Denmark may not soon be able to afford offering such a good deal to its people and this is a problem for the country.

Marking one of the highest levels in the rich world, Denmark devotes slightly more than 30 percent of its gross domestic product to social spending, through programs such as free health care for all, a $757 monthly stipend for college students and robust safety nets for the less fortunate all cost money.

Such a “generous welfare system requires robust public finances,” says the Organisation for Economic Cooperation and Development. The OECD warned in a recent survey that the assumptions that underpin that view carry a high level of uncertainty even as Denmark’s programs “seem sustainable” for now.

Even though industry in Denmark frequently complains about shortages in skilled labor, an unemployment rate below 4 percent is one of Europe’s lowest. A future of more customers and fewer people around to pick up the bill is the problem that the 600 billion-krone ($91 billion) welfare system is facing in Denmark. The assumption is based on the population projections.

A new baby-boom has failed to have taken place in the country despite child benefits and an abundance of nurseries. Due to the minority government’s reliance on the anti-immigration Danish People’s Party, importing labor from abroad isn’t an option. Less than an eighth of the number of refugees who resettled in neighboring Sweden wa accepted by Denmark last year.

Denmark’s population is aging, like many other developed countries. Getting people to work longer is one of the possible solutions. Successive governments have increased the minimum pension age (to 68 years by 2030) and have already canceled early retirement schemes. Prime Minister Lars Loekke Rasmussen’s forthcoming 2025 economic plan could see more measures being announced.

Increasing of revenues is the obvious alternative to cutting costs. But with faltering productivity leading to an economy that’s now expanding at a slower pace than the euro areas, Denmark’s not doing too well there either.

Had Danes matched the kind of productivity gains seen in the U.S. since the mid-1990s, annual output would have been 360 billion kroner higher, boosting GDP by about 15 percent in the process, a government commission in 2014 estimated. American companies accelerated the deployment of computers and other technological advances during the mid-1990s.

It’s not too late to reap the rewards of automation according to the Confederation of Danish Industry,

“Robotics, artificial intelligence, connecting everything to the internet – it’s all so cheap now,” said Adam Lebech, who represent technology companies at the trade lobby.

Some of the 150,000 industry jobs that moved abroad after the financial crisis is being brought by development in technology in Denmark, believes Lebech.

For example, due to advances in robotics and 3D printing, Danfoss is now able to make more sophisticated thermostats in Denmark.

Helge Pedersen, chief economist at Nordea believes that robots are also part of the solution.

“Robots allow us to pull production back home,” he said, but they can also “help improve the return on welfare spending,” Pederson said.

(Adapted from CNBC)

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