Denmark: What Labour Market Exclusion Costs the State
The direct fiscal burden of keeping people outside the labour market — benefit expenditure, lost tax revenue, and the structural cost to public finances across Europe.
Country Profile
Direct benefit payments
Danmarks Statistik — sociale ydelser; OECD SOCX 2023 Denmark incapacity · 2024
→ Disability pension
Styrelsen for Arbejdsmarked og Rekruttering (STAR) — førtidspension 2024 · 2024
→ Sickness benefit
Danmarks Statistik — sygedagpenge 2024 · 2024
→ ALMP spend
Finansministeriet — aktiv beskæftigelsesindsats 2024 · 2024
Estimated lost tax revenueestimate
Estimate: ~250k excluded working-age persons × DKK 420k median earnings × 39% effective income tax rate / 7.46. Source: Danmarks Statistik indkomststatistik 2024.
Total estimated fiscal cost
Sum of direct benefit expenditure (Danmarks Statistik 2024) and estimated lost income tax. Denmark's high marginal tax rate amplifies the fiscal value of every excluded person who re-enters employment.
Local currency: 75 DKK bn
Per working-age adult
€2,364
Context
Denmark's system includes førtidspension (early disability pension), fleksjob (subsidised employment for reduced capacity), sygedagpenge (sickness benefit), and ressourceforløb (resource process). The 2013 disability reform shifted many from førtidspension toward fleksjob — a cost shift rather than cost reduction.
Methodology
Sum of direct benefit expenditure (Danmarks Statistik 2024) and estimated lost income tax. Denmark's high marginal tax rate amplifies the fiscal value of every excluded person who re-enters employment.
In Practice
A real organisation putting this into practice.
107,000 people in paid work — thanks to a Danish wage subsidy
107,000 people in Fleksjob · Record high in 2023
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