We analyzed the Danish left-wing’s proposal for an increase in the child allowance for people affected by the social security benefit cap as well as people receiving integration benefit. The proposal also includes an abolishing of next year’s scheduled reduction of the integration benefit of DKK 2,000 for family with children.
The analysis concludes, among other things, that a 63% increase in the child allowance for persons affected by the social security cap and integration benefit will reduce the gain from having a low-paid job by DKK 1,400 per month for a single breadwinner on social security benefit, with two children.
The background to the calculation is the red block’s white paper, as well as a memorandum from the Ministry of Employment. Our calculation is based on the family-type model of Ministry of Finance, and considers all benefits (social security, housing support, child allowance, “green cheque”, child benefit and tax).
“The red block operates with a 63% child allowance increase for persons affected by the social security benefit cap and integration benefit. In addition, they propose to abolish the reduction of the integration benefit next year of DKK 2,000 for a family, which means that the difference between being in work and receiving social security benefit is reduced for many families with children. For a single mother with two children, the gain today by taking a low-paid job is DKK 4,900 per month, which is reduced to DKK 3,500 per month after the child allowance increase. This means that the incentive to take a low-paid job is reduced by DKK 1,400 per month, and for a single person with one child, the monthly gain from taking a low-paid job is reduced by DKK 800 per month,” says Mads Lundby Hansen, Chief Economist at CEPOS.
“If you look at people receiving integration benefit, the child allowance also increases by 63%, and the scheduled reduction of the integration benefit next year will be abandoned. If you take a single mother with two children, the gain from taking a low-paid job is reduced from DKK 6,400 to DKK 3,800 per month, which will reduce employment and impair labour market integration,” says Mads Lundby Hansen, Chief Economist at CEPOS.
“It’s unfortunate that the red block plans to roll back a significant part of the social security benefit cap and integration benefit. It’s vital that there is an incentive to have a job, but that carrot is now getting smaller, which will result in lower employment and less self-sufficiency,” says Mads Lundby Hansen, Chief Economist at CEPOS.
“With the red block’s proposal, the income of people receiving integration benefit will be at the level of social security benefit for single breadwinners. For couples with children and non-breadwinners, there is still a significant difference between the income of social security benefit and integration benefit,” says Mads Lundby Hansen, Chief Economist at CEPOS.