Centre for Labour Market Research (CARMA)

Aalborg University, Denmark

Flexicurity: The Danish Experience

Mads Peter Klindt, Research FellowCentre for Labour Market Research (CARMA)

Aalborg University mpk@epa.aau.dk

Presentation at the FORES labour market conference in STOCKHOLM

March 24, 2010

Outline of the presentation

• The Danish flexicurity-model• Nordic flexicurity profiles• The dynamics of flexicurity: some empirical

findings concerning labour market mobility• Time to turnaround? Some policy

recommendations for the Swedish government

The ‘Golden Triangle’ of Flexicurity

Active labour market policies

Traditional nexus between flexibility

and security (since 1899/1907)

Motivational effect of ALMP(1994/2001)

Qualification effect of ALMP (1994)

Flexible labour market

Generousunemployment

benefits

Source: Madsen (2006)

Flexicurity version 2.0

Unem-

ployment

Benefits

Flexible

Labour

Market

Education

and

CVT

Service, monitoring

and control

Job trai-ning

Source: Klindt (2010)

Nordic flexicurity-profiles

Source: Nordic Council of Ministers (2010)

Dynamics of flexicurity

• Moderate to low EPL reduces labour market segmentation and improves employer’s ability to adjust to changes through hiring and firing (flexibility).

• So, when hiring and firing is cheap, employers are less hesitant to hire; especially, this has an positive impact on youth employment rates.

• Good UB provides economic security for unemployed persons (security) and reduces the political pressure for better job security

• High and long lasting UB can create functional disincentives (such as reduced search intensity), however, it a has positive effect on workers’ willingness to take the risk of job-to-job mobility

• Furthermore, the negative incentives stemming from UB can largely be offset by ALMP through balanced systems of rights and duties.

Labour turnover

European Commission (2009)

Labour market segmentation and EPL

Source: European Commission (2006)

Youth unemployment

Source: European Commission (2009)

Mobility from temporary employment to other statuses (from one year to the next)

Source: Nordic Council of Ministers (2010)

Belgium

Finland

France

Hungary

Ireland

Netherlands

Spain

Austria

Czech Republic

Denmark

Sweden

Slovakia

Germany (West)

Great Britain

Italy

Greece

Slovenia

Northern Ireland

Poland

Portugal

Germany (East)

0

10

20

30

40

50

60

70

80

90

0 1 2 3 4 5 6

Job mobility: Experiences and attitudes

Average number of job transitions per person

Sha

re o

f w

ork

forc

e w

ith a

pos

itive

vie

w o

n jo

b m

obili

ty

R2 = 0,8401

R2 = 0,6195

Source: Own calculations based on Eurobarometer 64.1 (2005)

Policy-recommendations for the Swedish government

• The Swedish government has reduced the generosity of the UB, halved the UB-duration, but maintained a high degree of EPL

• These steps, together with increased self-financing in the UI-funds, may jeopardize Swedish workers’ willingness to take the risk of job-to-job mobility, and may result in a less dynamic labour market.

• From a flexicurity-perspective, Sweden should rather have preserved its UB system (generous benefits and collective risk pooling) while at the same time it should have reduced EPL to lower the economic burden on private enterprises.

• “Workers will be more inclined to take risks associated with job transfers if benefits are adequate during transition periods and if prospects for new and better jobs are real (…) if these conditions are met, dismissal procedures can be made considerably lighter, less costly and less time consuming” (European Commission, 2007)

Unemployment insurance in Denmark and Sweden

Com

pen

satio

n ra

te

90 %

80 %

Duration

300 days 4 years

70 %

Denmark also has problems…

Gap between registered and surveyed unemployment

Source: AE-raadet (2010)