Words like entrepreneurship, startups and company growth seem, to many people, incompatible with high taxes, social security and social equality. It couldn’t be further from the truth.
Websites like https://thegedi.org/global-entrepreneurship-and-development-index/ rank Denmark 5th – ahead of United Kingdom and Ireland. In fact, The United States, Switzerland and Canada are followed closely by socialist welfare states like Sweden, Denmark and Iceland.
Clearly Denmark, with the world’s highest taxes, has a few lessons to learn entrepreneurs throughout the world. So what exactly is the X-factor behind Denmark’s seemingly paradoxical success in the startup sector? There are a few.
Denmark tops the charts for transparency as well as personal and economic freedom. Happy workers work more efficiently. Contrary to popular belief, more hours don’t necessarily mean more work done.
Denmark has one of the world’s shortest workweeks (37 hours), but is also one of the richest countries in the world per capita. Average per capita is actually the proper way to measure wealth in a team-oriented culture such as Denmark. While the rich are few and far in between, so are the poor.
Instead of the hierarchical American society, Denmark has a single class. As economists like Richard Reeves has pointed out, this actually increases social mobility much more than the American social inequality. This argument is so strong, that economists like Richard Wilkinson have declared, that the place to live the American dream is actually in Denmark.
It turns out, that high tax actually enables individuals to strive for success – which is part of the reason why the startup culture is so strong.
The few working hours is the result of politics that allow long vacations and a good work-life balance. Danes love their vacations, and without the prospect of exotic vacations and a rewarding life apart from work, they probably couldn’t work like they do. Instead of the American approach, where the stereotypical good worker is the workaholic, Denmark emphasizes the healthy worker whose life satisfaction translates into “arbejdsglæde” – the uniquely Danish term for happiness at work.
Perhaps not surprisingly, Denmark is also known as the happiest country in the world.
An equal and helpful culture
This egalitarian approach to entrepreneurship may seem odd, but actually pays off. While the United States may have a competitive environment where high-achievers are rewarded handsomely, the average worker as well as the entrepreneur experience much more stress every day.
When work colleges are opponents rather than team players, the atmosphere can become toxic and inefficient – rich in competition but poor in actual results.
In small startups, where everyone needs to get along and work together, this is especially harmful. The added stress of competing against coworkers can result in stress-related absence, which is harmful for everyone in an emerging business. The many vacation days in Denmark previously mentioned certainly help with this.
The security net
Benefits for Danish workers extend far beyond the long vacations. The socialist welfare system that evolved intellectually in the 50’s and politically in the 60’s and 70’s have provided Danish citizens with outstanding social support in hard times.
The service, known as “Kontanthjælp” (literally, cash help), is the most generous of its kind not just in mainland Europe but in Scandinavia as well. The rate is so high, that it is double that of Denmark’s nordic neighbor, Sweden. Everyone who is jobless and searching is eligible for Kontanthjælp, but it doesn’t end there.
Way back in the beginning of the 20th century, the emerging workers unions began to establish so called “a-kasser” (unemployment funds), which offered significantly higher monthly support for its members than Kontanthjælp.
To this day, the unemployment funds (known as ”Dagpenge”) ensures that recently jobless Danes can search for new employment without the added stress of economic problems. The A-kasser are private, but to a large extent funded by the state. The benefits of A-kasser so far outweigh the monthly membership costs, that 70% of the Danish workforce have membership.
You can find all the rules regarding “dagpenge” here (site in Danish).
In the Danish work sector, the manager is expected to know his/her employees as humans first and foremost. While nobody has the time to sit down and chat with everyone, leaders are expected to have an interest in the wellbeing and general events of their workers.
This way, the leader makes sure he has the support of his employees without he would never have a company to lead.
This mutual friendliness is partly enabled by the flat hierarchy, which enforces lunchtime break – during which the CEO sits with his employees.
The stereotypical arrogant but successful boss would be hard to find in this environment, where work satisfaction includes personal relationships all the way up or down the social status ladder. While certainly possible, such a leadership will in many cases be short-lived.