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The following is the Chapter 3 of the OECD assessment and recommendations, taken from the Economic Survey of Denmark 2006 published on 9 May 2006.
Contents
Mobilising the talent of all young people
A key weakness is the surprisingly slow progress in human capital formation. Among the 25-34 year olds, only 86% have at least upper secondary education, compared with 89%, 91% and 95% in Finland, Sweden and Norway respectively. Despite large public investments in early childhood care and compulsory education, Denmark seems to have substantial difficulties mobilizing the talent of all young people, and a large share -- including many second-generation migrants -- seem to be lost during school, leaving with only limited literacy skills. Some steps are being taken now. The introduction of more frequent and systematic evaluation of student achievement will help identify learning problems at an earlier stage. Allowing teachers to specialise more will improve educational performance not least in subjects like science where Danish learning outcomes are among the poorest in the OECD. Efforts to improve compulsory education should continue including by strengthening the educational content of the introductory year for six-year olds and targeting or abolishing the voluntary 10th form. More apprenticeships should be made available, possibly helped by increasing refunding for firms taking apprentices based on higher contributions from all employers. The government and social partners have agreed to increase resources for the already high level of life long learning.
Educational attainment compared to other Nordics
Per cent, 2003
Enhancing incentives for individuals to acquire and use human capital productively
High and progressive income taxation reduces the reward for studying, and weakens the incentive to choose subjects with promising job and earnings prospects. Despite both this and a narrow income distribution, private economic returns are boosted by full public coverage of tuition costs and generous grants for student living costs. Consequently, a comparatively high share of a youth cohort takes tertiary education, but the other side of the coin is a growing "culture of delay". With a typical starting age of 23 and prolonged study duration, too few years are left for reaping the fruits of the qualifications in the labour market. To counteract this, the study grant should be adjusted to encourage young people not to postpone studies, as proposed by the government. For the longer term, an arrangement whereby the costs of tuition and grants for living costs throughout tertiary education are treated as a loan to be repaid after graduation should be developed in order to improve the efficiency of educational choices and increase the responsiveness of universities to student needs. By granting tax deductions for repayment, the introduction of such loans can remedy the current adverse incentives for graduates to leave the country or work short hours, while not reducing the individual's economic return to education.
Tax reform should promote labour supply, notably for skilled workers
Previous Surveys have noted that high marginal taxes hold down hours worked and may encourage "informal" work, especially in sectors like construction. Tax cuts introduced in 2004 targeting people with low and intermediate earnings were welcome, but the problem is remaining particularly pronounced for those with incomes at or just above average, where the top income tax rate cuts in, with the combination of social contributions plus income and consumption taxes creating a marginal tax rate above 70% for four in ten of the full-time employed. The first priority for tax reform to increase labour supply should therefore be to raise the income threshold from where the top tax is paid, considering that this would strengthen work incentives more, krone-for-krone, than tax reductions at the lower end of the income scale. It would also raise the average skill level of the labour supply, as people with intermediate qualifications would benefit most. Furthermore, disincentives for accumulating human capital would be reduced as the after-tax return to education would be higher.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
The complete edition of the Economic Survey of Denmark 2006 is available from:
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SourceOECD for subscribing institutions and many libraries
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OLISnet, under "Publication Locator", for government officials with accounts (subscribe)
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Additional information
For further information please contact the Denmark Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Jens Lundsgaard, Felix Hüfner and Espen Erlandsen under the supervision of Andreas Wörgötter.
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