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2 Flexicurity in Denmark
of working people for secu- how the three main compo- The Danish lab our market is
rity at the social level. nents of Flexi security come quite dynamic
together in a single interlin- Thus, the Flexicurity model
Some features of the ked system. goes hand in hand with
Danish model the quite dynamic Danish
Employment security before labour market and its cha-
job security racteristic high job mobi-
Flexicurity’s three main The readjustment of the lity. Roughly 30 percent, or
components Danish labour market to about 700,000 wage earners,
Flexicurity may be descri- this line of thinking has had change jobs every year.
bed as condition or also as a number of positive effects: Danish wage earners have
a strategy. The formula for Flexicurity means employ- on average had more jobs in
Danish Flexicurity today ment security over job the course of their working
has three main components: security, and on the Danish careers than their counter-
labour market workers and parts in other EU countries
• Fleksibility in hiring employers have come to the (Cf. Fig. 2).
mutual understanding that
• A social welfare system if security in the individual A major cause of this high
job is non-existent, the best mobility is that wage ear-
• An active employment solution is to provide good ners encounter practically
policy opportunities for employ- no set barriers to changing
ment. jobs. For example no one
Easy to hire and fire, easy to loses his or her entitlements
get welfare support
It is easy for companies to Figure 2
hire, and also to fire, while
work time and wages are DENMARK HAS THE HIGHEST JOB MOBILITY
decided in the individual
company. If a person finds
himself or herself jobless, Average number of jobs to date for a wage earner 2005
the jobseekers allowance 7 7
system, with payments very 6 6
near the minimum wage,
is available. In return, an 5 5
unemployed person must
4 4
be willing to find a new job
and to help that person find 3 3
the way back to work quick-
ly, the measures provided 2 2
for by the active employ- 1 1
ment policy are available;
namely, assistance in fin- 0 0
AT IT EL BE DE EU-25 FR NL FI SE UK DK
ding a job, on-the job work
experience, skill upgrading,
etc. That, in a nutshell, is SOURCE: Eurostat, Eurobarometer 2006, Europeans and Mobility.
Flexicurity in Denmark
3
to a pension, to earned Figure 3
holiday time, etc. This is
not so in many other coun-
tries where entitlements EASIER TO GAIN ACCESS TO THE LABOUR MARKET
are linked to the individual
company. This is often the Per cent, 2006 Long-term unemployment Youth unemployment
case with pension systems 60 60
for example.
50 50
Many job openings make it
easier to come on to the labour 40 40
market
The high job mobility on 30 30
the Danish labour market
creates many job openings, 20 20
which in turn makes it
10 10
easier for more vulnerable
groups to find a new job. 0 0
On the other hand, the high DK NL IE DE UK PT EU 25 ES FI HU BE SE IT FR GR PL
rate of job changes means
that many persons are hit by NOTE. Long-term unemployed is here defined as unemployed for more
unemployment. Lastly, the than one year in percent of all persons employed. The Swedish long-term
many job openings are of unemployment figure is from 2004.
major significance for youth SOURCE: Eurostat, Labour Force Survey, harmonised unemployment.
unemployment as well as
long-term unemployment, and security of income. On locally, and can therefore
which are much lower in the contrary, flexibility is a be flexibly adapted to the
Denmark than in the rest of requisite, and necessary if individual company’s com-
the EU (Cf. Fig.3). there is to be a social wel- petitive situation. Within
fare net. Thus, it is relatively the domain of the Danish
Flexicurity triangle easy for a firm to hire and Confederation of Employers
In the following we shall fire in Denmark, which (DA), 98 percent of workers
take a closer look at the means that firms need not are covered by agreements
main features of the three be hesitant about expanding that have established that
principal components of their workforce when busi- the number of hours wor-
Flexicurity: flexibility, so- ness is going well. If it is ked per week can vary as
cial welfare, and an active very difficult to reduce staff, long as the average stays
employment policy. firms will think twice about around 37 hours considered
expanding their workforce over a relatively long pe-
Flexibility should the opportunity pre- riod.
sent itself.
A sense of security makes for Flexicurity makes for greater
flexibility Flexicurity also entails local flexibility in setting wages
In Flexicurity there is no solutions, where working Flexibility is setting wages
contradiction between hours and wages are agreed is also local; the chance of
flexibility in employment
4 Flexicurity in Denmark
Figure 4 finding local solutions is
greater and wages are more
and more often being set by
FLEXIBILITY IN SETTING WAGES the individual company (Cf.
Fig. 4).
Proportion of employees whose wage can be negotiated
Centrally Locally
Danish wage earners feel
secure in their jobs
Flexibility in employment
16 does not create a sense of
insecurity among wage ear-
34
ners. On the contrary, Da-
66 nish wage-earners find tat
84
the system is working well,
and feel more secure in their
jobs than wage earners in
other EU countries, despite
1989 2005 the fact that Flexicurity does
not really give job secu-
rity, but rather security in
NOTE: DA/LO domain. employment. Cf. Figure 5).
SOURCE: DA.
The dynamic on the Danish
Figure 5 market makes it easier for
the individual to find just
the job that best fits his
JOB SECURITY or her qualifications. This
effective use of workers’
Scale from 1 to 10, the higher the number the higher is job security, 2001 resources is clearly an ad-
10 10 vantage to workers as well.
Measurements of job satis-
(3,9)
(4,8) (3,9) faction show that Danish
8 (7,0) (4,8) (7,7) (8,2) (4,4) 8
(5,3) (6,8) (9,4) (8,6) workers top the list compa-
(7,7)
(8,9) 6
red to the other European
6 countries (Cf. Figure 6).
4 4
2 2
0 0
DK AT NL SE DE FI BE IE UK IT FR ES PT GR
Flexicurity in Denmark
5
Figure 6 stered with the local job cen-
tre and if he or she has been
a member of an unemploy-
JOB SATISFACTION ment insurance fund for at
least one year, and has been
Number of employed 2006 in full employment for at
100 100 least 52 weeks of the prece-
ding three years. For part-
80 80
time employed somewhat
different but otherwise pa-
rallel rules apply.
60 60
Public income transfers are
40 40 supplemented in collective
bargaining agreements
20 20 Income transfers as an al-
lowance for unemployment,
0 0 illness, and maternity leave
DK NO UK CH AT BE DE NL IE LU SE PT FI FR ES IT EL are regulated and finan-
ced primarily from public
NOTE: The number of employed who are satisfied or very satisfied with their funds. In the past 10-15
job. years collective bargaining
SOURCE: European Foundation for the Improvement for Living and Working agreements have provided
Conditions (2006). for a supplement to income
transfers from public funds
Security at the social labour market who have on a number of points, for
level taken out unemployment instance, wages during
insurance. For the unemplo- illness or during mater-
Economic security when one yed without unemployment nity leave, in which cases
loses job income insurance, the social welfare employers supplement
Income transfers – from the net provides cash assistan- public income transfers for
public purse or from emplo- ce. The social welfare net a limited period up to the
yers – which replace job enables the unemployed to full wage or a wage ceiling.
income if a worker becomes concentrate on finding new In addition, since the early
unemployed, becomes ill, employment. nineties the two parties
goes on maternity leave, on the labour market have
etc, helps to prevent people Unemployment insurance enlarged the pension pro-
from losing hearth and funds pay our allowances vision so that the employer
home if they unexpectedly Insured unemployed per- now pays 2/3 of the pen-
lose their job or are unable sons, whose unemployment sion provision.
to work for a time. is not of their own making,
are entitled to a jobseekers’
The jobseekers’ allowance allowance from the first day
system is exclusively for they are unemployed, if the
unemployed persons on the unemployed person is regi-
6 Flexicurity in Denmark
Dane may receive a Figure 7
jobseekers allowance for four
years
Another special feature of PARTICIPATION IN ADULT AND CONTINUING EDUCATION AND TRAINING (VEU)
the Danish jobseekers’ al-
lowance system is that the Proportion of 25-64 year-olds, 2006
benefit period is quite long. 35 35
In Denmark a person may
continue to receive this allo- 30 30
wance for up to 48 months, 25 25
which is one of the longest
benefit periods in the entire 20 20
world. In Finland the maxi-
15 15
mum period for receiving
benefits is 23 months; in 10 10
Sweden it is ten.
5 5
An active employment 0 0
policy SE DK UK FI NO NL EU-15 DE FR
Flexicurity in Denmark
7
(DA) shall be entitled to two since a bite is taken out of unemployment in Danish
weeks further education per their free time in any case. society never become exces-
year, paid for by the firm sive.
but chosen by themselves. The historical background
of Flexicurity The September Compromise
Employment policy should laid the foundations
bring to light skills… There is no fundamental
The active employment Business and labour have political regulation of the
policy also has the function developed the system together labour market in Denmark.
of discovering what jobs The Flexicurity formula was Business and labour have
are open and what type of not invented by chance. It together created a place for
unemployed persons are is a product of more than a the labour market. The 1899
available on the labour mar- hundred years of evolution September Compromise,
ket, so that the best match on the Danish labour mar- in which the key industrial
possible can be found bet- ket – a development that and labour organisations
ween jobs and workers. For owed much to the Danish signed the Basic Agreement,
instance, this might mean collective bargaining model. marked the start of the
that in periods of economic Labour and business have endeavour to establish a col-
upswing the focus can be together crafted the system lective bargaining system in
on what types of qualified over time – for the most Denmark. The Basic Agre-
labour is available from part in collective bargai- ement established the fra-
abroad, if there is a labour ning negotiations but also mework within which busi-
shortage on the Danish in negotiations in which ness and labour negotiated
labour market.. the government and other the terms and conditions
parties have been involved. of wages and employment,
And support effective job- One example is the tripar- and this principle continue
seeking tite agreement of 2006 on to this day.
A third function is to more adult and continuing
support and assist the education, in which the A high level of organization is
unemployed in making government pledged to a Danish trait
their job-seeking more ef- find one billion crowns for It has been a feature of the
ficient. This is a voluntary this purpose if labour and Danish labour market that
offer, where the takers are business could also agree to both workers and employe-
required to participate in prioritise the project in their rs have always been highly
course on how to look for collective bargaining nego- organised. This ensures that
work or to search for a par- tiations. collective bargaining agre-
ticular job. Such incentives ements always have a broad
can contribute to the for- Combating unemployment is coverage and a high degree
mation of a more effective written into the constitution of legitimacy.
job-seeking strategy as a Combating unemployment
consequence of the ”moti- has a central place in eco- The collective bargaining
vation effect,” as it is called, nomic policy. At the same system is not only central;
that is, the unemployed will time it has also been regar- it extends down to the very
prefer an ordinary job to ded as society’s obligation workplace where works
positive activating measures to ensure that economic councils and shop stewards
8 Flexicurity in Denmark
negotiate with management Working together with sons of working age who
over everything from wages politicians promotes mutual are outside the labour mar-
to job content. understanding ket. A very large portion of
The broad and thorough these are at the margins of
The system has a smooth coverage afforded by collec- the labour market and there
conflict resolution tive agreements makes mu- are numerous signs that the
If a disagreement arises tual understanding among social welfare net can be an
over the employment si- those responsible for the impediment to getting a job.
tuation between employer provisions of an agreement If it is hard to see the benefit
and worker it is of crucial (employee and employer getting a job will bring, a
importance that a solution representatives) and those decline in the job supply is
that all parties will respect responsible for formulating the obvious consequence.
is found quickly and easily. the laws (politicians) cru-
It has often been suggested cial. A key component in the Many are unable to work,
that the secret behind the Danish Flexicurity model is some do not want to work
success of the Danish labour that employers and work- Tackling some persons’
market is this smoothly ers are in constant dialogue unwillingness to take a job
functioning system, which with the political system is one of the tasks the active
labour organisations and whenever new labour legis- employment policy is meant
employer organizations lation is needed. This en- to address. But – and there
have built up together. ables both to be responsive are a number examples
to signals coming from the that will illustrate this – the
Conflicts are dealt with within society at large which may employment system has not
the firm then are dealt with in nego- been fully able to meet the
Labour and management tiations that may then make demand of businesses for
have a long tradition of new and perhaps inflexible workers, despite the fact
resolving most disagre- legislation. that unemployed persons
ements themselves through were ready and waiting to
local negotiations within Flexicurity’s challenges step on to the labour mar-
the firm. More than that, ket.
quite many conflicts are Flexicurity is not perfect
prevented and averted by With such good results, and Low-paid jobs are
internal works councils set so much positive attention, disappearing because of high
up in firms in the wake of one is tempted to believe transfer incomers
the aforementioned coop- that Flexicurity was perfect The relatively high Danish
erative agreement. With and has fully evolved as a benefit levels also mean that
this conflict-solution system labour market model. But it there are quite a number
disagreements big and is not so simple. of jobs that are simply not
small can be resolved wi- to be found on the Danish
thin a firm with no outside 950.000 are outside the labour labour market. Jobs paid at
intervention. market levels near the bottom of
Even though employment public income transfers are
and participation in econo- very difficult to fill if they
mic life is high in Denmark can be filled at all. This is
there are still 950.000 per- especially problematic for
Flexicurity in Denmark
9
the large group of refu- Figure 8
gees and immigrants who
are outside the workforce.
Many of these have no skills DEGREE OF COVERAGE OF UNEMPLOYMENT
that can sustain a wage at
the same level or just above Share of all adult DA/LO domain, 2005
the transfer income. 16 16
10 Flexicurity in Denmark
troduced during that same off on the labour market The population makes
period the Danish system is cannot be copied part and demands on the labour market
still relatively costly. parcel. But the underlying The population at large is
thinking behind Flexicurity constantly making new
Flexicurity is forward- is arousing considerable demands on the labour
looking interest. Many European market as well. The demand
countries, for example, for more leisure time, more
have tried to create job consideration to families
Pioneer of tomorrow’s day? security by making it dif- with children or some other
Does the Flexicurity model ficult if not impossible to demand are of importance
have a secure future? There dismiss workers. The re- for collective bargaining ne-
is no guarantee that even if sult has been that business gotiations and for how our
the Danish labour market have been reluctant2 to hire system is set up.
had flexible rules for dismis- new staff for fear that they
sals, and high benefit levels would not be able to get Today the Danish model is
in the 1980’s the Flexicurity rid of them should they no riding high in Europe. But
mode in place at the time longer be needed. The result without change it will lose
did not prevent a very high in such countries has been its position. Fortunately the-
unemployment rate and a a high unemployment rates re is much to indicate that
weak Danish economy. and, not least, high youth a capacity for change and
unemployment. adaptation is indeed one of
Other models have been the very special features of
successful Dynamic model is an the Danish model.
It is worth mentioning that advantage in globalisation
countries such as Ireland The Danish Flexicurity
and Great Britain, which formula is evidence that
provide only very modest unemployment can be
benefits to the unemployed, reduced with a model that
also reduced unemploy- gives both flexibility to busi-
ment radically in the nine- nesses and income security
ties. to wage-earners. But the Da-
nish labour market model is
Flexicurity arouses interest in constant change – which
The Flexicurity formula is is also urgently neces-
at present playing a major sary, since the challenges
role in the European debate constantly are constantly
and in efforts in the EU to changing their character as
make the European labour well. Global competition is
markets function better, i.e., becoming ever more bitter:
to ensure a higher employ- Yesterdays winners often
ment rate, a lower unemplo- become tomorrow’s losers,
yment rate, and greater and valuable skills within
growth. The especially one sector can become use-
Danish institutions with its less in just a short time.
two strong partners facing
Flexicurity in Denmark
11
FLEXICURITY
DANSK ARBEJDSGIVERFORENING
VESTER VOLDGADE 113 T 33 38 90 00
1790 KØBENHAVN V F 33 12 29 76