still the poster boy? – danish flexicurity and the great recession
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Still the Poster Boy? – Danish Flexicurity and the Great Recession. Per Kongshøj 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. Per Kongshøj Madsen. Economist - PowerPoint PPT PresentationTRANSCRIPT
Centre for Labour Market Research, Aalborg University, Denmark (CARMA)
Still the Poster Boy? – Danish Flexicurity and the Great
Recession
Per Kongshøj MadsenCentre for Labour Market Research (CARMA)
Aalborg University, Denmarkwww.carma.aau.dk
Images of LisbonUniversity of Southern Denmark
September 15-16, 2011
Per Kongshøj Madsen
• Economist• Professor and Director of
CARMA, Aalborg University• Member of the European
Employment Observatory (www.eu-employment-observatory.net)
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
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?
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
Rapidly rising media interest
References to flexicurity in Danish media 2001-2008
And international research
Source: Number of new references to”flexicurity” on google.scholar.com
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
200
400
600
800
1000
1200
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”
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)
Examples of flexicurity policies
Putting countries in boxes
Jobsecurity Income security
Employment security
Combination security
Numerical flexibility (hire and fire)
Denmark(for decades)
Denmark(since1990s)
Functional flexibility(between tasks)
SwedenGermany
Working time flexibility
Wage flexibility
Source: Eurostat
The Poster Boy
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
2
4
6
8
10
12
Danmark EU-15
Pro
cent
Unemployment rates 1990-2010
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 Rasmussen’s speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning
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 "flexicurité".
Anders Fogh Rasmussen’s speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning
Job tenure
The Commission: Job Mobility in the European Union, 2008
Protection of ordinary employees 2008
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
EP
L-in
dica
tor
Source:Venn, D. (2009), "Legislation, Collective Bargaining andEnforcement: Updating the OECD Employment ProtectionIndicators", OECD Social, Employment and Migration Working Papers, No. 89, OECD publishing,
Unemployment benefits
Source: OECD (2007) – Average of four family types and two levels of income over 60 months
Net replacement rates (NRR) 2005
0102030405060708090
Italy
Greec
eSpain
Franc
e
Portuga
l
Austria
Belgium
German
y UK
Luxe
mbour
g
Sweden
Netherla
nds
Norway
Finlan
d
Irelan
d
Denmar
k
NR
R
Expenditure for Labour Market Policy 2008
Source: Eurostat
EE RO LT CZ SI BG LV CY MT UK GR HU SK LU PL IT SE PT EU27 AT DE FR IE FI NL DK ES BE0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Drift Aktiv AMP Passiv AMP
Percent of BNP
The Danish Golden Triangle
Flexible labour market
Unemploy-ment insurance
Active LMP
The basic Flexicuritynexus
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 %
How did the Danes get there?
• The 1899-agreement: The freedom of the employer to hire and dismiss workers
• An industrial structure dominated by SME’s • 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
Learning flexicurity?
• The slogan: “Don’t 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
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 the positive 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
The Commission’s 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.
Stop press!
Source: Eurostat
In the summer of 2008
Source: Eurostat
Decline in employment
Employment elasticities
Change in Employment (%) divided by change in GDP (%)
Flexicurity (DK) under stress
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?
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
Long-term unemployment
Paying the bills
Source: Eurobarometer: Monitoring the social impacts of the crisis, Wave 4, June 2010 (data collection: May 2010)
Government budgets 2008-2010
Source: Eurostat: Statistics in Focus, 45/2011
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
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
Flexicurity policies and the crisis
Job security Employment security
Income security Combination security (care and work)
Numerical flexibility (hiring and firing)
Temporary placement in other firm
Worker pools Use of benefits as wage subsidy or educational support
Mortgage support
Working-time flexibility
Shorter working hours,
Work-time accounts
Joint employership Part-time UB, Reduced working
hours
Leave schemes
Functional flexibility (between job functions)
Job rotation Internships 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
New Skills for New Jobs
Commission Communication November 2010
Mobication?
Flexible labour market
Flexible education
Public support
Thank you for your attention
References:
Madsen, P.K. (forthcoming): ”Flexicurity i modvind – En analyse af den danske flexicurity-model under den økonomiske krise”, Tidsskrift for Arbejdsliv 2011/4, December 2011
(English version is in the pipeline)
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 Kongshøj (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 Jørgensen & Per Kongshøj Madsen (eds.). Copenhagen : DJØF Publishing, 2007, pp. 365-391ILO (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, GenevaLeschke, 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: ETUIMadsen, Per Kongshøj (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-Queen’s University Press, Montreal, pp. 321-355OECD (2010): “Labour markets and the crisis”, Economics Department Working Papers No. 756, Paris: OECD.