While the Senate, the House and the President haggle over how to get the American economy through the Corona crisis, other countries have passed large stimulus packages.
In Denmark a package that could fork out as much as 13 percent of GDP in just as many weeks is sailing through parliament, as per the Atlantic:
This week, the Danish government told private companies hit by the effects of the pandemic that it would pay 75 percent of their employees’ salaries to avoid mass layoffs. The plan could require the government to spend as much as 13 percent of the national economy in three months. That is roughly the equivalent of a $2.5 trillion stimulus in the United States spread out over just 13 weeks. Like I said: very, very big.
That is 75 percent of the wages of employees not working, but that the companies have decided to keep on the pay roll instead of laying them off. The employers are on the hook for the remaining 25 percent and the employees pay the first week with 5 holidays.
The wage reimbursement is the most important element of a series of sweeping economic packages, extending unemployment benefits, paying fixed costs like rent for small businesses under mandatory closure (restaurants, hair dressers etc), relief for self employed people and a host of other measures.
As reporter Derek Thompson puts it in his dialogue with a Danish labor market expert:
Denmark is putting the economy into the freezer for three months. You’re saying: We know that all these people won’t be able to work for the next few months. It’s inevitable. Rather than do rounds of firing followed by rounds of hiring, which will delay the recovery, let’s throw the whole economy into a deep freezer, and when the virus winds down we can thaw it out and almost everybody will still be with the company they worked for in January.
Or as the Danish Minister of finance, Nicolai Wammen has put it: “This will be expensive. The alternative will be worse.”
In reality this is an experiment on an unprecedented economic scale. Whether it works remains to be seen.
Unprecedented has also been the speed and the unanimous support in parliament. Whithin a week the package has been cleared with both unions and employer’s organizations and secured the support of not only the usual supporters of the Social Democratic minority government on the left wing, but of all 10 parties in parliament. The final passage of the main wage compensation measure will be tomorrow, but all minor measures have so far been passed with unanimous consent and so did this one at the first reading last week. There were questions, suggestions for clarifications and even calls for additional measures, but noone against.
Finally a short note on the role of the labor market parties. The package was first secured in a so called three party agreement between the government, the unions and the employer’s organizations. This is is so inherently Danish, and nothing special for this situation (though the scope and the speed is). Labor market laws are never done without at least consultations with the labor market parties, and very often with agreements like this, where the consent of parliament often feels more like a formality.
- author is an independent reporter and native Dane residing in Copenhagen