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IN DATA: Danish incomes rise faster than any time in the last 30 years

The average income earned in Denmark shot up by 6.3 percent in 2023, the largest annual rise in earnings recorded since the early 1990s. We break down the numbers.

Published: 18 September 2024 14:46 CEST

IN DATA: Danish incomes rise faster than any time in the last 30 years

A pile of kroner coins and notes. Photo: Kristian Djurhuus/Ritzau Scanpix

The average pre-tax income in Denmark rose to 395,500 kroner in 2023, a 6.3 percent rise on the average in 2022, and the highest year-on-year percentage rise in real incomes seen in the country in 30 years.

The sharp rise was driven primarily by income from investments, with shares and funds which performed poorly in 2022 bouncing back strongly in 2023, leading to a near-doubling in the earnings booked by many Danes.

"The high increase in the average total income per person before tax in 2023 must be seen in the light of an extremely good year on the financial markets," Statistics Denmark wrote in a press release. The average pre-tax income from assets shot up 77 percent to 24,600 kroner in 2023, after the disappointing 29 percent decline in investment earnings received on average in 2022.

Income from salaries rose a very solid 4.1 percent, with the average pre-tax salary rising by 10,100 kroner to 255,900 kroner. Income from small businesses rose 3.8 percent from 265,500 kroner to 275,500 kroner, while income for the self-employed was flat compared to 2022 at an average of 18,600 kroner.

"It's hardly surprising that income is rising on average," Brian Friis Helmer, a private economist at Arbejdernes Landsbank, said in a comment. "Employment rose by more than 30,000 last year, and wages in the private sector, in particular, rose noticeably. With more Danes in work and more in the salary bag, it raises the average income."

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EXPLAINER: Would an EU minimum wage rule affect Denmark?

The EU court this week began hearing Denmark’s call for it to annull the EU’s minimum wage directive on the grounds that it contravenes the EU Treaty.

In the hearing, Denmark is arguing that when they adopted the directive in 2022, the EU Parliament and EU Council were in breach of the EU’s Article 153 (5), which states that the EU’s right to legislate over social policy should not apply to pay, among a number of other areas.

“I am pleased that the European Court of Justice will be given the opportunity to assess the case. This is a matter of principle,” Denmark’s employment minister, Ane Halsboe-Jørgensen, said in a press statement on the hearing.

Denmark, which has a longstanding tradition for a labour model under which wages and other conditions are set through agreements between trade unions and employer confederations, is opposed to the EU directive on principle – even if it’s unlikely to actually affect the wages of anyone who works in the country.

READ ALSO: Why Denmark doesn’t have a minimum wage and how to ensure you’re fairly paid

“The government, a broad majority in the Danish Parliament and the social partners have been against the EU’s minimum wage directive from the start. We are adamant that wage formation must take place in Denmark and not in the EU. We have 125 years of good experience in leaving the negotiations on wages and working conditions to the parties,” Halsboe-Jørgensen also said in the statement.

Despite the ongoing case, Denmark will still likely have to implement the directive – at least temporarily.

EU member states are required to implement the directive within two years, even if a case is ongoing, meaning the minimum wage order has to be transposed by Member States by November 15th.

In a statement provided to The Local, a spokesperson from Denmark’s employment ministry said that the government was currently in talks with unions and employer organisations over how to do this.

“The Danish government is currently analysing the Directive in close dialogue with the social partners in the Implementation Council (‘Implementeringsudvalget’) and will notify the European Commission at the latest by November 15h 2024,” they said. “The Minimum Wage Directive is expected to have limited impact in Denmark.”

It appears, then, that there is little concern over the directive’s impact on wages, despite Denmark taking the step of going to court to get it annulled and having to implement it in the meantime.

Denmark brought its case against the EU parliament and the EU Council in January 2023, with the support of Sweden, which backed Denmark’s position in June 2022.

The minimum wage directive adopted by the EU in October 2022 gives Denmark and Sweden, which share a similar union-based wage setting system, the right not to institute a minimum wage.

But such is the importance of the so-called “Danish model” for labour, the Danish government announced in January 2023 that it was taking the European Commission to the EU court to get the directive annulled, with Sweden joining the case a few months later.

The EU Commission has stated that it will respect the Danish model and will not force the country to code a minimum wage into law, but the Danish government wants the directive to be removed completely.

“It’s important to underline that the directive does not force Denmark to introduce a minimum wage,” Halsboe-Jørgensen said in January last year.

“But despite that, this is a case of legislation without precedent, which makes it a principal case. We insist that wages must be set in Denmark and not the EU,” she said, in comments similar to the ones she made as the court proceedings commenced.

The European Court of Justice is expected to give its judgement on Tuesday’s proceedings in the first half of 2025.

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