Peter Hummelgaard: What we’re trying to do is to freeze the economy. This is very different from 12 years ago when, as you might say in American terms, we bailed out Wall Street and forgot about Main Street. This time around, it’s about preserving Main Street as much as we can.
After the lockdown, we knew that people would get fired in vast numbers. We wanted to avoid most firings, entirely. The best idea we came up with was for governments to pay businesses to keep employees.
It’s a radical plan. But radical times need radical responses. You could say it puts the old Ronald Reagan quote on its head: We are the government, and we are here to help.
Thompson: Tell me exactly how this plan works, because it’s unlike anything I’ve ever heard. Let’s say I’m a restaurant owner in Copenhagen who has to shut down my business for the next few months. I have 10 employees and, without income, I might have to lay off all of them in a week. I ask you for help. What happens now?
Hummelgaard: First, all of your employees would be eligible to receive income compensation as long as you keep them on contract. That means they are sent home, and the government pays you, the restaurant owner, up to 90 percent of their salaries—up to about $4,000 a month—which you would pay to the workers you still have on contract.
Second, the government would compensate you for fixed costs, like rent. For example, the government will pay a portion of your rent depending how much your revenue declines.
Third, if any of your employees get sick from the coronavirus, the government will pay their sick leave from day one. Generally, in Denmark, the employers are responsible for the first 30 days of paid sick leave.
Finally, we decided to postpone the deadlines of taxes like the value-added tax, and we’ve encouraged banks to extend credit to companies like yours.
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Thompson: This is such a generous program. Couldn’t I just defraud you? Couldn’t I pretend to send my workers home but secretly ask them to come into the restaurant and help with a secret delivery business? How do you prevent rampant, massive fraud?
Hummelgaard: We’re not naive. Of course there will be companies that try to take unfair advantage of this. But in Danish society, there has been broad support for these initiatives, and these programs have been rolled out with a large degree of trust.
While at first there won’t be thorough control mechanisms, since these programs are being implemented very fast, we have a few ways to find fraud. Employers have to have an authorized accountant sign for their compensation applications. Also Denmark is a thoroughly digitized country. The government can see—via tax records and mobile-payment applications—if some businesses are still operating as normal. And if we do find cases of fraud, we are going to ask for the money back with a fee on top, or even charge employers with a crime.