Back in action after a three day, study tour to West Denmark.
One of the things I am starting to understand about Denmark, is that everything comes back to culture. In the United States we can get a relatively good picture of how things work by looking at laws, balance sheets, macroeconomic data, etc. While cultural influences are important (particularly in innovation), they are in no way necessary to understand the American business world. This is not at all true of Denmark. To understand how the businesses we are meeting with work, we first need to understand the mentality of the people working at them.
Denmark is obsessed with equality. I have mentioned how Denmark has the lowest wealth gap in the world, and this is no accident. The degree of homogeneity of the Danish people is shocking, conformity is crucial. People dress similar (stylish as hell), drive similar cars, and generally like the same types of music. It works because stereotypical Danish society is healthy, educated, and generally kind. However, because of this focus on equality, immigration is a huge issue here. Certain immigrant populations are extremely non-conformist, and this runs counter to everything Denmark stands for. What at the surface level might seem like racism (or religious intolerance) is oftentimes a frustration with certain religious populations staunch refusal to integrate themselves into the Danish system. To be clear, Danes still value wealth, and there are some class distinctions in society, just much less than anything Americans can relate to. Equality reigns supreme. In everyone’s favorite presentation this week (Suzlon Wind Energy), the employee explained that in Denmark, “Having more time to spend with one’s family, is a significantly larger demonstration of status and wealth than a nice car or a nice house.”
The obsession with equality helps to make sense of the astronomically high taxes and (blue collar) wages. Waiters, cleaners, crop pickers, and anything else you might think of, all make at least $20.00 an hour, along with one year paid unemployment and a million other benefits. As you can imagine, for businesses to remain competitive under these constraints would be impossible if people thought like Americans. People seem to make more than they deserve on the bottom, and not nearly as much they should on the top. It is almost always cheaper to outsource production, and the high taxes drive down demand. Yet, Denmark remains one of the most competitive nations on earth. How?
One of the benefits about such a high minimum wage, is that there is almost no stigma attached to even the “lowest” of jobs. In America, we are raised with the mentality that our goal is to get as high in a company as possible in order to get the best paycheck. At the point where money is no longer an issue, we want to keep rising in order to become the decision maker, or to get our names on the door. Thus, many students will say that their goal is to become CEO of a company. If I ask Danes the same question, they will say they want to do medical research, work in security, or start a business. The lack of stigma, and the guaranteed comfortable life, mean people end up doing what they actually want to do. Even artists are given a stipend, which allows them to focus purely on creating without worrying about surviving. People are perfectly happy working on the floor of a factory even if their education level might suggest that they should be running the company. This introduces a sort of pareto efficiency to the work force, and helps to explain some of the Denmark’s ability to compete globally.
It is no secret that happy and motivated employees get more done. Couple high job satisfaction, with high education levels, and you get companies producing at high levels despite ridiculous costs of business. From the forklift operators to the CEOs, people seemed genuinely happy. This of course translated into corporate loyalty, which circles back into higher quality work. Many of the companies we visited are known as creating the best products worldwide in their industry. Additionally, the lack of job stigma means a lack of strict corporate structure as well. Everything is more laid back, everyone gets a minimum of five hours of vacation a year, and as long as they get their work done, they pretty much do what they want. While I don’t think this could work in many places, I really do believe that the success of such a model is rather telling, and valuable to think about.
Food for thought!
About this post: Team Global Economics group B goes on a three-day trip to West Denmark, and a weeklong tour to Paris and Brussels. Winners. So I am sitting on the bus heading back from our three-day trip to Jutland (West Denmark), and am completely exhausted. The West Side goes real hard in the paint no doubt. We have visited five businesses, and two BA museums. We went to a real life chocolate factory (so ya basically heaven) called Toms, a meter making company called Kamstrup, which is somehow in sourcing jobs to high-labor-cost Denmark, a business council in Arhus, a wind power company called Suzlon, and a military defense company.
While my natural instinct is to explain what makes each of these places cool, I tried to go a little bit bigger and talk about how an economy can work when socialism driven taxes are off-the-charts high, and minimum wage is usually over $20.00 an hour.