The high road to high wages: Denmark's answer to the U.S. model

Original Reporting | By Mike Alberti |

Andersen was quick to add that sustaining high wages also requires high taxes on the upper end of the income spectrum. Danes pay anywhere from 50 to 63 percent of their income in taxes to the government, one of the highest rates in the world. The revenue from those taxes is used, in part, to finance the worker training programs and educational system.

But according to Andersen, many businesses don’t seem to be dissuaded by the tax rates from operating in Denmark. A recent, prominent example is the U.S.-based, Fortune 500 manufacturing firm SPX, which recently purchased three smaller Danish firms. In an interview on Danish television, SPX CEO Chris Kearney said that, instead of relocating to a different country where wages were lower, “we bought the companies because of the expertise that come with them.”


The education factor

It is rare for students to drop out of high school in Denmark, which also consistently boasts one of the highest college completion rates in the OECD. It appears that the result is in part a function of structural safeguards.

According to Anna Mae Allerslev, the Copenhagen official in charge of employment and integration issues, students who do not finish high school are more likely to be unemployed as adults. and structures are in place to quickly funnel dropouts back into the education system.

“If someone comes to the jobs center” — which Danes are required to do in order to collect unemployment benefits — “and they haven’t finished high school, he will be required to take those classes,” she said. “It’s difficult to fall through the cracks here.”


Aren’t some industries necessarily low-wage?

In the United States, low-wage labor has typically been concentrated in a few industries; specifically, retail, hospitality, food service, food processing, and other service sectors like personal care and childcare that, as currently operated, do not require workers to be highly skilled.           

These jobs exist in Denmark — albeit labor economists believe they make up a much smaller share of the labor market — but they are often unionized or covered by a collective bargaining agreement, and they generally pay significantly higher wages than their U.S. counterparts.

Remapping Debate spoke with Diana Ranile Baluyos, who works as a hotel cleaner in a large hotel in Copenhagen. She explained that, in addition to a livable hourly wage, her job provided her with six weeks of vacation time a year and allowed her flexible hours so that she can spend time with her children and study.

“It’s a good job,” she said. “I make more than enough to live on. We never struggle.”

Lars Esbjerg, a professor at Aarhus University, has spent much of his career studying the sectors of the economy that are often prone to low-wage work. “There are very few jobs that you would consider low-wage in Denmark,” he said.


Retail and food processing

“It was a specific strategy of the unions and the Social Democratic Party to say that we don’t want a low-wage labor market as the solution to unemployment.” — Niels Ploug, Statistics Denmark

In the retail industry, Esbjerg found that entry-level jobs are often paid low wages by Danish standards, but, when compared to other countries, the wage is relatively high, starting around $19 per hour for workers older than 18 (collective bargaining agreements often stipulate that workers younger than 18 may be paid less). The average wage for retail salespersons in the United States is about $12 an hour.

Milk and meat products are two large Danish exports, and Esbjerg has also studied this industry, noting that food production workers in other countries often suffer low-wages and very poor working conditions. But Esbjerg concluded that low-wage work is not a problem in the Danish food production sector.

“We really don’t see a lot of low-wage workers there,” he said. “What we see is that there has been a lot of on-the-job training by employers, so that food processing workers have become very skilled in certain functions, and Danish workers in that industry are very productive.”

In slaughterhouses, for example, Esbjerg found that the minimum hourly wage in 2006 was $15.30; the comparable rate for U.S. slaughterhouse workers was $10.55, according to BLS.


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