Successful employment model in Denmark

The small country Denmark practices one of the most successful employment models in Europe. Since 1998, Denmark pushed the unemployment rate from 10.1% to 4.3% in 2001. Since then it has risen because of the bad economy to 5%. But all in all, the small kingdom could divide the unemployment in half within a few years. Amongst increasing jobs, the Danes generate every year budget surpluses and reduce public dept.

It is quite remarkable that in no other European country so many men and women flood the job market. In Denmark around 80% at the age between 15 and 64 years work or search for a job whereas for example in Germany only 70% of men and women in the same age group push towards the market.

The Danish employment model

In Denmark unemployed people obtain 90% of the final salary for at most four years. The unemployment benefit is in percentage higher the lower the income was. Additionally, they get a variety of private and public professional development and retraining.

At the latest one year of unemployment the “activation phase” begins. The unemployed persons have to participate in some measures. People who do not participate will not get any financial support first and foremost for five weeks. Unemployed people have to accept jobs with less money and a way to work of maximum four hours.

In Denmark a cancelation period exists, which depends on the period of employment, but there is no employment protection. The companies only have to pay the first two days of dismissal. That is one reason why in Denmark many jobs are created. The companies know that they have the possibility to dismiss an employee every time.

The average duration of employment is really low. At the same time, Danish people have less fear to lose their jobs than German and French people. The Danes know that they will get a high unemployment benefit and will quickly find a new job. Denmark only has a long-term unemployment of less than 20%. In Germany it amounts around 35%.

The job-rotation is another Danish idea to create employments. As an employee leaves temporarily his workplace, for example to make a professional development, an unemployed person gets this job. In 2010 60 secretaries got a professional development in Aarhus. The courses lasted 13 weeks. The companies scheduled these development measures that in total 16 unemployed people should get a job for one year. Finally, 24 people got a job, because some of them found a permanent position during this period.

Sources:

http://www.berliner-zeitung.de/archiv/flexicurity—seit-jahren-feiert-daenemark-erfolge-mit-einem-arbeitsmarkt-modell-ohne-kuendigungsschutz–aber-ist-das-system-kopierbar–daenische-zauberformel,10810590,10432156.html

http://www.stern.de/politik/ausland/daenemarkarbeitsmarkt-null-kuendigungsschutz-512652.html

http://www.zeit.de/2004/41/D_8anemark

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3 thoughts on “Successful employment model in Denmark

  1. This really sounds like a promising system. It´s fascinating to see, that although the people in Denmark get real high unemployment benefits, the unemployment rate is so low. This really argues for the quality of the existing reintegration measures in the working environment.

    Especially I like the idea of withdrawing public support, when people are not showing efforts to reintegrate in the labor market. I think this measure should also be taken more serious in Germany. Indeed after a specific time people have to go to arranged job interviews and have to show a specific form with a signature to the job office afterwards, but even I experienced already in my working life a lot of people which just went there to get their signature and where not even willing to show at least a little bit of effort to get the job. This behavior should also lead to the elimination of unemployment benefits and should definitely be at least randomly controlled.

    Furthermore, I like the basic idea that people have to accept lower paid jobs, after they did not find a new job conforming to their requirements. I think many cases of long term unemployment are caused by to high job and salary requirements in combination with too much ego to accept a job below these requirements. If this behavior is accepted or even supported over a long time by the state due to the safety of ongoing unemployment benefits, the acquirement of a new job will get more and more difficult. This gets also visible by examining the different % of long term unemployed people of Denmark with 20% long term unemployed, where the people have to accept jobs with lower salary, and Germany with 35% long term unemployed.

    So I think many countries should take Denmark as a positive example and should try to adapt to this system at least in some respects.

    Reply
  2. Denmark and its level of employment protection serves as a good example for a good functioning labor market. Denmark was long-time praised for its labor market performance; in fact its low unemployment level was due to moderately strict “Employment Protection Legislation” and high level of expenditure on active labor market policies.
    This model is called “flexicurity” and is described as a combined mix of flexibility in the labor market (easing of dismissals), social security and an active labor market policy (e.g. job search assistance).

    There are always heat debates about the impact of Employment Protection on different labor market outcomes. “Employment Protection” affects the whole population and everyone wants to defend his own interests. While employers claim flexibility, the workforce demands more security on the labor market.
    The worldwide economic crisis showed us that economic shocks can always occur and therefore the job security rules help to soften the employment impact. For the majority of the labor force, working life is impossible to do without such insurance against labor market uncertainty.

    When seeking to implement another range of job protection, a better combination of Employment Protection Legislation, effective reemployment services and active labor market policies should be considered for a better functioning of labor market.

    However I think that the optimal degree of employment protection is country-specific, given that nations have their own characteristics and labor market institutions differ widely across them.
    So maybe for Denmark this model of flexicurity seems to work quite well, but that does not mean that we can impose the same system in all countries. The same level has not necessarily to be the best solution for the french labor market for example.

    Reply

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