Combining a High level of Welfare with Flexibility Eurozone Countries?

– Is the Danish Labour Market Approach a Model for Stagnating 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 Per cent

20 18 16 14 12 10 8 6 4 2 0

4,3 4,4 4,7 4,9 5,6 6,4 6,7 7,5 7,5 7,8 8,5 8,5 9,2 9,5 10,1 16,1 17,2

NOTE: December 2005.

SOURCE: Eurostat.

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 High flexibility

Many job openings: • 800.000 job shifts per year • 300.000 new jobs per year • 300.000 jobs disappear each year

Generous Benefit system Benefits

High compensation for low-wage groups: 90 pct. Duration: 4 years

Motivation effect Qualification effect

ALMP Active labour market policy (ALMP)

Emphasis on upgrading of skills Test of availability

8 6 4 12

Average Job Tenure in OECD

Years 10 SOURCE: CEPS (2004).

8 6 4 12 10

Employment Security

Scale from 1-10 – the higher the number the more secure, 2001 9 8 7 3 2 1 0 6 5 4 (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) 9 8 7 3 2 1 0 6 5 4 NOTE: Figures in brackets are unemployment rates in 2001.

SOURCE: CEPS (2004) and Eurostat.

50 45 40 35 30 25 20 15 10 5 0 Participation in Continuing Education Per cent of employed, 2004 Source: OECD, Education at a Glance, 2005 50 45 40 35 30 25 20 15 10 5 0

3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0

Educational Costs at Company Level

Per cent of total labour costs for educational training in private companies, 1999 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 SOURCE: Eurostat (2002).

Flexible Regulation in Denmark

 Main Characteristics  Basic 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