A leaky Danish labour market

As Denmark’s demographic crisis deepens, Kelly Draper Rasmussen looks at how immigration policy may be contributing to the loss of international talent.

Images: Pexels / Jason Toevs / Kelly Draper Rasmussen

Text: Kelly Draper Rasmussen

Denmark is in the midst of a significant demographic crisis, in which an ageing population and younger people moving to large cities are causing communities to lose workers. Meanwhile, Danish universities cannot educate enough people in the shortage industries fast enough. Denmark is recruiting international workers in record numbers, but they are not staying longer than a few years.

Retention rates are falling fast

Dansk Industri recently examined international workers' retention rates and noted that 50% of EU internationals remain for more than six years, 40% of non-EU internationals here for work do so, and 25% of students educated here remain for six years. In 2007, Denmark had relatively high retention (75% over 7 years), and there was also a phenomenon of academics returning to Denmark after time abroad. By 2025, that pattern had reversed. Dansk Industri also noted that 'unskilled' labour retention is converging on 'highly qualified' rates. As in, 'getting as bad'.

Recruiting well, but leaking talent

Denmark is very good at recruiting international workers. Thousands arrive every year, but there is a leak in the bucket. Analyses, if they touch on root causes at all, will point out that international workers are highly mobile, so therefore, just like a force of nature, a roll of the gods' dice, there is no way of persuading them to stay. Is fatalism appropriate in these circumstances? I would like to kick the tyres on one of my hypotheses to see if there are any interventions open to Denmark to keep more people here.

Permanent residency as a retention bottleneck

I hypothesise that the difficulty of obtaining permanent residency for non-EU workers is part of what drives them away. To examine this possibility, I used migration data from the past 15 years. EU immigrants can get permanent residency automatically after five years (almost), no questions asked. Non-EU must meet a rigorous set of requirements after eight years (four years if they are unicorns with excellent Danish, etc.). Denmark has been systematically tightening these requirements over the past decade, while EU workers have maintained a stable five-year pathway. Looking at cohorts who arrived in a particular year and seeing how many of them 'convert,’ that is, receive permanent resident status, in the two years after they become eligible, shows the disparity in sharp relief.

“Denmark is very good at recruiting international workers. Thousands arrive every year, but there is a leak in the bucket.”

A widening conversion gap

For EU residents, the conversion rate is 10%. For non-EU, it is 3%. The EU conversion rate has deteriorated in recent years, but this is only because many more EU workers have been arriving, not because the pathway is becoming more difficult. Permanent residency grants increased from 4,000 to 6,500 per year, but arrivals more than doubled. Non-EU immigration has also increased, but the number of permanent residency grants has not changed.

Same contribution, different security

The work is the same. The contribution is the same. The only difference is their passport. For me, it seems plausible that people coming to work in Denmark might want the stability of permanent residency before they put down roots. Danish citizens and permanent residents receive two years of unemployment benefits (dagpenge) to find their next role. International workers on temporary permits? Six months to find a job or leave the country. Danish companies are happy to lay off large fractions of their workforce periodically, and if you can rely on (dagpenge), then that is no big deal. But if you have only six months to find a job or end your lease, move your children to a new school, pack all your belongings, and ship them without the assistance of a relocation package, your position is much more precarious and vulnerable. When studies investigate the reasons for leaving Denmark, this is often cited as one of the key issues driving people away.

“The work is the same. The contribution is the same. The only difference is their passport.”

Politics, incentives, and the cost of inaction

Why is it so hard for people to get permanent residency, even though Denmark desperately wants international workers, and Danish businesses do not want to spend any more than they absolutely have to on recruitment? Politically, tightening immigration rules has played well with voters and perhaps has been seen as consequence-free. We are entering an election year, and we have already seen, in the local elections, the rhetoric surrounding foreign nationals hardening. The question is: will the business community and the kommuner, reliant on international workers, push back against national political point-scoring, or will they simply continue to monitor the problem and publish an annual report on how much worse things have become?