Centre for Labour Market Research,

Aalborg University, Denmark (CARMA)

Flexicurity:

What is it all about and can

any lessons be learned?Per Kongshøj Madsen

Centre for Labour Market Research (CARMA)

Aalborg University

www.carma.aau.dk

Presentation at the conference:

Responding to the Great Recession :

Labor Market Policies in Europe and the U.S.

Rutgers University Friday November 19, 2010

Overview

• A blend of flexibility and security:

flexicurity

• Flexicurity the Danish way

• Can you learn flexicurity?

• Flexicurity and the European Union

The basics of flexicurity

• The starting point: Flexibility and security are

not contradictions, but can be mutually

supportive

• Originally a Dutch concept from the 1990s

(with academic content added by professor

Ton Wilthagen, Tilburg University)

• Against both common sense and mainstream

economic theory

Rapidly rising media interest

Source: Infomedia

References to flexicurity in Danish media 2001-2008

Number of references to "flexicurity"

in seven nationwide Danish newspapers 2001-2009

0

20

40

60

80

100

120

140

2001 2002 2003 2004 2005 2006 2007 2008 2009

Nu

mb

we

r o

f re

fere

nc

es

And international research

Source: Number of new references to”flexicurity” on google.scholar.com

0

100

200

300

400

500

600

700

800

900

1000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

The basics of flexicurity

• Flexicurity arrangements can be

important components in achieving a

high level of “institutional

competitiveness” => Link to Lisbon

Strategy

• The two icons of flexicurity:– The Wilthagen matrix

– The Danish “golden triangle”

The Wilthagen Matrix

Jobsecurity

(keeping your

job)

Income security

(unemployment

benefits)

Employment

security

(getting a new

job)

Combination

security

(work-life

balance)

Numerical

flexibility (hire

and fire)

Functional

flexibility

(between tasks)

Working time

flexibility

Wage flexibility

Source: T. Wilthagen & Tros (2004)

Examples of flexicurity policies

Putting countries in boxes

Jobsecurity Income

security

Employment

security

Combination

security

Numerical

flexibility (hire

and fire)

Denmark

(for decades)

Denmark

(since1990s)

Functional

flexibility

(between tasks)

Germany

(Sweden?)

Working time

flexibility

Wage flexibility

Source: T. Wilthagen (2004)

Job tenure

The Commission: Job Mobility in the European Union, 2008

An urge for mobility!

Protection of ordinary employees 2008

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Portugal

Germ

any

Neth

erlands

Sweden

France

Finland

SpainKore

aGre

eceNorw

ayAust

riaPola

ndBelg

ium

Italy

Ireland

Denm

ark

Unite

d Kingdom

Unite

d States

EP

L-indic

ato

r

Source:Venn, D. (2009), "Legislation, Collective Bargaining andEnforcement: Updating the OECD Employment

ProtectionIndicators", OECD Social, Employment and Migration Working Papers, No. 89, OECD publishing,

Unemployment benefits

Source: OECD (2007) – Average of four family types and two levels of income over 60 months

Net replacement rates (NRR) 2005

0

10

20

30

4050

60

70

80

90

Italy

Gre

ece

Spa

inFra

nce

Por

tuga

lAus

tria

Belg

ium

Ger

man

y

UK

Luxe

mbo

urg

Swed

enNet

herla

nds

Nor

way

Finla

nd

Irela

ndDen

mar

k

NR

R

Expenditure for Labour Market Policy

2008

Source: EurostatPercent of BNP

The Danish Golden Triangle

Flexible

labour

market

Unemploy-

ment

insuranceActive

LMP

The basic

Flexicurity

nexus

Threat

effect of

LMP

Qualification

effects of

LMP

•Low job security

•High job-to-job mobility

•Rapid structural change

Income

securityEmployment

security

Educational

policy AND

MORE!.

30 %

20 %10 %

Is Denmark a hybrid?

Unit Year United

Kingdom

Denmark Sweden

Tenure Year 2005 8.2 8.4 10.6

EPL Index 2003 1.1 1.5 2.9

Net

replacement

Rate

Percent

of

Income

2005 62 79 70

Active LMP Percent

of GDP

2005 0.49 1.74 1.32

Sources: For average tenure: Auer (2007), Figure1; for employment protection: OECD (2004): Employment Outlook 2004 table 2.A2.1; for net

replacement rates: OECD (2007): Benefits and Wages, table 3.3; for ALMP: OECD (2007): Employment Outlook 2007 table 7.

How did the Danes get there?

• The 1899-agreement: The freedom of the employerto hire and dismiss workers

• An industrial structure dominated by SME’s

• State-supported unemployment insurance fundssince 1907 – and a major reform in 1970 increasedcompensation rate to 90 percent for low-incomegroups

• Strong corporatist structures and implicit socialcontract balancing interests of capital and labour

• The absence of Social Democratic majoritygovernments has preserved strong liberalistic traitsin the Danish welfare state

Learning flexicurity?

• The slogan: “Don’t protect jobs –protect mobility!”

• Many options for flexicurityarrangements – more than justcopying the Danish version

• Direct policy transfer is rarelypossible – one size will not fit all

European Council ended up believing in it!

In this context, the European Council asks Member

States to direct special attention to the key challenge of

"flexicurity" (balancing flexibility and security): Europe

has to exploit the positive interdependencies between

competitive-ness, employment and social security….

The Commission, jointly with Member States and social

partners, will explore the development of a set of

common principles on flexicurity.

Presidency conclusions, European Council, Brussels, 23-24 March 2006

The Commission’s view on flexicurity

Source: Communication from the Commission, June 2007

• Flexible and reliable contractual arrangements

(labour laws, collective agreements and work

organisation)

• Comprehensive lifelong learning (LLL) strategies

• Effective active labour market policies

• Modern social security systems that provide

adequate income support, encourage employment

and facilitate labour market mobility.

The outcome

• European Council agreed on eight commonprinciples in December 2008

• Four pathways for different groups of countriesbased on identification of ”flexicurity systems”

• Focus on reform packages rather than onindividual policy tools

• Flexicurity is now an integral part of theEuropean Employment Strategy, the Lisbon-agenda and the new EU2020-strategy

• Indicators have been developed (EMCO,2009)

• Reporting in National Reform Programmes

Pathways

Source: Pathways to Flexicurity – Turning hurdles into stepping stones. Report

from the European Expert Group on Flexicurity, 2007

Pathways

Source: Pathways to Flexicurity – Turning hurdles into stepping stones. Report

from the European Expert Group on Flexicurity, 2007

The Crisis and Flexicurity

• Rising unemployment makes it harder to

argue the virtues of lower job protection

(EPL)

• The crisis is hard on public budgets and

reduces the resources for security

arrangements (income support etc.)

• ”Model countries” have not proven to be

resistent to the crisis

The fall in employment

The decline in employment from national peak til 2009Q4. Source OECD LFS-data

The End?

• For flexicurity in Denmark or for flexicurity as a

European strategy?

• Challenges for the Danish version of

flexicurity?

– Globalization

– Can the Danish welfare state afford flexicurity?

– Support from social partners?

– Political support

Political support…..

“Still, I have faithin flexicurity. Itwill serve us wellin both the bestand the worst oftimes.“

Minister of Finance Claus Hjort

Frederiksen at London School of

Economics, March 16, 2009