The Nordic social model is based on the idea that people are in different phases of their life cycle net beneficiaries and net contributors of the social system. When the number of net contributors decreases in relation to the number of net beneficiaries this causes a serious financing problem.
At same time the room for higher taxation is limited because of an already heavy tax burden, increasing tax competition and declining trend of GDP growth. It would be also politically unsustainable if the contributing population felt that the welfare society means for them only costs but not benefits. Public services need to provide a good match with the preferences of a median voter.