Achievements of Denmark’s Flexicurity: A Comparative View

Achievements of Denmark’s Flexicurity: A Comparative View

Why has Denmark’s concept of flexicurity been proven to be

the only European labour market model to combine

equity and security and efficiency?

What’s so special about Denmark? Denmark’s exemplary labour market model in the era of globalisation

For long, scholars such as André Sapir (2005: 2) have acknowledged that the recent era of globalisation^[1] has led to a “global economic transformation at a speed and of a scope unparalleled in history” which is increasingly giving rise to challenges for all European economies, industries and labour markets in multiple ways.

Between 1970 and 2003, the share of developing countries in developed countries imports of manufactured products rose from 10% to 45% (Sapir 2005). Additionally, scholars like Alan Blinder (2006) believe that in the future more and more impersonal service jobs^[2], too, will be offshored^[3] from rich to poor countries.

At the same time, Europe is likely to remain a target region of international migration (van den Berg 2004). Figure 1 gives illustrates to which extent push-and-pull factors^[4] have been causing rising immigration into European countries. Apart from asylum seekers and refugees, contract workers and professionals make up an increasing share of the migrants: Multinational companies increasingly view the markets for labour as international, so that those migrants move from country to country to perform specialized jobs in order for the firm to be able to “produce for world markets, operate factories, market products, and take advantage of all available knowledge and technology” (van den Berg 2004: 527).

Since the 1990s, labour markets across Europe have shown insufficient flexibility to adjust to these rapid transformations, and have therefore decreased in efficiency (Sapir et al. 2004). Figure 2 shows the efficiency of key European countries’ labour markets – indicated by unemployment rates – while figure 3 indicates income distribution inequality levels and therefore illustrates their respective equity and security, too. Surprisingly, only Denmark’s labour market managed to achieve high levels of equity, security and efficiency.

This raises the question: Why has Denmark’s concept of flexicurity been proven to be the only European labour market model to combine equity and security and efficiency?

It is the intention of this essay to explore this phenomenon. The first section of the essay presents Danish labour market model – the so-called concept of flexicurity. The second section will deal with the merits and demerits of the labour market models of the other European countries compared to Denmark’s flexicurity system.

How to achieve security, equity and efficiency? The Danish ‘flexicurity’ labour market model

Flexicurity refers to a combining system of a flexible labour market and a high level of employment security. It attempts to harmonize easy hiring and firing policies and active labour market policies which both guarantee high degrees of efficiency with a strong welfare system that ensures security: Generous unemployment benefits^[5] are counter-acted by strict requirements of availability for work^[6]. Flexicurity seeks to gain mutual benefits from balancing out the two seemingly contradicting aspects. Flexibility and security, therefore, must not be developed in isolation or coincidence. They must be achieved through deliberate and synchronized efforts (Madsen 2006).

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^[1] Michael D. Bordo (2002: 20) defines globalisation as “the increasingly close international integration of markets for goods, services and factors of production, labour and capital” since the 1970s.

^[2] Alan S. Blinder (2006: 114) defines impersonal service jobs as those services that “can be delivered electronically over long distances with little or no degradation in quality.” According to Blinder (2006), impersonal service jobs must be distinguished from personally delivered services, also simply called personal services.

^[3] With regards to labour markets, offshoring refers to the substituting of foreign workers abroad for domestic workers (Economic Policy Institute 2006).

^[4] According to Hendrik van den Berg (2004), push-and-pull factors are those conditions that generate immigration flows. In the context of the international migration of people, the term refers to conditions that “are bad or deteriorating in the country that people leave, or [...] attractive in the country that immigrants move to” (van den Berg 2004: 535-536).

^[5] Unemployment benefits (UB) refer to payments usually made by the state to the unemployed to ensure a certain level of social security. Depending on the specificities of the system, the scope and duration of the UB may vary. UB are usually made by the state “and are typically financed by a tax on those who work” (Sapir 2005: 6).

^[6] Availablity for work requirements refer to “regulations governing demands on availability for work in order to be eligible for benefits cover aspects such as job search questionnaires, occupational mobility, and geographical mobility” (Binder/Lyngesen 2004: 19).