Inequality and poverty in the Danish Welfare State: recent Developments and Driving Forces

Denmark has experienced high levels of employment since the mid-1990s, and the unemployment rate in 2008 was the lowest since the 1970s. Paradoxically, the levels of relative poverty and inequality increased during the same period. This paradox only applies to poverty studies based on median disposal income, but this approach is the most widespread in Danish research. However, there is general agreement concerning the increasing inequality and that groups such as young people, ethnic minorities and those relying on social assistance are increasingly at risk.
Contrary to theories of globalisation and demographical changes in the Danish case, the rising inequality appears to be especially driven by the housing and stock markets. The so-called ‘financial crisis’ has affected both of these markets deeply, which could have an impact on any further developments in inequality. Conversely, unemployment again increases and the redistributive welfare state would appear to be becoming less redistributive. Policy developments concerning taxation are reducing the significance of marginal taxes, and social benefits are compensating less. The use of incentive strategies has been applied to groups such as young people and ethnic minorities, and the social assistance system has been especially addressed for this purpose. Despite these developments, the emphasis of the Danish welfare state on universalism, progressive taxation and extensive social benefits still appears to prevent poverty problems and inequality quite well comparatively, but the active political efforts towards reducing inequality are less.