Dismantling the nanny state, gingerly

1 September 2017

Most of the parties in the Danish Parliament have reached an agreement (DK) to reform the rules on the amount of time that people on unemployment benefits and early retirement can spend on voluntary activities without losing any benefits. Currently, they can work up to four hours without penalty, and any additional time results in a reduction of their benefits. According to the new rules, the unemployed can work up to 10 hours and people on early retirement 15 hours. For recipients of so-called flex benefits and those in a flexible job program, the current limit, also four hours, will be abolished completely. All the parties support the change except to two furthest to the left, the Socialist People’s Party and the Red-Green Alliance.

Examples of volunteer work most often mentioned are fundraising for philanthropical organizations and serving as assistant soccer coach. There have been cases of clubs needing to close or reduce their activities because they didn’t have enough staffing. Sports teams in Denmark are generally run by private clubs; they aren’t associated with schools and universities. Denmark has an extensive system of non-profit associations for all kinds of activity. That’s why rules in this area have a significant effect.

Win-win or zero sum?

The proponents of the reform argue that such activities enable volunteer organizations to thrive, they are satisfying and healthy for the volunteers, they give the volunteers experience and contacts that can help them find a job, and so on. Why is there a limit at all, one might ask? Isn’t volunteering always a good thing for both the participant and the recipients of the work?

The argument against it (DK) is that it reduces the need for paid work and keeps more people unemployed. The unemployed are in effect taking jobs away from themselves. They also have less time to seek paid work. A two-year study showed that the more time the unemployed spend on volunteer work, the longer they remain unemployed. Every spokesperson for the parties in favor of the change also adduces the need for such limits and maintains that the new ones provide a better balance.

Rules and subrules

The rules also distinguish between voluntary social activities, which are not subject to these limits, and voluntary unpaid work, which in principle could be performed by paid employees. They also distinguish between two subcategories of voluntary unpaid work: operations and maintenance on the one hand, and anything else on the other. According to the reform, it will now become possible for people to perform minor operational and maintenance tasks with a reduction in benefits in small organizations that do not ordinarily pay people to do such work.

These are the nuts and bolts of the nanny state. The rules on unemployment and illness benefits reportedly fill 26,000 pages (DK). I don’t know the extent of similar rules on volunteer work in other countries, and I don’t understand the economics behind the criticism of the reform. It seems unlikely that, if people are prevented from volunteering, an organization will always be able to hire a paid employee to fill the job.

Surveillance and criminality

The other question that comes to mind is, who’s counting? How do the municipalities, which administer unemployment benefits, know whether Assistant Coach Lars spent four hours or five hours with his six-year-old and his soccer teammates last week? Does the picnic lunch after game count as well? Driving the kids across town to a game?

The unemployed need to report to the municipality about their job-seeking activities, but are they questioned about everything else they do? Are the positions of volunteers published in association documents? Are fellow citizens encouraged to rat on volunteers as though they were working in the shadow economy to evade taxes? People on early retirement must report earned income, which above a certain amount can also reduce benefits. But I doubt that they need to show up at public agency regularly to report on their leisure activities.

Whose money is it?

Another factor to remember is that both unemployment benefits and early retirement benefits are based on individual contributions to programs resembling insurance policies. Both of them receive public subsidies, but any reduction in benefits for exceeding these limits represents a proportional loss of one’s own contributions. One’s own taxes also go toward the subsidies.

The reform is a positive step toward a more realistic treatment of social behavior. There is much less charitable givingin Denmark than in the US because the state takes better care of people in need and taxpayers feel they “gave at the office.” Because of the large number of clubs and associations, volunteering to support and administer them is probably the main way that individuals express their altruistic impulses. And the unemployed have more time to do it and probably derive greater benefits from it. If we return the basic question about what makes people in social democracies happier than those in countries with freer market capitalism, it isn’t because their bureaucracies have limited or criminalized such activity.