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Paradise under pressure – Impacts of crisis and reforms on
the Danish flexicurity model
Mikkel Mailand
Employment Relations Research Centre, FAOS
Department 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 LMP
Generous
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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