Saving Danish welfare from the phantom EU menace

EU workers provide a healthy surplus to the Danish economy, but the government still wants to limit how much welfare it pays them

The right to free movement is the glue that holds the EU together. Without it, there could be no single market with open trade across the 28 member states. The economic growth that resulted from the single market has increased standards of living across the continent, particularly in Eastern Europe and the Baltic region.

But the right to live, work, study and do business anywhere in the EU could also prove to be its undoing. Concerns that EU migrants suppress wages contributed to anti-EU sentiment in the UK and ultimately resulted in that country’s referendum decision to leave the union last June.

The idea that foreign EU nationals put pressure on the UK’s public services also concerned British voters. EU nationals are entitled to the public services available in the country in which they work and reside. This has lead to fears of “welfare tourism”, the idea that some EU citizens move to other EU countries simply to access more generous welfare.

READ MORE: Myth of EU “welfare tourists” dispelled in new report

Several EU states, including Denmark, have lobbied the European Commission for new regulations to help protect their welfare systems from abuse. In December, Marianne Thyssen, the employment and mobility commissioner, answered these concerns with several new rules.

“[The] free movement of people would not be possible without EU rules on coordination of social security. These rules guarantee that you and I don’t lose our health insurance coverage when traveling as a tourist or our pension and unemployment coverage when working in another Member State,” Thyssen said.

“So why did we come forward with this update? To sum it up in one word: it is about fairness. It will ensure that EU rules are fair, simpler to apply and easier to enforce.”

Ahead of her announcement, Danish employment minister Troels Lund Poulsen said there was an urgent need for reform.

“We are in a state of emergency,” Poulsen told Berlingske. “The question of how these regulations will be adjusted will have a fundamental impact on Denmark and our welfare state.”

Harder to get unemployment benefits
There are two central areas in which the Danish government wanted reform. The first is to stop EU citizens from claiming Danish unemployment benefits (dagpenge) from the moment they arrive in Denmark.

To qualify for dagpenge in Denmark, you must be employed and pay into an unemployment insurance fund (A-Kasse) for one year. Under current EU rules, however, you can transfer your qualifying hours and payments from one EU country to another. This means that you could technically move to Denmark and immediately claim dagpenge.

This would be the case, that is, if Denmark hadn’t already introduced a rule that requires new A-Kasse members to work 296 hours in a 12 week-period before they can transfer their qualifying hours and payments to Denmark. This rule was controversial, and there was speculation that it would be challenged in the European courts.

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The three-month quarantine is among Thyssen’s proposals, however, vindicating the government’s existing regulation. Without it, many more EU nationals living in Denmark would qualify for dagpenge. Of the 18 billion kroner spent on dagpenge in 2015, around 1.2 billion – or 6.7% percent – was spent on EU nationals.

Child benefits are the second issue that the government hopes to address, and it was here that Poulsen was most disappointed. His Liberal Party (Venstre) has long objected to EU workers in Denmark claiming child benefits when their children live in another country with a lower cost of living.

Instead, the government wants to see child benefits indexed according to the child’s country of residence – the cheaper the country, the lower the sum.

Thyssen rejected this proposal, writing that while she understood it was a sensitive issue for many countries, there were more compelling arguments against indexation. For a start, only one percent of child benefits in the EU are sent abroad, while setting up an indexation system would be enormously bureaucratic and prohibitively expensive.

“It is also difficult to argue why someone who is paying full contributions as a tax payer should not receive the same treatment in terms of benefits. Therefore the country where you pay your contributions will remain responsible for paying your child benefits, independently of where the child lives. If we want equal pay for equal work, then it is only consistent that you get equal benefits for equal contributions,” Thyssen said.

A matter of principle
There is good evidence to support her position. Firstly, EU workers in Denmark generated an average surplus of 21,205 kroner for the Danish state in 2015, according to a recent study by the Danish National Centre for Social Research (SFI).

Secondly, benefit payments for children living abroad are vanishingly small. According to the Ministry of Taxation, around 687,000 people received child benefits in 2013, amounting to 14.5 billion kroner. Of this amount, only 90 million kroner went to European citizens who work in Denmark but whose children live abroad – about 0.6 percent of the total.

READ MORE: To fight populism the EU has one option: reform or die

But to Poulsen, it’s not the size of the payments that matters, but the principle.

“It’s about what’s right and fair. It doesn’t make sense to wait to address it until it becomes a major economic problem. This is a major political problem. It wipes out support for the political project if you introduce models that undermine the ability of nation states to pursue their own policies,” he told Berlingske.

Benefits cause wage dumping
Poulsen also criticised Thyssen’s proposal to extend from three months to six the length of time an EU national can take their unemployment benefits abroad while looking for work.

While Thyssen argued that the policy would help EU nationals look for work abroad, Poulsen thought it was a step in the wrong direction. The Confederation of Danish Employers (DA) agrees.

“If you can’t find a job in another country after three months, then you simply haven’t been searching broadly or intensively enough,” wrote Christiane Mißlbeck-Winberg, DA’s Director of European and International Affairs.

The Danish Confederation of Trade Unions (LO) is also opposed to extending the period that workers can take their unemployment benefits abroad. LO chairman Lizette Risgaard argued that six months of Danish dagpenge is equivalent to an annual full-time salary in some European countries.

Just as LO, DA and the government all support the proposed three-month quarantine before being eligible for unemployment benefits, so too were they all disappointed by the lack of a child benefits index.

But while DA and the government were more worried about Danish public opinion, LO is concerned that the benefits could be used to suppress Danish wages.

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“High child benefits mean that foreign workers in Denmark ‘can afford’ to accept a lower salary in Denmark, as they are ‘compensated’ with very high child benefits,” she wrote.

Still, the government has reason to be concerned about public opinion. Despite the surplus EU workers provide, and the small share of child benefits that are sent abroad, increasing numbers of Danes are opposed to giving migrant workers the same access to benefits.

A 2014 survey by Ugebrevet A4 found that 58 percent of Danes thought negatively about allowing EU workers to get Danish benefits – in 2009 it was 42 percent. M


By Peter Stanners

Co-founder and Editor-in-chief. Occasional photographer.

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