(Bloomberg) -- Denmark’s government secured majority backing for measures to tackle labor shortages that threaten to derail an economic rebound that’s eclipsed most rich peers.

Prime Minister Mette Frederiksen’s Social Democrats clinched a deal with smaller parties to cut jobless benefits for fresh graduates and boost incentives for seniors to remain in the workforce, the finance ministry said in a statement late Friday. 

The plan would add an estimated 12,000 jobs, with Denmark’s economic output rising 0.5% by 2025 and 0.7% by 2030 as a result, it said.

The Nordic country’s economy, now clearly above its pre-crisis peak, has weathered the pandemic as one of the best among wealthy nations. Yet concerns of overheating are growing as Denmark’s gross unemployment rate fell to a 13-year-low of 2.8% in November and new vacancies are at record high.

An increasing number of Danish businesses are reporting that labor shortages are limiting production, Swedbank said this week. It also cited a risk that wage growth could exceed its forecast of 3% this year, eroding competitiveness.

The parties also agreed to temporarily set a lower floor to wages for foreign workers to help address labor scarcity in next two years. To get a job as an international recruit from July, a person’s annual wage has to be at least 375,000 kroner ($57,100) compared with 448,000 kroner minimum requirement so far. 

 

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