World’s Best Place to Live Is Now Looking for Brainy ForeignersBy
Denmark struggles to get growth above 2% amid labor shortages
Tax cuts are not an easy sell to Danes, Finance Minister says
According to a recent ranking, there’s no better place on Earth to live than Denmark.
The Social Progress Imperative, a study which was conducted with the help of Michael E. Porter of Harvard Business School and Scott Stern of MIT, measures things like access to the Internet, affordable housing, health care and freedom of expression. Its findings suggest money isn’t the only key to happiness. The U.S., which boasts a higher gross domestic product per capita than Denmark, ranks 18th in the study.
But the Danish finance minister, Kristian Jensen, says his country faces a number of challenges in persuading highly skilled professionals to bring their much-needed expertise to an economy now facing labor shortages.
Part of the problem, Jensen acknowledges, is a perception that Denmark has become less welcoming to foreigners. Local media have been full of examples showing the country’s strict immigration laws at work, including, most recently, a Danish astrophysicist who was unable to start a new life with his American wife in his native country.
In an interview in his office in Copenhagen, Jensen said that laws keeping such skilled individuals out are unfortunate. “It’s the clear goal of the government to attract skilled labor to Denmark,” he said.
But the country’s efforts to communicate its immigration policy to the outside world haven’t always worked, he said. Denmark’s notorious jewelry law, which allows immigration authorities to confiscate valuables from asylum seekers, is a case in point.
“In terms of the tone and perception of Denmark abroad, we’ve tried to fix a lot of the misunderstandings,” he said. “The jewelry law is an example of this.”
Denmark is governed by a center-right minority coalition that holds on to power thanks to the support of the anti-immigration Danish People’s Party. The group, which is backed by about one-fifth of the electorate, wants Denmark to introduce border checks, exit Europe’s Schengen arrangement on freedom of movement and to stop accepting refugees.
Jensen’s Liberal Party, which has been in power for 12 of the past 16 years, has made immigration rules progressively stricter, tightening 64 times, by its own count. The changes include cutting financial support for asylum seekers and making it harder for foreigners to obtain Danish citizenship.
But without foreigners, Denmark will struggle to solve its labor shortage. The local workforce isn’t motivated by tax cuts, which makes it hard to provide the kind of fiscal impulse that would normally kickstart growth, he said.
Denmark’s economy has been straining to get going in the wake of a local housing market crash and the global financial crisis. The government now sees growth of 1.7 percent both this year and next, up from 1.3 percent in 2016. The economy’s output gap will be erased next year, according the latest forecast in May.
“We could easily increase the workforce in Denmark by lowering taxes,” but there’s no voter appetite for such a policy, he said. “Denmark is peculiar in the sense that tax cuts aren’t necessarily popular.”
He says without such measures, economic growth of 2-3 percent will be hard to achieve. It “would require a lot of political initiative to materialize,” Jensen said.