Flexicurity

Trade and Labor according to the OECD Trade is good – 10% increase in trade translates over time into an increase of around 4% in per capita income in the OECD area Public is skeptical – “freer trade costs more jobs than it creates” (GMF, 2006) There is a loss of “good” jobs in manufacturing in favor of “bad” McDonald’s type jobs - The Flat World has permitted fragmentation in production - Unskilled workers are forced into the less productive services sector Has drawn political response - Demand for labor clauses in FTAs - Backlash against off-shoring - Resistance to changes to labor policy

“Something is right in the state of Denmark” 1.Denmark is Competitive – #5 in the WEF and the IMD for High Quality of Life – Highest life satisfaction in Europe (eurobarometer) 3.Low Unemployment – 4.2% in October High Participation – 78% 5.Few working poor – Low wage earners earn a higher percentage of the wage of high wage earners than the rest of the EU, and their absolute compensation is high 6.Dynamic Labor Market – Staff turnover: DK 23% - EU 16%, Newly hired staff (latest year): DK 15% - EU 8%

Underlying the success is the combination of flexibility and security. The Danish approach provides a combination of high labour market dynamism and relatively high social protection. It concentrates on employabiilty and income security instead of tenure and job security. It is a third way between the flexibility often attributed to deregulated Anglo-Saxon countries and strict job protection characterising southern European countries. Flexicurity

Flexible Labor Market The Elements of Flexicurity Active LMP Life Long Learning Benefit System Flexibility Low employment protection: Easy to hire and fire High job mobility: (23% turnover) Portable Benefits Low gross wage costs for employers Rapid structural change: job openings 250k jobs disappear, >270k new jobs

Flexible Labor Market The Elements of Flexicurity Active LMP Life Long Learning Benefit System Conditional Unemployment Insurance: 90% of former income (max 2,050 Euro pr. month) Unconditional Means Tested Social Assistance Subsidized Daycare Top-Notch Public Services: education, transportation, health, etc.

Flexible Labor Market The Elements of Flexicurity Active LMP Life Long Learning Benefit System Active Labor Market Policy Activation Social responsibility to work Subsidized Daycare Flexijobs for disabled

Flexible Labor Market The Elements of Flexicurity Active LMP Life Long Learning Benefit System Lifelong Learning Free university tuition Learning clauses in all collective bargaining agreements Government grants to support corporate education programs

The Social Partners and Flexicurity Little government involvement Few labor laws, no official minimum wage Courts rarely used Unions enforce agreements, not the government Unions don’t protect jobs Employers have the sole right to distribute work in the enterprise Unions focus on: creating new and better jobs upgrading worker skills ensuring suitable workplace conditions Very high unionization rates Unions have the right to organize Built over 100 years of continual dialogue

Conditions for Success The success of Flexicurity depends on a number of factors: 1.New job creation 2.Huge budgetary outlays 3.Low dependency ratio and high participation since it is funded by taxes on labor 4.Readiness for social compromise by unions and employers (flexible labor markets and the right to organize) 5.Inclusion of all industries and sectors 6.High percentage of organized labor

Critiques of Flexicurity Not good at integrating the unskilled and immigrants (IMF WP/07/36) - Creates a high-wage economy for skilled workers only - Denmark has high unemployment amongst 1 st generation immigrants - Rise in disability seekers, unskilled pushed out of the labor market Is it feasible in a country with low participation and budget difficulty? How much of the system is due to unique Danish culture? There are other successful models - Swedish unemployment lower over the past 30 years (IMF WP/07/36) - Anglo-Saxon model of high flexibility and low security has also achieved low unemployment rates

נספחים

Activiation Requirements IMF WP/07/36

Bibliography Anna Ilsoe, “The Danish Flexicurity Model – a Lesson for the US?,” Center for Transatlantic Relations, CAIS, Johns Hopkins University, Bredgaard, Larsen and Madsen, “The flexible Danish labor market – a review,” CARMA, Aalborg University, Christain Wise, Danish Labor Organization, Meeting, December ”Flexicurity,” The Reut Institute, Henning Gade,Danish Manufacturers Association, Meeting, December Leif Christian Hansen, ”Flexicurity and Danish labor market policy,” The National Labor Market Authority of Denmark, meeting and powerpoint presentation, December Zhou, “Danish for All? Balancing Flexibility with Security: The Flexicurity Model,” IMF, WP/07/36.