Since the mid 70s the economic crisis has simultaneously created a crisis for the welfare state in most western nations. Since the beginning of the 1980s all over Western Europe unemployment has been at a very high level, thus presenting social policy with increasing difficulties in securing satisfactory living conditions for the long-term unemployed. This report presents results from a longitudinal survey of the magnitude and duration of long-term public support (i.e. unemployment and sickness benefits, social assistance and early retirement pension) and the incidence of poverty within the labour force in the 1980s in Denmark. It is established that by the end of the 1980s, between 15 and 25 per cent of the labour force were marginalised in the labour market and a considerable part (up to one third) of these were facing the risk of being poor. In contrast to Denmark - and most other OECD countries - Sweden has been able to keep unemployment at a low level using a comprehensive active labour market policy to combat unemployment and labour marginalisation. It is therefore concluded that high levels of long-term unemployment are not unavoidable or a 'natural' consequence of the economic restructuring that has taken place in most Western societies. To counteract long-term unemployment and poverty, welfare state policies in the 1990s must be directed towards a societal guaranteed minimum income for all citizens, combined with employment and educational measures.