Combining a High level of Welfare with Flexibility – Is the Danish Labour Market Approach a Model

for Stagnating Eurozone Countries?

Thomas Qvortrup Christensen

Confederation of Danish Employers

CICERO FOUNDATION

Paris 23 February 2006

The Danish situation on Labour market

Low unemployment in relation to other EU-Member States and a significant fall in unemployment in the 90s.

Unemployment

NOTE: December 2005.SOURCE: Eurostat.

4,3 4,4 4,7 4,9 5,66,4 6,7

7,5 7,5 7,8 8,5 8,5 9,2 9,5 10,1

16,117,2

02468

101214161820

IE DK NL

UK LU Sl EE IT PT CZ

EU25 BE FR DE EL SK PL

Per cent

The Danish situation on Labour market

Low unemployment in relation to other EU-Member States and a significant fall in unemployment in the 90s.

Lowest unemployment since 70s !

Among the countries with the highest participation and employment rates.

Low youth-unemployment

Main characteristics of the Danish employment policy

The active labour market policy in Denmark has traditionally been built on a broad political consensus

A high degree of regionalisation of the administration – 14 independent regions/counties in Denmark. (From 1. January 96 municipalities)

Close involvement of the social partners

– Support of active line

– Involved in the regional management and implementation

The Danish flexicurity model

Flexible

Labour market

Generous

Benefit system

Active labour

market policy

(ALMP)

Qualification effect

Motivation effect

High flexibility

Many job openings:

• 800.000 job shifts per year

• 300.000 new jobs per year

• 300.000 jobs disappear each year

BenefitsHigh compensation for low-wage groups: 90 pct.

Duration: 4 years

ALMP

Emphasis on upgrading of skills

Test of availability

Average Job Tenure in OECDYears

SOURCE: CEPS (2004).

4

6

8

10

12IC

EU

SD

KU

K IE NL

CZ

NO

HU ES

CH Fl PT PL D

GR SKF L SE B IT

OEC

D

4

6

8

10

12

Employment Security

NOTE: Figures in brackets are unemployment rates in 2001.SOURCE: CEPS (2004) and Eurostat.

0123456789

DK AT NL SE DE

FIN BE EIR

UK IT FR ES PT GR

0123456789

Scale from 1-10 – the higher the number the more secure, 2001

(4,3) (3,6)(2,2) (4,9) (7,4) (9,1) (6,7) (3,9) (5,0) (9,1) (8,4) (10,8)

(4,0)

(10,8)

Participation in Continuing Education

05

101520253035404550

DK

SE FIN

USA

SCH

UK

CA

SL AT

FR

BE

LU

XD

EC

ZEIR

PO

PT

ES

HU

IT EL

05101520253035404550

Source: OECD, Education at a Glance, 2005

Per cent of employed, 2004

Educational Costs at Company Level

Per cent of total labour costs for educational training in private companies, 1999

SOURCE: Eurostat (2002).

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

DK

SE NL

EI

FR FI EU

-15

NO

LUX

IT BE

DE

ES

AU

PT EL

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

Flexible Regulation in Denmark

Main CharacteristicsBasic principles established more than 100 years ago

Regulation at company-level through collective agreements

Disputes are handled by the two sides of industry solely

Employment Regulation Collective agreements the primary

regulation:

Wages

Working time, overtime

Redundancies, shop stewards, extra holidays

Sickness pay, maternity leave, pension, training,

Legislation only on specific topics:

Holidays

Health and safety

Equal pay and equal treatment (sex, race, religion etc.)

Regulation by Framework Agreements

Collective agreements cover aprox. 90 pct. of the employed in companies affiliated to DA member federations

Framework agreements

Supplemented by agreements at company level

Flexicurity in Europe?

Outcome of long history

Social partners role

Social security, pensions, health care are not a part of a specific position => cost for employees to change jobs are very small

High degree of flexibility for all groups

ALMP – availability-testing and upgrading is very expensive

Company structure. Mainly smaller firms

Challenges

Globalization

Ageing

High cost of educations, but DK not in top – and decreasing

Changes to the Danish system