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Denmark’s secret labour sauce: flexicurity

27 Mar
How many more stereotypical viking photos can I get away with this week?

How many more stereotypical viking photos can I get away with this week?

Perhaps the most fascinating thing I learned about Denmark during my research trip there last week was how its labour market works. Hiring and employment is based on what’s called the flexicurity model which, it turns out, has big benefits for both companies and workers.

The system is based on strong unemployment benefits. People pay into this while working and, in the event that they find themselves unemployed, get a good chunk of their former salary – up to a whopping 90 per cent for the lowest-end jobs – paid out to them for a period of up to two years.

Sounds crazy, right? It’s the sort of socialist, welfare-state thinking that immediately kicks off that North American reflex of: “Why wouldn’t everyone just abuse this system?”

Well, the worker benefits are only one part of the equation. On the employer side, businesses have much more flexibility to fire people. They’re not able to axe people willy nilly, but they can sack underperforming workers or downsize labour forces when the economy turns sour, provided they follow strict guidelines.

Several academics and business people explained to me that this has several benefits, with the main one being that companies are much more willing to hire people when they know they won’t be saddled with them if said worker turns out to be a bust, or if an unexpected downturn comes along. Anyone who’s seen this sort of hesitance in action here in North America can appreciate that.

There’s a third part to this “Golden Triangle” system, which has nothing to do with drugs in Southeast Asia but rather refers to the government’s involvement. Denmark spends about 1.5 per cent of its gross domestic product on assistance and training programs for unemployed workers, so the average person can be confident that if they do find themselves out of a job, there’s help and re-training waiting.

The biggest effects are therefore felt in the psyche of workers, who simply don’t have to worry about maintaining a job. In speaking with all manner of people during my visit, it’s hard to overstate how important this is – and how different it is from North America. In Denmark, people generally just don’t work at jobs they hate – they quit them, knowing that the state is there to back them up. That contrasts starkly with North America, where you don’t have to look far to find someone toiling away at a job they loathe.

This is good for the country too, because Danes don’t hesitate to quit their jobs to start their own businesses. As with the telecom services I wrote about previously, Denmark also tops the world in entrepreneurialism. These sorts of new businesses, ideas and jobs – backed up through good, affordable infratructure services – are the lifeblood of any economy.

Judging from the people I spoke to, flexicurity is the main reason why Denmark is routinely rated the happiest country in the world. It’s no wonder, then, that the European Commission in 2007 decided to incorporate this particular Danish idea into other countries.

Denmark’s flexicurity is also another one of those pragmatically human ideas that makes one wonder whether we’re coming at things all wrong here in North America.

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2 Comments

Posted by on March 27, 2013 in denmark, economy, government

 

2 responses to “Denmark’s secret labour sauce: flexicurity

  1. El Presidente (@elquintron)

    March 27, 2013 at 9:22 am

    I think this is brilliant; it works for both workers and employers, however I don’t think it would fly in North America for “moral” reasons.

    The predominant belief here is that you’re a better person for flipping burgers at minimum wage, than you are for being on EI while you look a job that you’re qualified to do, because using the system that you pay for somehow makes you a burden on society.

    I think the Danes have this one right myself.

     
  2. Vadim Katcherovski (@TheRealLogic)

    March 27, 2013 at 1:55 pm

    I think it’s a great system for both employers and employees. It’s like having a money-back guarantee: very few people use it, but it stimulates people to buy things, in this case: take on new jobs / hire people.

     
 
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