The government has set up the Reform Commission, which gave its first report on Thursday. It is first and foremost about the problems it intends to deal with. It will later come up with suggestions for solutions.
Among other things, the Commission will look at how more young people receive a youth education and how to get fewer people with non-Western backgrounds to end up more or less permanently on what was intended as temporary benefits.
This is despite the fact that the so-called economic sages in the autumn of 2020 found that “long-term public finances are judged to be very sound”.
Here you can find out more about how and why the Commission, led by economist Nina Smith, will try to solve these problems:
* In its report on Thursday, the Commission writes a little about why these reforms are needed at all. In short, the Commission writes:
– There will continue to be more demands for public services, which will become more and more expensive to produce.
* One is called the Wagner effect. Roughly speaking, when citizens become more prosperous, two things happen that are bad for the public budget:
On the one hand, citizens want better services, which often cost more to provide. On the one hand, at some point someone chooses to prioritize increased leisure time or to retire earlier from the labor market, because it becomes more possible for them as a result of increased prosperity.
It both increases government spending and means less revenue such as income tax.
* The second element the commission points to is called the Baumol effect. It is about the fact that wages in some professions at some point increase more than productivity.
The Commission points out, for example, that although wages are rising steadily, there is a point where the teacher cannot teach children faster or more effectively.
* The two things effects lead the Commission to conclude:
– No matter how much balance there is in the Danish economy right now in these years, there is almost a state guarantee that the public sector – both finances and the public service – will come under pressure in the coming decades.
* Therefore, it must be looked at how the public sector can reduce expenditure or increase its revenue in other ways.
* although the report on Thursday has no solution proposals, it does reveal what it calls second-generation reforms. It must therefore run counter to what the Commission calls first-generation reforms.
– For example, many of the last three decades’ economic reforms have been about adjusting who is entitled to what benefits, when and for how long, the commission writes.
Attempts have been made to ensure that citizens do not choose the socio-economically problematic – for example, preferring leisure or unemployment to work, because the difference in economic terms for the individual is too small.
* It is thus called a first generation reform. This is in contrast to the other generational reforms that the Commission will pursue:
– Another generational reform does not primarily move on benefits, but affects people’s behavior and choices in other ways.
Classic, long-implemented reforms of this type are the pension reforms of the 1980s, in which the then government and the social partners set in motion the construction of labor market pensions.
– When labor market pensions were built up, a possible here-and-now consumption was postponed to later in life, which has hardly excited everyone.
– Nevertheless, a significant element of coercion was found appropriate – and the pension schemes were built up.
* However, the Commission denies that this means that the benefits are protected in future proposals. It just will not be where the Commission has its focus.
Source: Reform Commission report “Recognized, attempted resolved, unresolved”.
Source: The Nordic Page