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Paradise under pressure – Impacts of crisis and reforms on the Danish flexicurity model

Mikkel Mailand

Employment Relations Research Centre, FAOSDepartment of Sociology University of Copenhagen

Labour Market Security and Flexibility, Sheffield, May 28, 2015

08-10-2012

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Outline

1. What is flexicurity and why talk about it?

2. Three-leg version of Danish FC-model – ‘the golden triangle’

3. The context of flexicurity in Denmark

4. Impact of the crisis – some main labour market indicators

5. Responses to the crisis

6. Effects of the crisis and recent reforms on flexicurity

7. Conclusions

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1. What is flexicurity and why talk about it?

Why talk about flexicurity?

• alternative to neo-liberal and protective models, positive sum game

• DK has been presented as a best practice case of flexicurity

Wilthagen et al. 2004 – components and requirements

• flexibility: external numerical, time, functional, wage• security: job, employment, income, combination• deliberate and synchronised; should incl. disadvantaged groups

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2. A three-leg version of Danish flexicurity – ‘the golden triangle’

The Danish flexicurity-model according to Per K. Madsen et al.: How the highly mobile labour market is working

Flexible labour market

Active LMPGenerous

welfare schemes

The main axis of the flexicurity

model

The qualification effect of the LMP

Motivational effect of ALMP

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3. The context of flexicurity in Denmark

The broader Danish model for labour market regulation• historically rooted model, not a deliberate strategy• strong labour market organisations • self-regulation and social dialogue: collective agreements with high

coverage levels – important for flexibility and less for security

Other important contextual features • highly skilled labour force and high minimum-wages • affordable childcare facilities• extensive vocational and further education

Not everybody is covered equally by both parts of the model • ideal type flexicurity-employee is a hourly paid blue-collar worker in

manufacturing and construction

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4. Impact of the crisis

The negative indicators

• relative increase in unemployment above EU-average (only Baltic states, BU, ES and IR above) – but from very level (ca. 3%)

• budget deficit and close to zero growth • recovery slow - compared to neighbours (Germany and Sweden)

The positive indicators

• outflow from employment in private sector during the crisis higher than in-flow, but not much. Hence, job-creating did still take place

• increase in long-term unemployment/all unemployment ratio, but still among the lowest in EU

• unemployment stared finally to decline in 2013

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5. Responses to the crisis and recent reforms

Governments reactions

• increasing state expenditures on unemployment benefits • government resource programmes (bank packages) to keep the

banks solvent and to facilitate loans and limited growth stimulus • max. unemployment benefit period reduced 4 > 2 years in ’10• various transition arrangements because 40.000+ did not find job• government ALMP: youth packages and long-term-

unemployment initiative etc.

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5. Responses to the crisis and recent reforms (cont.)

Social partner reactions

•no or limited wage-increases and benefits during private and public sector collective bargaining rounds 2010-13•increase in use of short time work arrangement (STWA) from ‘08 to ‘09 (30.000), but still limited compared to D (1.4 million in ‘09) •introduction of (limited) redundancy payments during CB 2010 in private sector – existed only in financial sector previously•additional unempl. insurances spreading – organised by trade union controlled unempl. benefit funds and insurance companies

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6. Effects of the crisis and reforms

Generous welfare schemes? (unemployment benefits)

•DK sources during crisis: replacement rates has been declining, for mid-income down to 50%, lower than in some other EU countries •OECD: DK net replacement rates declined2010 (UI reform) Now no. 10 in EU-15 (excl. cash benefit + housing support), no. 2 (incl.).•OECD: DK net replacement rates generous for low-income groups (no. 2/1 excl./incl.) and to some extent for mid-income (7/3)

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6. Effects of the crisis and reforms (cont.)

Flexible labour markets? (measured by OECDs EPL-index)

•Employment Protection Legislation measures terms of notice, severance payments and other obstacles for lay-offs•in ‘04 and ‘08 DK EPL-index second-lowest in EU-15, in ‘15 sixth-lowest. Reforms in GR, ES, IR and BL. EPL in DK unchanged •decline in job-to-job mobility, but still fourth-highest in EU

Effects on job-search (ALMP etc.)

•Aim of UI-reform inter alia to increase job-search•Evaluations of UI-reform on job-search and employment effects point in different directions. Too early to evaluate? •Hard-facts: 27 % of 40.000+ loosing their right to UI have got a job

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7. Conclusions

The golden triangle – problems as a research model

• grasp some important features of the Danish labour market, but:• generous welfare schemes most generous for low-income groups;

replacement rates reduced, but still above average comparatively • flexibility not changed, but not any longer especially high in DK• disagreements about the effects of ALMP • some groups more covered by flexibility than security and vice-

versa

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