COPENHAGEN, Denmark — As chief executive officer of the Happiness Research Institute, I talk to a handful of journalists every week from around the world. As Denmark consistently ranks among the happiest countries in the world, many of the journalists will look at me with disbelief and ask, “Danes pay some of the highest taxes in the world, so why are they so happy?”
Denmark has one of the highest tax rates in the world, which is often mentioned as one of the biggest objections against the Danish welfare model. The average annual income in Denmark is about 39,000 euros (nearly $43,000) and as such, the average Dane pays a total amount of 45 percent in income taxes. Danish income taxes are based on a progressive tax system, so if you make more than 61,500 euros (about $67,000) per year, an additional tax rate of 7 percent is added over this threshold.
Neverthless, a Gallup survey from 2014 showed that almost nine out of 10 Danish people happily pay their taxes to some or a high degree.
Investing in quality of life
The reason behind the high level of support for the welfare state in Denmark is the awareness of the fact that the welfare model turns our collective wealth into well-being. We are not paying taxes. We are investing in our society. We are purchasing quality of life.
The key to understanding the high levels of happiness in Denmark is the welfare model’s ability to reduce risks, uncertainties and anxieties among its citizens and prevent extreme unhappiness.
The Danish welfare model provides opportunities for its citizens to pursue their happiness from advanced starting positions disregarding economic, social, gendered or cultural backgrounds. Let me give you some examples.
Education is free and even at university level, there is no tuition fee. Meanwhile, every Danish student receives around $900 per month from the state. This means I won’t have to worry about how to finance my kid’s education. It will be their talents and dreams that shape the path of their careers, not the size of my wallet.
The Danish laws for parental leave are among the most generous in the world with a total of 52 weeks, out of which the parents can receive up to 32 weeks of monetary support from the state. Furthermore, most employees have five weeks of vacation allowing families and friend to spend quality time with each other.
There is free quality health care for everyone and the welfare model works as a risk-reducing mechanism. Danes simply have less to worry about in daily life than most other people and that forms a sound basis for high levels of happiness.
Let’s have a closer look at how the Danish flexicurity model provides a flexible job market while reducing the worries of unemployment.
The Danish flexicurity model
The Danish labor market is based on flexibility for employers, security for workers and an active labor market policy. These three elements in combination constitute the golden triangle of flexicurity, working out to the mutual benefit of all the parties involved. The golden triangle suits the needs of employers, workers and the unemployed, by allowing companies to adapt to changes and stay in business, and by providing a safety net for workers and the unemployed. Employers can easily make changes in staff, and the unemployed can look for new jobs without the same level of financial anxiety.
Also, an active labor market policy is meant to keep both the employed and unemployed active and skilled. For workers, there are many opportunities for the ongoing development of useful skills and continued education. For the unemployed, the active labor market policy provides services assisting with the job search, keeping those out of the workforce actively engaged in applying for a new job.
The golden triangle of flexicurity
According to several scholars, the welfare model’s ability to alleviate risks and insecurities in people’s lives is one of the keys to understanding why Denmark does well in the happiness surveys. This is mainly because Denmark does well in terms of preventing extreme unhappiness. In a research paper from 2010 it was shown that the poorest Danes generally are quite happier than the poorest Americans — since the poorest people in Denmark enjoy a wide range of public social benefits that the poorest Americans do not — while the difference between the wealthiest people in each country is very little. That is also why Denmark is one of the countries where people feel most resilient to changes and least anxious in their daily lives.
Thus, Denmark is very equal in terms of happiness. As Richard A. Easterlin, Professor of Economics at the University of Southern California, explains, “There is greater equality in happiness in Denmark and Scandinavia. Mainly because the poorest groups are doing better than in other countries.”
Happiness — a new measure of progress
Happiness is becoming a core concern for the people who pass the laws shaping the circumstances of our lives.
In recent years, happiness, well-being and quality of life have made a powerful imprint on policy-making. The United Nations passed a resolution inviting countries to start measuring the happiness of their populations. Similarly, the Organization for Economic Cooperation and Development now includes life satisfaction as a parameter for the development of the member countries, and OECD Secretary General Ángel Gurría declares that “Improving the quality of our lives should be the ultimate target of public policies.”
These ambitions reflect the growing awareness among people, politicians and scientists that economic progress is no longer a satisfactory indicator for the progress of a society.
Despite economic growth, I see massive economic anxiety. I see countries such as the United States and South Korea having achieved tremendous growth in the past decades, but failing to convert wealth into well-being for the people.
Denmark is by no means a perfect utopia, and the country faces challenges and issues like any other country. But I do believe Denmark can be a source of inspiration in how countries can increase quality of life.
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Why Danes Happily Pay High Rates of Taxes originally appeared on usnews.com
