New cash benefit reform hits refugees in particular

What do the new rules contain?

The bill was passed in the fall of 2024 and implements an agreement between the government (Social Democrats, Moderaterne and Venstre), SF, Radikale and Conservatives, and will enter into force on 1 July 2025. The new rules are “based on” the recommendations from the Benefits Commission on a reform of the cash benefit system. The Commission had been given a limited task to accommodate children to a greater extent, but at the same time not to increase overall expenses. 
 
The new benefit rates and requirements are linked to the new work obligation bill, which was already introduced on 1 January 2025. The work obligation and the reduced benefits for newcomers have in practice already applied to refugees and immigrants who arrived after 2008 but will be extended from 1 July to include everyone who has arrived since 1968, regardless of whether they were or have since become Danish citizens. Adoptees will be exempt from the work obligation as a result of a heated public debate, just as Danes working abroad for the state and their children are exempt. Less attention has been paid to the fact that Ukrainians under the special law have never been subject to the new requirements and work obligation and will thus receive higher benefits than all other refugees.
 
If you do not meet the requirement of at least 2½ years of full-time work (the work requirement) and have not resided (legally) in Denmark for at least 9 out of the last 10 years (the residence requirement), you will be reduced to the lowest rate and will be subject to the work obligation. The lowest rate corresponds to the level for those who are currently on ´self-sufficiency and repatriation benefit or transition benefit´ (SFHO benefit), and the very wordy name will thus disappear. The special low rates for refugees were first introduced way back in 2002 under the name ‘start-up allowance’, and after a short break in 2012 they returned again under the name ‘integration allowance’.

NEW RATES

Three basic rates (2025 level): 

➢ Minimum rate: DKK 6,789

➢ Basic rate: DKK 7,205 (young people living at home: DKK 2,925)

➢ Increased rate: DKK 12,498

All amounts are before tax. Most amounts above DKK 4,300 per month will be taxed by around 38%. The minimum rate without any supplements will give you around 5,700 after tax.
 
In addition, there will be a possibility of child supplement, single parent supplement, single non-parent supplement, special youth supplement, temporary adaption supplement and leisure supplement. However, the current possibility of support for high rent will be abolished.

• The minimum rate will replace the current ‘self-sufficiency and return benefit or transition benefit’ (SFHO benefit) and includes everyone who does not meet the residence requirement of at least 9 years of residence in the country within the past 10 years and the employment requirement of at least 2½ years of full-time employment within the past 10 years. It is targeted at people with a refugee and immigrant background.
 
• The basic rate is targeted at young people under 30 years of age without education, and the increased rate is targeted at people over 30 years of age and 25-29-year-olds who meet the employment requirement.
 
• The increased rate is given to those who are over 30 years of age and meet both the residence requirement and the employment requirement.
 
• Child supplement is given to all parents with dependent children, even if they do not live with their child. However, it is given as a single fixed amount, regardless of how many children you have.
 
• Young people aged 18-29 can receive a special youth supplement. However, this does not apply to young people who do not meet the residence requirement and the employment requirement.
 
• Leisure supplement amounts to DKK 450 tax-free per child, however for a maximum of 3 children in a family. However, children of parents on a fractional pension are not entitled to the benefit.
 
• An income limit of DKK 5,000 per month will be introduced for people on the minimum rate and the basic rate, and DKK 2,500 for people on the increased rate. This means that a wage income below these amounts will not be offset against the benefit.
 
• A new right to coverage of 100% of the expense for subsidized medicine for all people receiving cash benefits at the minimum rate, basic rate and increased rate, for people who have received cash benefits for 12 months out of the past 18 months (for children's medicine, the right applies from the first day). 
 
• Refugees who have previously received SFHO benefits will in future be covered by the same holiday rights as other unemployed citizens in a similar situation. They have not had the right to holiday before.
 
• A new right to clarification for all benefit recipients who are deemed ready to participate in job training, have reached the age of 30 and have received cash benefit for a continuous period of two years (e.g. for the purpose of resource courses, flexible jobs or disability pension). However, the right does not apply to those who are covered by the Integration Act and under the current self-sufficiency and return program or introduction program.
 
• Bonus for completed Danish course is abolished. The same applies to the 225-hour rule and the cash benefit ceiling.
 
• Time limits for unpaid employment and certain requirements for employers who engage citizens in ‘useful jobs’ and internships are removed.

What does this mean for the individual?

It is difficult to calculate exactly how the new rules will affect individuals. The Danish Institute for Human Rights has asked the government to calculate various examples of how different types of families will be affected financially, but this has not been done. The municipalities are sending out letters with personal information to all citizens who are covered by the new rules to explain how it will affect them. However, many have not yet received letters, and few will have the opportunity to reduce their expenses seriously – for example, find cheaper housing. Refugees are assigned to a municipality and to a housing unit and cannot move until they become self-sufficient.
 
In addition to the lower income, individual citizens can in the future be forced to stay for an unlimited time in unpaid internships and ´useful jobs´, and in practice work full time without pay.

EXAMPLES

In Refugees Welcome we have tried to provide some examples of refugee families based on the new allowances and requirements. All four households will be considerably below Statistics Denmark's relative poverty line, and also far below the Rockwool Research Foundation's minimum budgets from 2016. The figures in our examples should be taken with some reservation, especially for tax deductions.
 
A) is a 35-year-old man who arrived 3 years ago. He will receive the lowest benefit of DKK 6,789 before tax because he has not been in Denmark for over 9 years and has not yet had 2½ years of full-time work. He has 3 children, but they live with their mother. The mother receives the leisure supplement and child and youth benefits. A will receive a monthly child supplement of DKK 2,784, but it is only given for one child. He receives housing benefit of DKK 500. The Family Court has decided that he must pay child support to the mother for all 3 children. The lowest amount, the standard contribution, is DKK 1,603 per child in 2025, some of which can be deducted in taxes. The total contribution costs him approx. DKK 3,700. That leaves him approximately DKK 4.400 after tax to pay for left for rent, food, transport, telephone, etc. 
 
B) is a single young man who has been in Denmark for 7 years and has worked full-time for 4 years. But he has just lost his job because his employer went bankrupt, and he has not heard of an unemployment fund. So until he finds a new job, his income will be DKK 6,789 before tax and a housing benefit of DKK 500, i.e. approx. DKK 6,300 in total after tax. His rent, heating and electricity combines to just about the same amount. 

C) is a single mother of 35 with 2 children of ages 5 and 7, whom she supports by herself. She has been in Denmark for over 10 years and has had part-time jobs at times, but has not been able to work full-time because she has a bad back and one child requires special care. She will receive the lowest benefit of DKK 6,789 before tax, single parent supplement of DKK 1,638, child supplement of DKK 2,784, housing benefit of DKK 500 and a leisure supplement for both children of DKK 225 in total. In addition, she receives DKK 2,496 in child and youth benefits and DKK 1,677 in child allowance. In total, this small family of 3 will have approx. DKK 13,500 after tax to cover all expenses including rent.
 
D) is a married couple with 2 children, where one meets the residence and employment requirements, but the other does not. One parent will receive DKK 12,498 before tax with the increased rate and the child supplement of DKK 2,784, a total of approx. DKK 11,100 after tax. The other parent will receive the minimum rate of DKK 6,789 before tax and the child supplement of DKK 2,784, a total of approx. DKK 7,600 after tax. With two children they get DKK 4,000 in housing benefit, but since one of them is affected by the housing benefit limit, this person's share of the housing benefit will be reduced to DKK 363, so they only receive DKK 2,363 in total (as the housing benefit is split evenly between the adults living in the home before the limit is applied, their housing benefit is calculated as DKK 363 + DKK 2000). The family receives the leisure supplement for both children, DKK 900 in total, and child and youth benefits of approx. DKK 2,700 in total. Overall, the family will therefore have approx. DKK 24,500 per month after tax for 4 people. 

Which groups will be particularly affected?

Figures from March 2024 show that almost 95% of the total number of citizens on the current SFHO benefit are immigrants and descendants from non-Western countries. At the same time, the explicit purpose of the work obligation is to affect “many immigrants, especially women with a non-Western background, who are not part of the Danish labour market” (quote from the bill proposal).
 
The Ministry of Employment estimates that 22,000 adults will be covered by the new work obligation and end up on the lowest benefit. This will result in approximately 10,000 people having their benefits significantly reduced compared to today. In this connection, approximately 11,000 children will be affected by the family's significant decrease in income. Despite the new child allowance and the possibility of covering medical expenses, families will overall have significantly less to live on. One of the main reasons for this is the almost total abolishment of the previous subsidy for rent.

Children of refugees and elderly refugees are already affected by the principle of earning the right to certain benefits, which was introduced a number of years ago, and will be maintained. This means that you only receive full child and youth benefits 6 years after you have been granted a residence permit in Denmark, and you only receive full state pension or disability pension after you have lived here for 40 years. Furthermore, refugees have rarely managed to save much in private pension schemes and have very few assets. Many elderly and incapacitated refugees have only earned the right to a fractional pension, but they can apply for a supplement, which in some cases can bring them up to the level of a state pension.

How little can you live on?

Denmark no longer has an official poverty line. But Statistics Denmark defines relative poverty as a disposable income of less than half of the median income in the country. For a single person, the poverty line is therefore a disposable income of approximately DKK 12,000 per month. 
 
The Rockwool Research Foundation created a minimum budget back in 2016: the lowest amount that one can maintain a modest existence in Denmark for, based on expert calculations of what rent, food, transport, etc. cost. It should be remembered that the price of both housing and food has increased considerably since then. They found that a child cost a minimum of DKK 3,200 per month. A single person without children needed DKK 10,000 per month after tax, and a couple with two children would need DKK 23,000 in total. These amounts constituted approximately half of what was described as a normal budget. As our examples show, the new cash benefit rates are far below the minimum budget, even with various supplements. 

In 2018, the Danish Institute for Human Rights published a study of refugee families on integration benefits (as it was called at the time). At that time, these were approximately 50,000 people, including 20,000 children, divided into 8,000 families. The study showed that many struggled every day to afford food, medicine, transport, clothing, etc. and suffered great deprivation. The institute found that this was a violation of Section 75(2) of the Danish Constitution, which obliges the state to ensure a minimum subsistence level for people who cannot support themselves.

In defense of the low rates, it is often mentioned that lots of young people live well on SU (the state grant for students), which is at the same level. But this cannot be compared, as many students receive help from their parents, and most have a job on the side. In addition, you can take out a favourable SU loan on beside the grant. As a single parent, you receive a supplement of DKK 7,000 on top of your SU. Finally, this is a limited period with the prospect of a much higher income afterwards – so you can postpone expenses and make temporary solutions.

What does “work obligation” mean in practice?

Work obligation involves ‘useful jobs’, company internships and other small jobs. It can also be preparation for Danish lessons, job search and paid ordinary work. The work obligation can be a maximum of 37 hours per week, and the individual municipality must therefore assess specifically and individually how many hours the citizen can work and what type of work they can do based on, among other things, health considerations. 
 
At the same time, there will no longer be a limit on how long a person can be in a ‘useful job’. Furthermore, there will no longer be a requirement that a workplace must have a reasonable ratio between the number of employees without subsidies and the number of people in, for example, company internships and ‘useful jobs’. 

In other words, the municipality can force a person to perform unpaid work for up to 37 hours a week at the same workplace for years. And a company can in principle be run almost exclusively with unpaid workers. For example, you can set up a cleaning company where all employees are in unpaid internships. The employees cannot complain or resign, because then they will be deducted from the benefits that they can already barely live on. A single person on work obligation and at the lowest rate will in practice have to work for a wage of approximately DKK 40 per hour before tax.

Criticism from many sides 

The cash benefit reform contains several good elements, such as the right to vacation for everyone, medical coverage and more lenient deductions for supplementary income, and it appears generally simpler than the current rules. But the criticism has been massive, not least in the consultation responses prior to its adoption. Several organisations have submitted joint consultation responses to the cash benefit reform and the work obligation, even though they were two different bills.
 
The purpose of the work obligation is explicitly to get more people into employment, with a special focus on people with ethnic minority backgrounds and “women with non-Western backgrounds who are not part of the Danish labour market” (quote from the bill). This constitutes illegal discrimination and cannot be justified when the positive effects are not commensurate with the negative ones. The low benefits may be in violation of the Danish Constitution, as many will not be able to survive on them. The work obligation also poses a risk of illegal forced labour.
 
The Ministry of Employment estimates that the compulsory work system will cover a total of 22,000 people in 2026 but is only expected to lead to an extra 100 full-time employees in 2025, 300 full-time employees in 2026 and onwards, and 300 full-time employees permanently. 

Many organisations have pointed out that refugees and immigrants are disproportionately affected, and that there is no fair arguments to pressure this group more than other groups to get them into work. Furthermore, there have been very bad experiences with the ‘useful jobs’ that have already been tested. 

“The compulsory work system places ethnic minorities at a significant disadvantage, without it being sufficiently documented that there are strong reasons for this. It is doubtful whether the intensive intervention is commensurate with the number who stand to get a job as a result of the compulsory work system.”
  - Pernille Boye Koch, Danish Institute for Human Rights

The Danish Institute for Human Rights is concerned about whether the cash benefit reform will lead to individuals and/or families living below the basic subsistence minimum as a result of the legislative change. The government has not, as requested by the Institute, calculated the effect on selected family types. The Institute notes that the proposal for a new work obligation will particularly affect individuals with an ethnic minority background. The proposal therefore constitutes indirect discrimination based on ethnic origin, and the same applies to the work obligation. The Ministry has not convincingly explained why it is necessary to introduce a work obligation for this specific target group, but not for other cash benefit recipients.

DRC Danish Refugee Council is very critical of the fact that the proposal maintains a residence requirement and an employment requirement and thus a low minimum rate for selected citizens in society. According to DRC, it is particularly serious for newly arrived refugee children to be in a family with such a low income, when they have to settle in a new country, learn a new language and start school and daycare. This has consequences for their integration process and their ability to achieve positive connections with friends and local communities. In addition to the financial and practical aspects, the low level of benefits also has a stigmatizing effect when a different benefit is maintained for them than for other citizens in a similar situation. 

The Danish Association of Social Workers finds it problematic that the lowest benefit levels are maintained in the future cash benefit system, and that there is also a massive expansion – close to doubling – of the target group for the lowest benefits. This will keep people in poverty, and it makes it more difficult for social workers to work with citizens' challenges and help them enter the labour market, when stress and worries – as a result of unmanageable financial challenges – reduce citizens' mental energy. It is also well documented that children are affected by growing up in poverty. This affects the children's well-being and worsens their ability to do well later in life.

Many organisations working on humanitarian and social issues including support for the disabled and patients have warned that the cash benefit reform risks pushing a larger number of people with, among other things, mental illnesses into a life below the subsistence minimum. These are people who cannot fend for themselves. 18 social organisations – including the Church's Red Cross, the Council for the Socially Vulnerable and Hus Forbi – have issued a joint appeal to the government. They warn that vulnerable people risk being pushed into homelessness because the reform removes the previous support for particularly high housing costs.
 
In response to criticism that citizens with mental illness are being affected, the Prime Minister Frederiksen has just announced a new "dignity reform" that will exempt addicts and certain mentally ill people from a number of requirements and sanctions. She refers to this group as the most vulnerable citizens in society. It is remarkable that the pressure on one vulnerable group will be reduced, while at the same time the work obligation will put further pressure on another vulnerable group. Refugees are among those who score lowest on parameters such as poverty and poor mental and physical health. But the dignity reform only targets those who can meet the residency requirement and does not solve the problems of refugee families.

The effect of low benefits

It is remarkable that the government has chosen to ignore the massive warnings from civil society and lawyers, and throw many thousands into desperation and extreme poverty, precisely at a time when the state's finances are good, we have record low unemployment and historically few on social benefits. The very group that is targeted by the work obligation – non-Western immigrants – has been responsible for 80% of the progress on the labour market in recent years. 

The particularly low benefits for refugees actually cause a significant socio-economic loss, according to the Rockwool Foundation's Research Unit. Under the name ‘start-up allowance’, they were first introduced in 2002, and the effect has been thoroughly studied over the years. The low benefits have not put more women into work. A smaller proportion of men have been pushed into work more quickly but have not maintained their attachment or gotten better jobs. The negative consequences, however, are clear. Children who grow up in poverty have a higher risk of ending up without an education, with mental health problems and substance abuse problems – all of which are costly for society.

The Economic Sages also point out in their report “Danish Economy Spring 2024” that previous analyses of low benefits for immigrants show that such initiatives have a limited effect on employment in the short term, and that there is no long-term employment effect. 
 
There is general agreement among researchers that a long-term effect on employment among refugees requires a focus on upskilling, both in terms of language and education. ‘Useful jobs’ and unpaid internships are not effective tools. And if you want to include the women who are furthest from the labour market, it requires special efforts such as mentors, social networks and joint family efforts. Rigid requirements and financial sanctions simply lead to more women dropping out of the system altogether and living off their spouse's income.