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ECONOMY

Danes’ buying power lags behind their incomes

Danes have the second-highest average income in the EU but Denmark’s high prices mean that their purchasing power is overtaken by both Swedes and Austrians. A new report also reveals major income differences among Denmark's immigrant groups.

Published: 22 September 2015 09:47 CEST
Danes' buying power lags behind their incomes
Photo: Colourbox
A new report from Statistics Denmark reveals that only Luxembourgers take home higher post-tax incomes than the Danes. But once national price levels enter the picture, Danes’ purchasing power is outpaced by both Swedes and Austrians, who can get more for their money despite their lower incomes. 
 
The average Dane earned 206,800 kroner ($31,000; 27,700 euros) after taxes in 2014, significantly higher than the EU-28 average of 115,400 kroner ($17,300; 15,500 euros). Among EU members, only Luxembourg had a higher disposable income level, although non-EU members Switzerland and Norway were also both ahead of Denmark. 
 
But the picture for Danes is less rosy when one looks at purchasing power. Although Danes earn more than their Swedish neighbours, they also contend with a higher cost of living.
 
“Denmark is also more expensive to live in than Sweden. Before the correction for purchasing power, the median income was 5.2 percent higher in Denmark. After the correction, it was 2.9 percent lower in Denmark,” the report stated. 
 
Austrians also leapfrog Danes when incomes are adjusted for purchasing power, with wage earners in Finland, Belgium, France, the Netherlands and Germany not far behind. 
 
Chart showing average incomes (blue) and purchasing power (green dot). Source: Statistics Denmark
Chart showing average incomes (blue) and purchasing power (green dot). Source: Statistics Denmark
 
Still, the report comparison left no doubt that Danes are among the most well-off Europeans. 
 
“The medium income in Denmark, after income taxes are paid and the figure is corrected for household size, is around 13 times higher than in Romania and twice as high as in Spain,” Statistics Denmark wrote in its report. 
 
In addition to comparing Danes’ financial situation with their European neighbours, the Statistics Denmark report also shows significant differences in the earning power of Denmark’s immigrants. 
 
Immigrants from the UK and their descendants were the highest earning group, with an average pre-tax income of 362,400 kroner even outpacing ethnic Danes (352,800 kroner). Bulgarians were the lowest-earning group, with an average income of 165,300 kroner. 
 
Immigrants from non-Western countries were the most likely to receive a bulk of their income from public benefits. People from Kuwait received an average of 74 percent of their income in the form of public support, while Syrians received 66 percent and Afghans 50 percent. 
 
Pre-tax income by country of origin. Source: Statistics Denmark
Pre-tax income by country of origin. Source: Statistics Denmark
 
The Statistics Denmark report also includes an online tool allow wage earners in Denmark to see how their incomes compare with the rest of the country. The wage test can be accessed here, in Danish.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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