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Centre for Labour Market Research, Aalborg University, Denmark (CARMA) Still the Poster Boy? Danish Flexicurity and the Great Recession Per Kongshj Madsen Centre for Labour Market Research (CARMA) Aalborg University, Denmark www.carma.aau.dk Images of Lisbon University of Southern Denmark September 15-16, 2011 Slide 2 Per Kongshj Madsen Economist Professor and Director of CARMA, Aalborg University Member of the European Employment Observatory (www.eu-employment-observatory.net)www.eu-employment-observatory.net Slide 3 CARMA An interdisciplinary research centre at the Department of Political Science, Aalborg University A staff of around 20 Research topics: wage formation, industrial relations, life-long learning and (comparative) labour market policy Flexicurity-research Slide 4 Overview A blend of flexibility and security: flexicurity Flexicurity the Danish way Flexicurity and the European Union Flexicurity in crisis? In Denmark? In the EU? Slide 5 The basics of flexicurity The starting point: Flexibility and security are not contradictions, but can be mutually supportive Originally a Dutch concept from the 1990s (with academic content added by professor Ton Wilthagen, Tilburg University) Against both common sense and mainstream economic theory Steeply rising popularity Slide 6 Rapidly rising media interest References to flexicurity in Danish media 2001-2008 Slide 7 And international research Source: Number of new references toflexicurity on google.scholar.com Slide 8 Why flexicurity? Flexicurity arrangements can be important components in achieving a high level of institutional competitiveness => Link to Lisbon Strategy and EU2020 The two icons of flexicurity: The Wilthagen matrix The Danish golden triangle Slide 9 The Wilthagen Matrix Jobsecurity (keeping your job) Income security (unemployment benefits) Employment security (getting a new job) Combination security (work-life balance) Numerical flexibility (hire and fire) Functional flexibility (between tasks) Working time flexibility Wage flexibility Source: T. Wilthagen & Tros (2004) Slide 10 Examples of flexicurity policies Slide 11 Putting countries in boxes JobsecurityIncome security Employment security Combination security Numerical flexibility (hire and fire) Denmark (for decades) Denmark (since1990s) Functional flexibility (between tasks) Sweden Germany Working time flexibility Wage flexibility Slide 12 Source: Eurostat The Poster Boy Unemployment rates 1990-2010 Slide 13 The (former) Danish Prime Minister By international standards, we have a very flexible labour market. This is, however, only possible because we have a high level of social security. Our level of unemployment benefit is high by international comparisons, and for those who have no unemployment insurance, we have cash benefits, also at a rather high level. Anders Fogh Rasmussens speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning Slide 14 The (former) Danish Prime Minister Flexicurity! We had an EU-summit the other day. There I had the opportunity to tell a bit about it. That discussion was of course in English. I combined the two words and said that we have flexibility and security, and then I called the Danish model flexicurity. That is good, because in French is is called "flexicurit ". Anders Fogh Rasmussens speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning Slide 15 Job tenure The Commission: Job Mobility in the European Union, 2008 Slide 16 Protection of ordinary employees 2008 Source:Venn, D. (2009), "Legislation, Collective Bargaining andEnforcement: Updating the OECD Employment ProtectionIndicators", OECD Social, Employment and Migration Working Papers, No. 89, OECD publishing, Slide 17 Unemployment benefits Source: OECD (2007) Average of four family types and two levels of income over 60 months Slide 18 Expenditure for Labour Market Policy 2008 Source: Eurostat Percent of BNP Slide 19 The Danish Golden Triangle Flexible labour market Unemploy- ment insurance Active LMP The basic Flexicurity nexus Threat effect of LMP Qualification effects of LMP Low job security High job-to-job mobility Rapid structural change Income security Employment security Educational policy AND MORE!. 30 % 20 % 10 % Slide 20 How did the Danes get there? The 1899-agreement: The freedom of the employer to hire and dismiss workers An industrial structure dominated by SMEs State-supported unemployment insurance funds since 1907 and a major reform in 1970 increased gross compensation rate to 90 percent for low- income groups Strong corporatist structures and implicit social contract balancing interests of capital and labour The absence of Social Democratic majority governments has preserved strong liberalistic traits in the Danish welfare state Slide 21 Learning flexicurity? The slogan: Dont protect jobs protect mobility! The promise of win-win-outcomes Many options for flexicurity arrangements more than just copying the Danish version Direct policy transfer is rarely possible one size will not fit all Slide 22 European Council ended up believing in it! In this context, the European Council asks Member States to direct special attention to the key challenge of "flexicurity" (balancing flexibility and security): Europe has to exploit thepositive interdependencies between competitive-ness, employment and social security. The Commission, jointly with Member States and social partners, will explore the development of a set of common principles on flexicurity. Presidency conclusions, European Council, Brussels, 23-24 March 2006 Slide 23 The Commissions view on flexicurity Source: Communication from the Commission, June 2007 Flexible and reliable contractual arrangements (labour laws, collective agreements and work organisation) Comprehensive lifelong learning (LLL) strategies Effective active labour market policies Modern social security systems that provide adequate income support, encourage employment and facilitate labour market mobility. Slide 24 Stop press! Source: Eurostat Slide 25 In the summer of 2008 Source: Eurostat Slide 26 Decline in employment Slide 27 Employment elasticities Change in Employment (%) divided by change in GDP (%) Slide 28 Flexicurity (DK) under stress Slide 29 Who is in trouble? Flexicurity in Denmark or for flexicurity as a European strategy? Challenges for the Danish version of flexicurity: Globalization? Can the Danish welfare state afford flexicurity? Support from social partners? Political support? Slide 30 Shelter from the storm? But also indicators of sustainability Still a relatively low rate of long-term unemployment Basic security arrangements seem to be still functioning Not excessive structural deficits on public budgets General political consensus concerning the fundamentals of the Danish labour market model Slide 31 Long-term unemployment Slide 32 Paying the bills S ource: Eurobarometer: Monitoring the social impacts of the crisis, Wave 4, June 2010 (data collection: May 2010) Slide 33 Government budgets 2008-2010 Source: Eurostat: Statistics in Focus, 45/2011 Slide 34 Political support.. Still, I have faith in flexicurity. It will serve us well in both the best and the worst of times. Flexicurity allows us to adjust to the changes in the market, and it secures the livelihood of the unemployed. Danish Minister of Finance Claus Hjort Frederiksen at London School of Economics, March 16, 2009 Slide 35 The Crisis and EU-Flexicurity Rising unemployment makes it harder to argue the virtues of lower job protection (EPL) The crisis is hard on public budgets and reduces the resources for security arrangements (income support etc.) Model countries have not proven to be resistent to the crisis Slide 36 Flexicurity policies and the crisis Job securityEmployment security Income securityCombination security (care and work) Numerical flexibility (hiring and firing) Temporary placement in other firm Worker poolsUse of benefits as wage subsidy or educational support Mortgage support Working-time flexibility Shorter working hours, Work-time accounts Joint employershipPart-time UB, Reduced working hours Leave schemes Functional flexibility (between job functions) Job rotationInternships in other firms, retraining Retraining for new job Accreditation of prior learning Wage flexibility (variable pay) Adjustment of wages Supplement wage in new job Extra UB as compensation Increased family allowance Source: Adapted from presentation by Ton Wilthagen at the conference on "Implementing flexicurity in times of crisis", Prague, March 25, 2009 Slide 37 New Skills for New Jobs Commission Communication November 2010 Slide 38 Mobication? Flexible labour market Flexible education Public support Slide 39 Thank you for your attention References: Madsen, P.K. (forthcoming): Flexicurity i modvind En analyse af den danske flexicurity-model under den konomiske krise, Tidsskrift for Arbejdsliv 2011/4, December 2011 (English version is in the pipeline) Slide 40 Thank you for your attention More references: Andersen, T.M. (2011): A flexicurity labour market in the great recession the case of Denmark, Preliminary and incomplete first draft, School of Economics and Management, Aarhus University, January 2011. Bredgaard, Thomas ; Larsen, Flemming ; Madsen, Per Kongshj (2007): The challenges of identifying flexicurity in action - A case study on Denmark. in: Flexicurity and beyond : finding a new agenda for the European social model. Henning Jrgensen & Per Kongshj Madsen (eds.). Copenhagen : DJF Publishing, 2007, pp. 365-391 ILO (2009): Protecting people, promoting jobs. A survey of country employment and social protection policy responses to the global economic crisis.An ILO report to the G20 Leaders Summit,Pittsburgh, 24-25 September 2009, Geneva Leschke, J; Watt, A. (2010): How do institutions affect the labour market adjustment to the economic crisis in different EU countries?, Working Paper 2010.04, Bruxelles: ETUI Madsen, Per Kongshj (2006): How can in possibly fly? The paradox of a dynamic labour market in a Scandinavian welfare state, in John A. Campbell, John A. Hall and Ove K. Pedersen (eds.): National Identity and the varieties of Capitalism: THE DANISH EXPERIENCE, McGill-Queens University Press, Montreal, pp. 321-355 OECD (2010): Labour markets and the crisis, Economics Department Working Papers No. 756, Paris: OECD.