The Corner

Danish Labor Shortage

Supply Side 101: Denmark’s high marginal income tax rate discourages Danes from working — at least from working in Denmark. Now Denmark faces a severe skilled-labor shortage and a shrinking native population (a trend masked by the arrival of many unskilled immigrant workers):

The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark – a level that hits anyone making more than 360,000 Danish kroner, or about $70,000…

…[T]he high taxes, mixed with his wife’s discomfort in Denmark, meant that a job offer in Qatar three years ago was all it took to pry [Thomas Sorensen] away from Copenhagen. Now, he is ensconced in Frankfurt, setting up a new business on the side and planning to pay no more than 25 percent of his income to the German state.

“When you are at 63 percent tax, you don’t look forward to the evaluation with the boss to get a raise,” Sorensen said. “You look for more vacation or a training course in the tropics – something that you get the full benefit of.”

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