Agenda
Flexicurity
In the past decade, flexicurity emerged as a central concept in the debate on how regulation of work and welfare could ensure consistency between the supply and demand of labour. The flexicurity debate can be seen as a response to structural challenges, which have already influenced policy development. This means that not all the structural challenges are new, but they have at varying speeds moved to the top of decision-makers’ agenda over recent decades.
Institutional Structure
Concept
Danish flexicurity can be described as a “golden triangle” combining a flexible labour market with low dismissal protection, a relatively generous social security system, and active labour market and education policies. Firms in Denmark gain global competitive advantages from a mobile labour force and government funding of public services and infrastructure, while workers benefit from domestic employment opportunities and continuing training.
ILERA (IIRA) World Congress 2012
Flexibility: hiring and firing
The flexible labuor market is characterized by high rates of job turnover and average job tenure comparable to liberal economies like the UK or US. High job-to-job mobility is generally found in countries with low dismissal protection. Firms in Denmark can fire and hire with few restrictions, and entrepreneurs can start new companies with a minimal amount of bureaucratic delay.
ILERA (IIRA) World Congress 2012
Currently, the Danish labuor market is one of the most flexible in the EU. Around 36 percent of Danes move within the country, the second highest ratio in the EU after Sweden (42 percent).
The World Bank
Social security: Unemployment benefits
The second element in Danish flexicurity is generous income security, especially unemployment benefits and social assistance for the unemployed. One of the main assumptions of flexicurity is that the availability of generous income replacements increases the risk-taking propensities of the labour force, thereby facilitating job mobility.
ILERA (IIRA) World Congress 2012
Active Labour Market Programmes.
The third element, active labour market policies have two important and somewhat contradictory functions: first, to motivate the unemployed to find work without assistance, and second, to qualify those who cannot find employment on their own. As a metric of active labour market policy effectiveness, long-term unemployment rates in Denmark have consistently remained among the lowest across the OECD.
ILERA (IIRA) World Congress 2012
History
Origin
In September 1899, the Danish Employers' Organisation (DA) and the Danish Confederation of Trade Unions (LO) signed the "September compromise", the first basic agreement regulating Danish industrial relations. The model created by the compromise strengthened the central organisations, which were thus jointly able to ensure extensive influence over labour market legislation in particular and the development of the welfare state in general.
Development
In the 1960s, labour market policy became an independent policy field in Denmark. Beside training programmes for unskilled workers and the institutionalization of continuing education of skilled workers, by an international standard very generous unemployment support system was established.
In 1994, the social democratic-led government implemented the labour market reform act with an emphasis on activation policies and reforms of the benefit systems that continued to be very generous in an international perspective but that comprised a shorter insurance period, strengthened eligibility rules, more restricted access to the unemployment benefit system and compulsory activation (e.g. through the introduction of individual action plans).
In 2003 a new labour market reform was introduced with less skill-upgrading and a stronger emphasis on measures as guidance and contact meetings and subsidized job training. Part of this is a change of active measures from more qualitative and attractive offers to more low-cost, low-quality offers to encourage unemployed persons to avoid active employment schemes and to encourage them to find a job of whatever sort.
Recent Status
To increase labour supply and employment, a number of labour market reforms have been implemented over the last few years, and several new initiatives are in deployment. Meeting the national employment target for 2020 requires further reforms. The government is planning a reform of the social assistance system, the early-retirement system, the “flex-job” system, and the sickness benefit system.
Budget
In 1989-1995 the expenditure on passive measures as percentage of GDP did not fall below 4 percent and the total expenditure on LMPs [Labour Market Policies] in the year of 1993, when unemployment peaked, was as high as 7.19 percent.
Among OECD countries, Denmark has one of the highest total expenditures on labour market policies (2.56 percent of GDP in 2008) as well as the highest expenditure on active labour market policies (1.35 percent of GDP in 2008).
In general, out of €13 billion devoted in 2010 to labour market policy, around 75 percent was spent on active instruments.
Key Features
Division
Since 1950, the agricultural sector has lost a workforce of 460,000 and the industrial sector has lost 170,000. The construction and civil engineering sector has grown by 60,000, the public service sector by 635,000 (!), and the private service sector by 655,000 employees.
Women in Labour Market
Danish women have the highest employment rate among women in EU countries [2010].
Lifelong Training
Eurostat Labour Force Survey (2009) found that Denmark had the highest rate of participation in adult vocational training in Europe. More than 30 percent of people aged between 25-64 years had participated in adult vocational training within the previous four weeks compared to a European Union (27) average of 9 percent. Participation in continuing training underpins a flexible labour market by increasing the employability, improving both their numerical and functional flexibility.
Challenges
Labour shortages
The demographic trends of today are reducing the workforce and employment as the historically large generations now leave the labour force and are replaced by smaller cohorts … This demographic trend is expected to reduce the labour supply by about 66,000 people in total between 2010 and 2020 while the total populations grows by more than 150,000. The decline in the labour supply will be greater if the trend toward fewer working hours continues into the future.
Gender equality
The latest of the annual reports from the Ministry of Employment (2010) reveals that the pay gap between men and women in Denmark has been more or less unchanged for most of the last 20 years. Overall men still earn more than women, but there are now more women who have attended a higher education institution than men.
Immigration from non-western countries
The high level of unemployment of immigrants compared to that of native Danes has been a very salient issue in Denmark. It continues to be a key factor both governing public opinion and public policies of integration and immigration management.
Prospects
Despite the fact that flexicurity can be seen as a response to structural developments, there are limitations to the insights it offers. A newly coined term for the tomorrow’s labour market is called mobication.
Mobication
Mobication suggests that security primarily comes from continuous education and training, meaning that employees will have access to further training in all stages of their working life. The aim is to have shorter periods of unemployment despite major economic upheavals. Mobication is an attempt to further develop the Danish flexicurity model, a model where flexible dismissal rules have been combined with relatively high unemployment benefit and active labour market policies.
Transition to Globalisation
The Danish “flexicurity model” has been launched as a third way between more deregulated Anglo-Saxon countries and stricter employment protection regulation in southern European countries. This model has been seen as “the new incarnation of the age-old claim that we can have both high levels of social protection and social inclusion and a competitive capitalist economy”.
Globalisation > Social > Labour Market
Transition to Political Tools
The Danish flexicurity model is promoted and advocated by the European Commission:
“At EU level, the Commission will work:
– To define and implement the second phase of the flexicurity agenda, together with European social partners, to identify ways to better manage economic transitions and to fight unemployment and raise activity rates;” Europe 2020
Political Tools > Regional > Europe > EU » Dom.Policies >Economy
Transition to Political Actors
Throughout the 1990s and first decade of the 2000s, Denmark enjoyed steady national economic growth and a consistently positive balance of trade in goods and services. While flexicurity cannot be singled out as the causal force behind this success story, the accommodative pattern of relations between business and labour made for a rather uniquely smooth transition from an economy dominated by manufactured goods and agricultural products to rising international trade in services.
Political Actors > Civil society > Trade Unions > National > Denmark
