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FEATURE

Are international workers the answer to Denmark’s labour shortage?

Denmark’s low unemployment rate is creating recruitment challenges for Danish companies. A recent government initiative aims to resolve the issue, but some say it overlooks the importance of international labour. 

Are international workers the answer to Denmark’s labour shortage?
Business organisations have called for Denmark to do more to enable companies to draw on skilled foreign labour. Photo by Darth Liu on Unsplash

On September 10th, Denmark became the only European nation with no Covid-19 curbs. Denmark is also one of only six European Union countries whose economy has surpassed pre-pandemic levels, reports Statistics Denmark. And, it is one of only four EU countries where unemployment is now lower than before the pandemic, according to recent figures from Eurostat.

Although this sounds like a hat trick of good news for Denmark, the country now faces a new challenge: maintaining economic growth while facing a severe labour shortage.

Earlier this month, Statistics Denmark announced that the number of job vacancies in Denmark reached its highest level in more than a decade. Data from the Danish Agency for Labour Market and Recruitment from the month of June show 22.5 percent of companies’ recruitment attempts were in vain. 

“It is gratifying that unemployment is falling rapidly in Denmark, but it also means that there will be fewer people taking vacancies,” said Steen Nielsen, head of labour market and policy at Danish Industry (Dansk Industri, or DI), an organisation representing approximately 18,500 companies across Denmark. 

“Without more employees, we will very soon experience a significant slowdown in economic growth,” Morten Granzau, DI’s deputy director, said.

What is Denmark doing about the labour shortage?

When Denmark’s government announced its 2022 budget proposal August 30th, critics claimed the proposal didn’t do enough to resolve Denmark’s labour shortage. Little more than one week later, the government announced a new initiative, Denmark Can Do More (Danmark kan mere I) that aims to increase employment by more than 10,000 people by 2030. 

The initiative consists of several efforts to increase Denmark’s labour force. It cuts the standard monthly unemployment insurance payment and shortens the eligibility period for new graduates to encourage them to join the labour force, requires some migrants to work a minimum of 37 hours per week to receive welfare benefits, and incentivizes employees to work past retirement age, among other policy changes.

It is the first in a series of reform proposals that aim to increase growth and employment in Denmark, according to the Ministry of Finance (Finansministeriet). 

Although Denmark’s business community says the initiative is a good start, it falls short of resolving Denmark’s labour shortage – especially in the short-term. DI, the Danish Employers’ Association (Dansk Arbejdsgiverforening), and the Danish Chamber of Commerce (Dansk Erhverv), among others, have expressed this concern and reiterated the important role of international labour.

“With just over 10,000 more sets of hands, the government only offsets what it has already lost in the workforce,” said Jakob Brandt, CEO of SMVdanmark, an organization representing 18,000 small and medium-sized companies in Denmark. For example, the 16,000 applicants for Denmark’s early retirement scheme and the 25,000 new public sector jobs created since the start of the pandemic.

According to hospitality trade association HORESTA, Denmark’s hotel and restaurant industry alone is short-staffed by 12,000 people. Recent data from Statistics Denmark shows that four out of five hotels and two-thirds of restaurants experienced labour shortages in August.

“The problems are of such a magnitude that we can not solve it alone with the people who are already in this country,” Kirsten Munch, political director at HORESTA, said.

What role does international labour play?

Within the same week the initiative was announced, the leaders of Denmark’s liberal, conservative, and far left parties all expressed the importance of foreign labour in resolving the shortage. 

Sofie Carsten Nielsen, leader of the Social Liberal (Radikale Venstre) party, said foreign labour may be the fastest way to alleviate the urgent need for labour. “We know how it works, and it does not take long negotiations,” Nielsen said. “Giving companies better access to pick up skilled labour outside Denmark and outside Europe is low-hanging fruit.”

One suggestion to attract foreign labour is to reduce the salary requirements for skilled non-EU nationals to qualify for Denmark’s Pay Limit Scheme (beløbsordningen), a visa scheme only currently available to those with a minimum annual salary of 445,000 DKK. 

“[Reducing the Pay Limit Scheme minimum compensation] will make us more competitive in terms of attracting the foreign workforce that many other countries are also longing for at the moment,” said Brian Mikkelsen, CEO of Dansk Erhverv.

However, the now-governing Social Democrats have continued to oppose the reduction of the Pay Limit Scheme‘s minimum salary requirement.

Minister of Employment Peter Hummelgaard said the party is “generally pleased” with the current arrangements for recruiting qualified foreign labour, but are open to adjustments if they prove necessary in the future.

“It is the government’s first priority to ensure that the unemployed who are already in Denmark have the opportunity to get a job,” Hummelgaard told The Local. “If there are areas that are not possible to cover with Danish labour, we must of course turn our attention to the EU and next to third countries for qualified foreign labour.”

The Danish People’s Party (Dansk Folkeparti) has also expressed opposition to reducing the scheme’s minimum salary to prevent underpaid labor and social dumping.

“Dansk Folkeparti prioritises finding or creating jobs for the group of unemployed people in Denmark who are able to work before importing a workforce from other countries,” Bent Bøgsted, the party’s labour market spokesperson, told The Local.

The anti-immigration party believes Denmark’s unemployed workers could meet current needs, albeit with some upskilling.

“Unfortunately we see employers favouring cheap labor from non-EU countries and Eastern Europe instead. …This is unacceptable,” Bøgsted said.

Will attracting international labour be included in future initiatives?

After the “Denmark Can Do More” initiative was announced September 7th, several parties in the country’s parliament continued negotiations on additional reforms to reduce the current labour shortage, along with industry stakeholders. 

“We (DI) are part of those discussions and though we don’t know what will come of those discussions yet, it’s clear that the government and other parties of parliament recognise the need for international labour as one way to solve that,” Søren Kjærsgaard Høfler, a political consultant in global mobility at DI, told The Local. 

“Though DI appreciates the suggested reforms we see a need to act now, since the situation on the labour market calls for action right now,” Høfler added.

Any additional policy changes may be included in the financial act coming out later this autumn. 

 “Whether we bring workers into the labour market sooner, keep them longer, or bring in foreign labour with fewer hurdles, everyone wants to make sure there is enough labour for Danish companies to thrive,” Høfler said. “Some problems can be resolved through structural changes in Denmark’s own labour market, but we also know international labour is crucial. It’s not either/or; it’s both/and.”

Updated September 21st, 2021 to include comment from Danish People’s Party and on September 22nd, 2021 to include comment from Social Democrats.

Member comments

  1. Reducing labor rates is the fastest way to put downward pressure on all labor rates as companies will always select cheaper foreign workers over more expensive nationals. This scheme is why real wages in the USA have reminded stagnant for years, pre-COVID, as citizens struggle to compete for jobs taken by immigrants, many illegal. Currently the US is suffering a labor shortage as well but a lot of that is due to political decisions which do not require any work from those receiving public assistance. Data indicates that low skilled workers if their family is included receive more in public assistance than they produce for a net loss! If this scheme is ever implemented there will be no going back. The solution may be short term contract workers who must leave at the end of their contract and can not bring family members or if they do they are not eligible for any financial assistance . And if they do not depart at the end of their contract the employer is fined.

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For members

TAXES

Why it pays to check your Danish preliminary tax return in January

Taxpayers in Denmark still have time to adjust their 2023 preliminary tax return (forskudsopgørelse) with Skat, the Danish Tax Agency, before too much or too little is deducted from January paychecks.

Why it pays to check your Danish preliminary tax return in January

Preliminary tax returns or forskudsopgørelser for the forthcoming year are released in November, meaning they can carry information over from the preceding tax year (the current year at the time of release). Tax years in Denmark follow calendar years.

If your circumstances have changed since last year, it’s therefore a good idea to update your preliminary tax returns for 2023 now.

It should be noted that taxpayers who do not pay the right amount of tax in the first month of the year can correct their preliminary returns later in 2023. This means the difference in tax paid in January would be spread across the rest of the year.

But if your circumstances have changed significantly since the last calendar year it makes sense to update now so that you are paying the correct amount of tax from the beginning of the new (tax) year.

READ ALSO: Forskudsopgørelse: Why checking your preliminary Danish tax return matters

“It’s never too late to go in and check your preliminary tax return. You can do that every day, all year round. It’s just important to do it now in relation to the paycheck for January,” Danish Tax Authority junior director Jan Møller Mikkelsen told news wire Ritzau.

Annual tax returns (årsopgørelser) in Denmark cover calendar years. They are released in March and finalised in late spring, meaning you have this period to correct the information on your tax return from the previous calendar year.

If you paid too much tax during the preceding year and didn’t adjust your preliminary return during the course of that year, you could therefore correct the final return the following spring to ensure you still paid the correct tax. Paying too much tax would result in a rebate, but the reverse applies if you pay under the correct rate for your circumstances, meaning you might receive a large bill further down the line.

Both of these scenarios can be avoided by adjusting the forskudsopgørelse during the ongoing tax (calendar) year.

When wages are paid into current accounts at the end of this month, it will be the first wage packet of 2023. That means now is the last chance to correct tax details carried over from 2022 to make sure deductions of income tax for the first monthly wage of 2023 are correct.

“We experience increasing numbers of calls from the public in January when people can’t understand why the first payment of the year is wrong,” Mikkelsen said.

“Now is the time to go in and check the preliminary tax return if you want to ensure the correct wages are paid in January,” he said.

The tax authority advises updating your preliminary return or forskudsopgørelse — a projection of your expected income for the year along with the deductions you’re eligible for — if your circumstances have changed in one or more of the following ways:

  • Changed jobs 
  • Been promoted or received a salary increase 
  • Taken on a mortgage 
  • Refinanced your mortgage 
  • Changed your commute 

Because a relatively large number of people refinanced their mortgages in 2023, this is an area that should be given particular attention for those affected, Mikkelsen noted.

You can change your preliminary tax return any day of the year by visiting the Skat website and signing in with your MitID. The agency can also be contacted over the phone or in writing for guidance on the preliminary return and other tax matters.

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