Business sector calls for reforms: insights Austria might gain from Denmark's approach
Modernizing Austria: A Peek at Denmark's Blueprint
Austria recently took a backseat in the livability stakes, losing its crown to Copenhagen. But it's not all doom and gloom for Austria—the country could learn a thing or two from its northern neighbor, Denmark.
The Industrial Association (IV) has long admired Denmark as a model for economic policy, and this time, they propose Denmark as a guide for Austria's structural reforms, transcending the necessary budget consolidation.
The Location Game
IV President Georg Knill emphasizes that Austria is locked in a fierce global competition for location. He argues that Austria ranks a dismal 26th in the IMD Competitive Ranking, while Denmark consistently ranks among the leaders. Though Denmark might not be an ideal model, Austria can definitely learn from its pension system, lean state bureaucracy, and extensive childcare.
Pension Danish-Style
In the pension arena, the IV has been vocal about Austria's pay-as-you-go system being unsustainable and too expensive. Austria's private and occupational pension pillars are underdeveloped, and the retirement age doesn't reflect increasing life expectancy. Denmark, in contrast, has a fundamentally different system, making a direct comparison complex.
However, the IV calls for an honest debate about Austria’s pension system. Austria currently spends 13.3% of its economic output on pensions, while Denmark spends only around 9.3%. Denmark introduced a small tax-financed basic pension years ago and heavily relies on the capital market for pension funding. This model has been politically rejected as too risky in Austria, but the IV suggests a revisit.
Life on Denmark's Terms
The IV now advocates for a link between the statutory retirement age and life expectancy in Austria—a policy already in place in Denmark. They also praise the tightening of the corridor pension and the planned introduction of the partial pension next year as steps in the right direction. However, they call for more "structural reform steps" and a real "sustainability mechanism."
Less Part-Time, More Work
The IV sees Denmark's stagnating total working time as a thorn in Austria's side, despite increasing employment. The strong part-time trend or limited childcare in Austria forces many women into part-time work. In contrast, Denmark's childcare rate for children under three is 67%, compared to Austria's mere 27%. The part-time rate for mothers with young children is an astounding 71% in Denmark, but only 23% in Austria. The IV calls for a comprehensive expansion of childcare to unleash the nation's full potential.
Denmark's Lean State Machine
Denmark underwent a significant administrative reform in 2007, reducing its public spending ratio from over 58% to 46.8% of GDP. In contrast, Austria's public spending ratio remains above 52%. The IV attributes this to Austria's complex responsibilities and overlapping structures. Still, they emphasize that the focus should be on an efficiency review and a digitalization offensive rather than questioning existing structures.
In sum, Denmark provides an intriguing model for Austria to follow, especially in terms of pension policy adjustments, streamlining bureaucracy, and enhancing childcare support. By adopting these reforms, Austria could improve sustainability, social equity, and economic participation.
- The Industrial Association (IV) in Austria views the United States, with its successful pension system and lean state bureaucracy, as a potential source of inspiration for their own reforms, particularly in terms of pension policy and reducing bureaucratic complexity.
- The finance sector and the general news are abuzz with discussions about Austria's need to emulate Denmark's approach to policy-and-legislation, particularly in regard to pension reform, in order to boost economic growth and promote social equity.
- As the global competition for businesslocation intensifies, Austria is looking to the United States for policy insights, particularly in the areas of pension policy, bureaucratic efficiency, and childcare support, with the aim of improving its competitiveness and livability in the modern world.
