My guess is that if there is any single quote which will define the legacy of the present Danish government, it will be Margrethe Vestager’s cool reaction to the fact that the cuts in the unemployment insurance would mean that a large number of unemployed would be forced out of the system having to rely on either support from their families or basic welfare:
Sådan er det jo
The Devil in the detail is the little “jo” which is almost impossible to translate but which gives the effects of the cuts an air of inevitability: It is nothing the politicians can do anything about, after all, so stop complaining. The Social Democrats have been suffering from the consequences ever since as the government has scrambled to find some kind of solution that would save the faces of the larger (but seemingly politically impotent) coalition partner and the trade unions. Today’s news that a larger number than expected will be forced out of the unemployment system does little to improve the chances of the Social Democrats (and the government) to reverse the trend of historically bad opinion polls.
There are more ways of looking at the problem.
First, unemployment comes in different forms: Friction unemployment, cyclic unemployment and structural unemployment. Unemployment insurance can be designed to cope with one or more of these forms and crudely put, the aim of the reforms (or cuts) of recent years has been to reduce unemployment insurance to a bare-bones cover for short-term friction unemployment, even if benefit levels are still more generous than in the Anglo-Saxon world.
Since the mid-1980s, structual unemployment has been the spectre of employment policy and nearly all cuts to the system has been motivated by the perceived need to reduce the level of the “natural rate” of unemployment. Another perspective which has had major political weight is the long-term effects of the demographic transition in the European countries on the supply of labour.
Cyclic unemployment is the lost perspective here: As a number of economists have noted, the effects of recession-driven unemployment are no longer an issue in macro-economic policy and research – both Continental and Anglo-Saxon countries (with the US as a partial exception) have focused stubbornly on controlling inflation and reducing public debt (the latter in a situation where the private sector is also reducing its debt levels). This also goes for Denmark where forecasters and policy-makers have consistently underestimated the depth of the crisis following the melt-down on the financial markets in 2007. One reason why Vestager’s comment is so significant, is that it follows the line of “there are no cyclical problems in the Danish economy”.
Second, the Danish system has traditionally been designed as a selective benefit to trade union members and cuts to the system also means that union membership becomes less attractive, especially to younger and unskilled workers. While Danish unions haven’t collapsed in the same way as we have seen in the Anglo-Saxon world, there are clear warning signs with blue-collar union menbership on a slow but constant slide downwards. The trade unions are worried but unable to influcence the parliamentary agenda and the Social Democrats are stuck somewhere between Social Liberal intransignence (which gets its legitimacy from academic economic discourse) and trade union desperation.