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Comment: So what’s the deal with efterløn?

Prime Minister Lars Løkke Rasmussen's move to scrap the generous Danish early-retirement scheme is said to be brave. Brave? Bravery would have been to reduce student grants, argues Howard Knowles

If you’ve just arrived back in Denmark from a trip abroad for Christmas the one issue dominating the headlines could appear somewhat trivial. Floods in Australia, earthquake in Chile, bombs in Pakistan – we’ve got efterløn.

Prime Minister Lars Løkke Rasmussen’s move to scrap the possibility of early retirement for 60-year-olds has become the dominant source of political discourse and threatens to become the overriding topic of the upcoming election campaign. So what the hell is efterløn and why the fuss?

Efterløn – or ‘pre-retirement’ – was introduced by the Social Democrats in 1979 as a way of providing those who had worked their nuts off for 40 years with the possibility of at least enjoying a few years of relative good health before the onset of senility, incontinence, hip joint replacements, cataracts, and everything else we’ve all got coming to us.

Labour market needs the ‘grey gold’

The Social Democrats’ argument for introducing the scheme was exactly the same as the government is using to get rid of it today – to strengthen the labour market.

Thirty years ago it was out with the old, in with the new – companies could shed ageing employees, at the public sector’s expense, and hire new, youthful, vibrant manpower. Now it’s a case of making oldsters hang onto their jobs as long as possible, and keep paying taxes, while the young fight desperately to get a foothold on the job ladder.

Like any well-meaning social policy that offers people money for doing nothing the scheme was seriously flawed from the start. The Social Democrats predicted that no more than around 20,000 deserving individuals would choose to take pre-retirement – the rest enjoyed their work so much they would obviously be happy to keep their nose to the grindstone for another seven years.

Not working proved a bit too popular, and expensive

Unfortunately for state coffers, around 150,000 people have now chosen to give up work at 60, at a cost of around DKK 25bn per year. And the chances are, not one of them was ever replaced by a shiny, new individual.

Companies embraced the scheme as a method of adapting to the ever-shrinking labour market as they moved production and services to China, India, Eastern Europe, or anywhere the tax-man doesn’t demand over 70 pct. of your hard-earned money every year.

In a desperate last throw of the dice to hang on to power the Prime Minister has now pinpointed these early retirees as the villains of the welfare society. Some political commentators have called him ‘brave’ for his attempt to squeeze the last drop of labour, and income tax, out of weary bodies.

Welfare deficit will be Løkke’s legacy

How dare they enjoy themselves on the golf course every day, or at the bingo-hall, draining state coffers of money when they could, and should, be contributing to the good of society. Well, what’s brave about that?

When Løkke gets kicked out in this year’s election he’ll leave behind a costly little legacy for Denmark – the prospect of a virtually permanent public sector deficit for the next thirty years as Joe Public struggles to pay back the welfare excesses of the past decade since the Lib/Con coalition came to power.

Political bravery would have been to reduce student grants, but that would have led to UK-style riots. Or closing down that great swamp of social apathy in the middle of Copenhagen called Christiana, where cannabis dealers earn hundreds of thousands of kroner every year whilst living off social handouts. But they’d torch the city. Or asking patients to pay a nominal user fee when they visit the doctor, just as they do in Sweden and Norway. But that would definitely have cost him the election.

No, it’s much easier to go after the golfers and the bingo players.

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