Income inequality in Denmark

Denmark has been noted as having one of the lowest income inequality ratings in the world and has been known to maintain relative stability in this metric throughout decades' past.^[1] The OECD data of 2016 gives Denmark a Gini coefficient of 0.249, below the OECD average of 0.315.^[2] The OECD in 2013 ranked Denmark with having a 0.254 Gini coefficient, ranking third behind Iceland and Norway respectively as the countries with the lowest income inequality qualifications.^[3] The Gini coefficients are measured using a 0–1 calibration where 0 equals complete equality and 1 equals complete inequality. "Wage-distributive outcomes" and their effect on income equality have been noted since the 70s and 80s.^[1] Denmark, along with other Scandinavian countries, such as Finland and Sweden, has long held a stable low wage inequality index as well.^[1] The scope and strength of Denmark's redistributive system and the latitude of the welfare state are the reasons for Denmark's low levels of inequality. The welfare system, in particular, allows for negligible effects that market income inequality can have on "disposable income inequality (i.e. market income after taxes and transfers)".^[2] The rise in income inequality all over the world, though, has not shielded Denmark and has seen its inequality increase in the same rate as all the other OECD countries, pairing Denmark with the likes of the United States and Canada with their pace in inequality intensification.^[2] The global course towards rising income inequality in the rich world and in Denmark has been attributed to an increase in capital incomes, a rising gap in "earnings dispersion", and structural changes that have took place within households; the long term propellant of inequality, though, has been skill-biased technical change.^[2] Rising inequality in Denmark can be illustrated by how the boon of GDP growth have gone to households of higher incomes, though it should be noted that the income distribution has been relatively equitably discharged throughout the country since the mid-1980s to the mid-2000s.^[2]

Income inequality and how it relates to happiness

Modern studies have posited a possible link between low levels of income inequality and happiness. Denmark, in terms of happiness, ranks as 1st in the World Happiness Report of 2016, with a score of 7.526.^[4] The report remarks that among the factors used in the past in evaluating happiness, incomes, healthy life styles and social support have ranked as the highest in their importance.^[4] Income inequality, in particular, across various studies have seen a direct correlation with happiness: "Individuals tend to declare lower happiness levels when inequality happens to be high...[and there is] strong negative effects of inequality on the happiness of the European poor and leftists".^[5] Danish society is for the most part of a leftish orientation politically. Documented from 1980–1987, the level of happiness declined as inequality increased in Denmark.^[5] It should be noted that Danish society, as well as their European counterparts, perceive high levels of inequality as more egregious than other non-Europeans countries, such as in the United States, for example.^[5] As has been remarked, low levels of inequality is aided by government redistribution, which can in turn lead to higher levels of happiness. In order to rein in inequality, the redistributive mechanisms of the state need to be strengthened.^[6] Denmark and the Nordic countries also have the lowest levels of individual earnings inequality and this is due to the high capacity of the redistributive system.^[6] The links between happiness, equality and redistribution need to be explored further, though, as many studies have appeared that contradict a strong correlation between them.

Among these studies there is a negative correlation between happiness and income inequality: "It seems rather evident that people live happier in the most egalitarian societies and that the differences in happiness will be smaller. Yet in this issue we have seen that this does not apply to all inequalities and particularly not to income inequality. Income inequality is essentially unrelated to the average happiness of citizens and only modestly related to the dispersion of happiness among them."^[7] In the World Happiness report for Denmark, the authors fashion a new approach where they measure happiness in terms of "inequality of well-being".^[4] The novelty of the approach needs to garner more consensus to add to the research between happiness and inequality. Nonetheless, using this approach, the report found that while income is an important factor, equality of well-being and life satisfaction are better indicators of happiness.^[4] Denmark ranks high on life satisfaction and in how they perceive themselves and others to be happy; meaning the inequality of well-being in Denmark is low.^[4] Evidence suggest that a relationship may yet exist between income and happiness, but using metrics such as the Gallup World poll, happiness gaps among countries, and in Denmark in particular, may have deeper unknown variables at work that transcend income inequality.^[8] General disparities of inequality in Danish society are low and are a part of the broader moral philosophy of egalitarianism that is characteristic of Scandinavia and holds that policy makers be morally impelled to suppress inequality as much as possible.^[7] Denmark, in terms of this institutional egalitarianism, has been labeled as having a social-democratic regime of welfare.^[9] The substantiality of the welfare state's reach in Denmark concerning income equality has led it to protect its citizens against the worst impact of the market and capitalism's more destabilizing effects.^[9] Even amid bad economic conditions in Denmark's past, poverty has lessened and standards of living and equality have increased.^[9] The preponderance of the evidence between income inequality and happiness suggests a possible link, but more research is needed for far-ranging conclusions.

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