The Danish Flexicurity Model The Danish Wonder Drug against Economic Troubles -- a win-win situation?

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The Danish Flexicurity Model The Danish Wonder
Drug against Economic Troubles -- a win-win
situation?

• Jette Steen Knudsen
• The Copenhagen Centre for Corporate Responsibility

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The Copenhagen Centre for Corporate
Responsibility

• Independent think tank founded by the Danish
  government with a focus on the changing role of
  business in society and corporate responsibility
  (CR) initiatives. Independent board of directors
• Secretariat for the Danish National Network of
  Business Leaders which advises the Minister of
  Employment
• Target group key decision-makers in business
  and government
• www.copenhagencentre.org

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The Copenhagen Centre

• Mission
• Generate knowledge, stimulate public debate and
  raise awareness about the changing social role of
  business in society
• How we work
• Applied research the Centre undertakes research
  and practical studies
• Outreach activities the Centre regularly
  convenes seminars and workshops, and continuously
  engages decision-makers and the media in dialogue
  and debate
• Practical tools develop practical advice for
  firms and government

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Focus Areas

• 1) Employment trends the Danish understanding of
  CR
• Globalization and outsourcing impact on
  vulnerable groups
• National Network of Business Leaders new forms
  of social employment due to 1) globalization 2)
  juvenile crime
• 2) Risk management
• SMEs and ethical supplier standards
• Non-financial reporting
• Corporate image and CR initiatives
• Institutional investors and social initiatives

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Implicit assumptions of the CR Agenda
whichfocuses on inclusive employment

• Economic burden-sharing perceived as necessary
  for maintaining social welfare
• Business included in problem-solving in order to
  solve problems from the bottom up rather than
  top down (business needs are a great motivating
  factor..)

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New labour market initiatives during the 1990s

• The Danish National Network of Business Leaders
  (1996) Regional Networks / Inspirators (2000)
• Tools employed Different kinds of subsidized
  employment programmes (i.e. sheltered jobs)
• The Network Award for Social Inclusion -
  initiatives that make a difference in every day
  life to employees, the company and to society

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Types of CR Initiatives

• 1) Integration of employees excluded from the
  labor market
• (training, sheltered jobs, testing the capacity
  to work)
• 2) Pre-emptive measures
• (with the goals to reducing absence due to
  illness, improving physical and psychological
  working environment, sheltered jobs for employees
  etc.)

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Study of CR initiativesNetværksprisen set i
Bakspejlet

• Integration of groups at the edge of the labour
  market qualitative study from The Copenhagen
  Centre
• What works?
• Possibility of getting a real job in the end
• Company must have a real need for workers
  (business case)
• Optimal framework conditions such as
  supplementary salary scheme, training and
  education)
• Mentors

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Examples

• Danish Crown
• Specialisterne
• TDC
• Read more at www.copenhagencentre.org
• http//www.copenhagencentre.org/graphics/Copenhag
  enCentre/Publications/Papers/pilotundersoegelse_fu
  ll_report.pdf

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Crucial features of the Danish welfare model

• Universal service provision
• Financed through general taxation
• Requires high taxes and high employment levels

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Successful model

• High employment levels, low unemployment
• High average income level
• Little poverty
• Government budget in surplus

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Den danske flexicurity model the golden triangle
Flexible labor market
ALMP Improved labor market qualifications
Aktive labor market policies (ALMP)
Generous welfare support
ALMP motivating factor
Kilde Thomas Bredgaard, Flemming Larsen og Per
Kongshøj Madsen, 2005
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Background for flexicurity model

• Flexibility Consensus that employer has the
  right to hire and fire
• ALMP Labor market reform from 1993 - active
  labor market policies (training and education
  schemes have been part of social partner
  agreements since mid 1990s)
• Social security

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Flexibility

• 1) high internal numerical flexibility (regulate
  working time, overtime, etc.)
• 2) high external numerical flexibility (regulate
  the number of hires and fired)
• 3) high functional flexibility
  (organization/work functions)
• 4) salary flexibility

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Active labor market policy

• Improvement of qualifications
• Separation of social security and active labor
  market policy so that ALM-period does not count
  towards right to unemployment
• Individual action plans
• Training after 12 months unemployment
• Young people after 6 months - reduced earnings
  during training.

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Security

• Collective agreements b/w social partners
• Combination of work/personal life (i.e. maternity
  leave, education leave, etc)
• Public welfare - universal provision

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Social Security Income Compensation
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Two challenges

• Ageing desirable but problem for public
  finances
• Globalization desirable but need adjustment
  pressures

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Options for adjusting to spending pressures
related to ageing

• Higher taxes
• Cut spending
• Pre-save
• Delay retirement (and finish education faster)

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Share of cohorts with a further education (source
Jørgen Elmeskov, OECD)
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Globalization

• Demand for low-skilled workers might drop but
  effect is not clear
• Some tax bases become more mobile
• More emigration of high-skilled workers?
• Pressure to improve integration of immigrants
  (Denmark is relatively more attractive to
  low-skilled immigrants)