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The Danish Model of Flexicurity

In: Business and Management

Submitted By antonio8814
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Antonio Caruso
Group 1 (09h00-11h00)
Assignment 3 : Article Summary

The Danish Model of “Flexicurity”- A Paradise with some snakes
Per Kongshoj Madsen (2002), University of Copenaghen

This article shows the so-called “Danish job miracle”, or the drastic decline in unemployment that happened in Denmark in the last twenty years after a hectic period of reforms in the early 90s. During this period the Danish labor market has changed radically becoming more flexible and dynamic but always with much attention paid to social security. The Danish model is an “hybrid” because it comes from the Scandinavian one, the archetype, but with essential differences.
The Danish system has, on the one hand, a level of flexibility very similar to liberal countries (e.g. Canada, USA, Ireland) but, on the other hand, resembles the Scandinavian countries through social security and active labor market policy. For these reasons, when we speak of Denmark is often used the term “Flexicurity” that characterizes this successful combination of flexibility related to dynamism and a solidaristic welfare system.
The success of the Danish model has stimulated ideas on the actual presence of a new model of the employment system, explained in general through the so-called “Golden Triangle” of flexicurity.
Generous Welfare System
Active LMP
Flexible Labor Market

Analyzing the corners of the golden triangle and specially the relationships, we can really understand how the Danish labor market works.
Concerning the Job Mobility, Denmark presents very high level of turnover, about 30 per cent; this is due to the ease with which employers can dismiss or hire new workers, indeed if we analyze the data on the average tenure of employees we find that Denmark is at the low end of the international scale in term of average tenure, conversely Nordic countries have much higher levels of average tenure.
A plausible explanation for the high level of job mobility is the liberal regime of employment protection. The level of employment protection in Denmark is one of the lowest compared to other industrialized countries, especially the Nordic Countries with which Denmark is commonly grouped.
Another main aspect concern the unemployment compensation system; in Denmark usually the unemployment benefits are calculated at the rate of 90 per cent of the previous income with a ceiling of 19,400 €; the income replacement rates are very high but they are addressed by requiring the unemployed to be actively seeking jobs during the unemployment’s spell.
The third corner refers to active labor market policy; the main features of the general labor market reform of 1994 are : * introduction of a two period benefit system (passive and activation period); * introduction of “individual action plans”; * decentralization of policy implementation to regional labor market councils; * introduction of three paid leave arrangements for childcare, education and sabbatical leave;
Unfortunately all that glitters ain’t gold, since many problems can be identified in the Danish Employment System concerning for example the groups expelled from the labor market, or the unemployment benefits related to the poverty trap or also the Problems of active labor market policy.
Generally is not an easy task try to outline the main features and the reasons of the “Flexicurity” model, because we should keep in mind that this model is the outcome of a long historical process involving a series of compromises, but it should be taken as a source of inspiration to try to achieve more efficient configurations of flexible labor market. The Danish case in only the start point not end point.

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