Employment challenges in the future By Nina Røhr Rimmer Associate Professor, MSc Econ University College Northern Denmark – Business March 2013

THE BACKGROUND for EU problems Long term situation Demographic change – ageing workforce Globalisation and competitive pressures New economy: knowledge; services Climate changes But how does the crisis influence this trend? Does it alter the labour market fundamentally? What sort of structural impacts?

LABOUR SUPPLY Emphasis on quantity and quality Moving beyond employability A necessity is long term supply Raising employment rates of specific groups Women Youths and older workers More contentiously: immigrants Enhancing human capital Life Long Learning Basic and transferable skills

LABOUR DEMAND Link to macro circumstances Seeking to maintain employment levels Possibilities for forms of job sharing Stimulating demand in ‘new’ sectors Such as ‘green’ jobs Demand for specific segments of Labour Force Mainstreaming atypical contracts Getting rid of the term “atypical” Labour cost considerations Including tax systems

INSTITUTIONS Matching supply and demand Delivering quality employment services The components of flexicurity Facilitating adaptability Making transitions pay Burden sharing Reviewing employment protection laws Diminishing insider-outsider conflicts Especially a problem with immigrants both EU and non-EU

QUALITY Focus on wider aspects of employment Fairness in the labour market Equality Gender Other dimensions Over the life-course Work-life balance Working conditions Avoidance of low wage traps etc.

The European Society – Can we agree on one model? Free-market capitalist society and a welfare society inspired by the socialism project Social spending is high as a percentage of GDP (education, health) A substantial part of income is redistributed through taxation and social protection Eastern + Central Europe with no or little strategies. They need to invent/adapt to the rest of Europe

Can we agree on one model? Cont. There seems to be a large consensus among European leaders in politics, trade-unions or social partners on the point that there is a European Social Model (ESM), and that it needs to be maintained and developed. But what ESM? Can the ESM survive in a global world? The answer will be positive only if social protection is not a handicap but also a factor of productivity and competitiveness. Job stability must be an incentive for companies to invest in workers and for workers to invest in their company How do we overcome potential corruption?

EU = 4 models of „Welfare Capitalism“ The Anglo-Saxon or Liberal Model The Continental or Social Insurance Model The Mediterranean or Family-oriented Model The Scandinavian or Universalistic Model + The lack of model in Eastern + Central Europe

EUROFRAME-EFN Special Topic Report, Autumn 2007 Anglo-Saxon Model Pre-dominant role of markets, minimal role of the State Low degree of regulation High competition, sophisticated regulation of utilities Selective social transfers; i.e. means tested benefits Private insurances Welfare-to-work strategies Public health system and publicly-financed schools Anglo-Saxon Europe: United Kingdom, Ireland Anglo-Saxon Model Overseas : USA, Canada, Australia, New Zealand

EUROFRAME-EFN Special Topic Report, Autumn 2007 Continental Model Social protection organised on occupational basis Income-related transfers with low minimum standards High employment protection, generous unemployment allowances Employment rates rather low Contribution-based social insurance system for pensions, and unemployment Low re-distributive efforts, regressive tax structure (low wealth taxation, high taxes on labour and consumption) Co-operative industrial relations and coordinated wage bargaining Germany, France, Belgium, Netherlands, Austria, Switzerland

EUROFRAME-EFN Special Topic Report, Autumn 2007 Mediterranean Model Important role of supportive family networks Low transfers, but generous old-age benefits High gender inequality, low female participation rate High job protection but low replacement rate Some traits of paternalistic society remained Italy, Spain, Portugal, Greece

EUROFRAME-EFN Special Topic Report, Autumn 2007 Based on equality, social inclusion, universality Low job protection High level of social services, affordable and of high quality High employment rates and emphasis on gender equality Tax financed health system and unemployment benefits (partly) Progressive taxation, taxes on property and bequests Low taxes for business High minimum wages, high replacement rates, pensions with high minimum standards & income-related elements Cooperation between social partners business, unions and government Trade unions operates unemployment insurance and training Sweden, Norway, Finland, Denmark Scandinavian Model

Flexible labour market Unem- ployment benefits Active LMP Low employment protection High job mobility Income security Educational policy etc. Focus on better qualifications Right and duty to accept job offers High degree of compensation Min. 2 years in the insurance system The Danish flexicurity triangle

Flexicurity Model = a combination of easy hiring and firing (flexibility for employers) and high benefits (= security) for the unemployed High mobility in the labour market Permanent employments Rather high level of security Equal opportunities (and high employment rates for both men and women + elderly) Strong organisation on both sides of the labour market – very few conflicts High level of unionisation (80 %)

Salary in Denmark Relatively high salaries But high level of tax marginal tax rate of 51,5% Ca. 35% for income up to 55,000 Euro Collective agreements: for example 15 euro per hour for unskilled work Private negotiation and employment contract Other examples: Electrician30 Euro/hour 4,500 p.m.) Nurse4,000 per month Engineer6,500 per month Spec. Doctor10,500 per month

37 hrs./week Paid holidays – min. 5-6 weeks per year + 9 public holidays High salaries Flexibility concerning illness, child birth, family benefits Work-scheme pension contributions The Danish Labour Market

Working culture Informal atmosphere Flat hierarchy responsibility is delegated Team work Professional development – rewarding Working language - English or Danish Effectiveness and efficiency Wide use of technology Social events and activities

An example Annual payment to Union400 euro Annual payment to unemployment scheme400 euro amounts are tax-deductable 80-90% of all employees are members Should you get unemployed…. 2 years of unemployment payment ca. 26,500/yr (previously 7 years then 4 years...) Plus re-training programme Should you not get a job you may still receive social benefit, although dependant on your assets and your spouses income, you can still receive 20-24,000 euro per year, free childcare, housing subsidy etc.

Job Satisfaction Per cent of employed, 2006

The lowest unemployment rate in 30 years = approx. 10% 2008 = 1,7% 2013 = 4.7% Source: Statistical Yearbook 2008, Statistics Denmark

EUROFRAME-EFN Special Topic Report, Autumn 2007 Key elements of a New Welfare State Architecture Child-centred and women-friendly social investments Thus fostering fertility rates Higher investment in human capital The higher the qualification, the higher are activity rates Restructuring from transfers to social services From passive to activation in case of unemployment, invalidity etc. “Flexicurity” or managed and balanced flexibility Jobs with high security and flexible jobs with inadequate protection Active anti-cyclical macro-economic strategy Growth and best technologies are preconditions for welfare

Eastern and central Europe challenges regarding labourmarket policies Lack of trust in the public sector Have experienced significant changes in their financial situation due to: Reduction of up to 40% in salaries in the public sector Severe losses in the property sector often combined with high risk loans in CHF or EURO Focus on keeping the society free of corruption and “black” economy Wrong to treat “Eastern Europe” as one region with the same cultural and economical situation

Video links and reports Video links:: Readings: The Danish Flexicurity model: c53ce1c1d6da).html Master thesis from Aalborg University development-of-flexicurity-in-central-eastern-european-countries(2ebfce7c-c4be e- 4bbc51ac4f50).html Flexicurity: a relevant approach in Eastern and Central Europe en/index.htm Security in labour markets : combining flexibility with security for decent work analysis/documents/publication/wcms_ pdf