. and 20th. September 2011
Ole Meldgaard, EAPN Denmark
1- Objective of the Danish NRP
To identify key structural reforms with significant
macroeconomic effects to ensure sustainable
and growth promoting policies and reforms
which enable the consolidation of public
finances and support a higher level of growth
and employment
2 - Five headline targets of NRP (I)
Denmark shall:
• be among the 10 richest countries in the world
by 2020 measured in GDP pr. capita
• have a total labour supply among the 10 best
countries in the world
• be among the most innovative countries in the
world
2 - Five headline targets of NRP (II)
• ensure sustainable growth
• be among the three most energy efficient
countries in the world
3 - Targets for employment, education,
poverty and social inclusion (I)
• 80 per cent structural employment rate for the
age group 20 - 64
• Less than 10 per cent school drop out rates of
the population aged 18 – 24
3 - Targets for employment, education,
poverty and social inclusion (II)
• At least 40 per cent of the population aged
30 – 34 having completed tertiary or equivalent
education
• Reducing the number of people in households
with low work intensity
4 - Key challenges ahead for Danish
economy (I)
• To strengthen growth prospects by increased
labour supply and higher productivity growth and
competitiveness
• To strengthen public finances that has weakened
considerably in connection with the financial crisis.
A large government surpluses in 2008 (3.2 per cent
of GDP) have turned into a significant deficit
around 70 billion DKK (2.7 per cent of GDP)
because of fiscal loosening, Gross government
debt 44 per cent of GDP compared to 87 per cent
in the Euro-zone
4 - Key challenges ahead for Danish
economy (II)
• Weak productivity growth. Although employment
has increased, the growth in prosperity was
1999 – 2009 second lowest among OECD
countries widening the gap to the most
productive countries, partial explanations: many
with weak LM experiences entered the LM 1993
– 2008, weak innovative performances, weak
competition in service and construction
industries, lending difficulties for small and
medium-seized companies
4 - Key challenges ahead for Danish
economy (III)
• As a small open economy Denmark is sensitive
to interest rate changes and vulnerable to
financial turmoil
• Economic stability is dependent on international
confidence in the financial sector in Denmark
• To introduce a new spending management
system based on binding spending ceilings for
the central government, municipalities and
regions
4 - Key challenges ahead for Danish
economy (IV)
• Demographic pressures on employment and
public finances, the generations of retiring will be
larger than those entering the labour market,
labour supply is reduced by 65.000 fulltime
persons and 225.000 more on old age pension
by 2020 – answers: LM reforms, tax reforms,
retirement reform, faster studies (median age at
entry in higher education 22.1 years in Denmark
compared to 21.1 years in Norway and 19.8
years in the Netherlands)
• Without reforms: decreasing structural
employment and continuing low growth, around
1 per cent per year
5 - Scenarios for public finances
• No reforms to strengthen government revenue
and if real public consumption grows as in the
past 30 years: 2.5 per cent deficit of GDP in
2020 and 6.5 per cent in 2030.
• The annual increase in government
consumption is reduced by half compared to the
past 30 years: a public deficit of 1.25 per cent of
GDP in 2020 and 2.5 per cent in 2030
6 - 2020 goals on public finances
• To ensure structural balance on public finances
• To ensure fiscal sustainability and reduce the
risk of conflicting with the 3 per cent GDP limit of
EU Stability and Growth Pact
7 - Fiscal consolidation agreement in
Parliament
• 90 per cent of the fiscal expansion in 2009 and
2010 is pulled back.
• Stable public spending until 2013
• Labour market reforms to strengthen labour
supply
8 – Employment (I)
• From 1998 to 2008 employment frequency has
increased from 76.9 per cent to 79.9 per cent and dropping to 77.8 per cent in 2009 for 20 –
64 aged
• The percentage of men aged 15 – 29 has
increased from 74.1 in 1998 to 74.7 in 2008 and
dropping to 68.8 in 2009 – women 68.8 per cent
in 1998 to 70.9 per cent in 2008 and dropping to
68.5 in 2009
8 – Employment (II)
• For aged 55 – 59 the percentage of employed
men has increased from 75.6 in 1998 to 84.3 in
2008 and dropping to 82.6 in 2009 – for women
from 59.6 in 1998 to 74.5 in 2008 and 74.4 in
2009
• For aged 60 plus the percentage of men has
increased from 39.7 in 1998 to 45.8 in 2009, for
women from 21.1 to 27.3
• Unemployment and long term unemployment
are relative low and employment quite high
8 – Employment (III)
• Unemployment 3.3 per cent in 2008, 2010 7.4
per cent. 300.000 unemployed in 1996, to
100.000 in 2008, today 150.000 unemployed.
50.000 long term unemployed from 150.000 in
1996, almost no long term unemployed in 2008
• Wage costs increase faster than abroad
although productivity growth has not followed
• Wage competitiveness has deteriorated since
2000 compared in particular to Germany.
Manufacturing industry wage costs are higher
than in most OECD countries harming
competitiveness
8 – Employment (IV)
• Wage setting is agreed collectively between the
social partners on the labour market and at
company level
• However surplus on current account as a result
of improved terms of trade and oil and gas
production reducing net energy imports
• Labour supply is reduced by 66.000 people
towards 2020, the population grows by 150.000
people, from 2010 to 2020 225.000 more people
on old age pension
9 - Employment targets and
strategies(I)
• Strengthening of labour supply and employment
• Target - 80 per cent structural employment for
the age group 20 – 64 by 2020, now 76.1 per
cent
• Strategies – Reforms to strengthen incentives to
work and measures to integrating vulnerable
groups, including young people, elderly, ethnic
minorities (Danish language training, company
apprenticeships and employment subsidies) and
disabled persons
9 - Employment targets and
strategies(II)
• A fall in the average study period
• Ensuring the attachment to the labour market for
as many people as possible during the crisis
• Adjustment to the flexicurity model, increasing
flexibility and increasing assistance to people
under notice
9 - Employment targets and
strategies(III)
• Prolonging working life, more people must work
more and longer; employment rate for 60 – 64
years is 40 per cent
• Reform of old age pension system
10 - Labour market reforms (I)
• 2002 the level of social assistance is reduced
after 6 months for married couples, a general
ceiling for the amount of social assistance
• 2005 repeated activation every 6 months for
social assistance recipients with problems
besides unemployment – a spouse which has
not had a job within the last two years with a
minimum of 300 hours ordinary work loses
entitlement to social assistance
10 - Labour market reforms (II)
• 2006 Agreement to ensure that a higher life
expectancy postpones pension age – eligible
age for voluntary early retirement is gradually
increased from 60 to 62 years of age during the
period 2019 – 2022
• 2008 The right to incapacity benefits in
combination with work, improved opportunities
for pensioners to work, tax deduction for 64 olds
in employment
10 - Labour market reforms (III)
• 2009 Focus on bringing down absence due to
sickness
• 2009 Tax reform with lower marginal tax rates,
lowering the upper marginal income tax rate and
increasing the threshold for paying upper
marginal tax – postponed for 3 years
10 - Labour market reforms (IV)
• 2010 Action plan on long term unemployment,
education and improving of skills in reading,
writing and arithmetic, job specific requalification
• 2010 Unemployment benefit reform reducing the
benefit period from 4 years within the last 6
years to 2 years within the last 3 years
• 2010 Increased focus on enterprises based onthe-job training with higher state reimbursement
rate (50 per cent) compared to other guidance
and qualification upgrading (30 per cent), a
common ceiling on operating expenses for self
chosen education
10 - Labour market reforms (V)
• 2010 Encouraging young people to finish studies
faster
• 2010 Disability pension reform, people under the
age of 40 shall not be eligible for disability
pension, instead support to with a view to their
further development, support to finding a job
• 2011 Agreement on advancing part of the 2006
reform raising early retirement age from 2014
and public pension age from 2019, voluntary
early retirement scheme is abolished totally for
people under 45 years in 2010, transition
arrangements for 45 plus years
11 - Education targets (I)
• Reduce the school dropout rate to 10 per cent
for 18 -24 year olds
• Increase the percentage of 30 – 34 year olds
having completed a tertiary education to at least
40 per cent
• By 2015 at least 95 per cent of all young people
have completed an upper secondary education
and at least 50 per cent have completed a
higher education
11 - Education targets (II)
• Targets for the primary and lower secondary
school system: 1) All children must be able to
read by the end of 2nd. Grade, 2) What 9th. grade
pupils can to today, they must be able to do in
8th. grade tomorrow, 3) Fewer pupils in special
needs education, 4) Recruitment of teachers
among the best students, 5) Introduction based
on scientific knowledge, not habit, 6) Pupils,
parents and school board must, to a larger
extent, contribute to the Folkeskole’s
development, 7) Clear objectives and
transparency with regard to results to minimise
the need for controlling in detail
12 - Target for social inclusion (I)
• Aiming at maintaining the position in Europe with
the lowest income inequality and which are best
at creating equal opportunities for everyone in
year 2020
• A firm affiliation to the labour market is the best
safeguard against poverty and social exclusion
• Target: Reducing the number of people in
households with low work intensity by 22.000
towards 2020
12 - Target for social inclusion (II)
• 2008 app 347.000 Danes lived in households
with low work intensity, 60 per cent of these are
students, recipients of anticipatory pension or
children – 8.5 per cent of households of people
aged 0 – 59, not students
• Strategies to reach the target: the welfare and
employment system: guidance and qualification,
on-the-job training and employment with
subsidies, training places for young people, to
ensure a greater number of residents in Ghetto
areas finds employment, initiatives towards
young single mothers
12 - Target for social inclusion (III)
• 2.5 pages in the NRP; half page in the
Commissions report
• No mentioning of poverty
• No mention of child poverty and other subobjectives
13 - Poverty in Denmark (I)
• At-risk-of-poverty (13.1 per cent) or exclusion
rate 17.4 per cent (Eu 23.1 per cent) of total
population (60per cent of median income)
• Immigrants and descendants 41.3 per cent
• Materiel deprivation 2.3 per cent
13 - Poverty in Denmark (II)
• In-work-poverty 5.9 per cent of persons
employed
• Risk-of-poverty for children 13.9 per cent
• Risk-of-poverty for elderly 20 per cent
13 - Poverty in Denmark (III)
• 234.000 poor people in Denmark (50 percent of
median income), increased by 55 per cent since
2002
• Long-term poor (3 year and more) has increased
by 62 per cent since 2002
13 - Poverty in Denmark (IV)
• Long-term poor children increased by 65 per
cent since 2002, 14.600 children
• In ghettoes in the big cities 20 – 25 per cent are
poor (ghettoes characterised by immigrants,
unemployment), number of poor in ghettoes
increased by 60 – 80 per cent since 2002
14 – Participation (I)
• A contact committee is set up with members of
ministries and organisations, including
organisations representing social dimension
• No participation from civil society, poverty
organisations or social partners in drafting the
NRP
14 – Participation (II)
• Ministerial process only
• No local collaboration
• Two days to respond on the NRP
• No public debate about NRP
15 - Reaction of the EU,
recommendations (I)
• Implement fiscal consolidation measures in
2011, 2012 and 2013
• Strengthen expenditure control with spending
ceiling for local, regional and central
government
15 - Reaction of the EU,
recommendations (II)
• Phase out the early retirement pension scheme
• No recommendation on poverty and exclusion