Centre for Labour Market Research (CARMA)

Aalborg University, Denmark

Beyond flexicurity: Labour market policy adjustments and welfare reform in Denmark in

the wake of the financial crisis

Mads Peter Klindt, Assistant Professor, PhDCenter for Labour Market Research (CARMA)

Aalborg Universitympk@dps.aau.dk

Presentation at the MSE, Centre d’Economie de la Sorbonne, Paris

May 27, 2011

Agenda

• The Danish model of flexicurity as it was• Governance reform and policy changes in

2007/09• Rigging the ship: Small labour market

adjustments in the wake of the crisis outbreak • Changing the course: Debt crisis and new

reform agenda• Beyond flexicurity: New dynamics on the

Danish labour market

3

Denmark’s ‘Golden Triangle’ of flexicurity

Aktiv arbejds-

markeds-politik

Traditionelt samspil mellem fleksibilitet og sikkerhed siden 1899/1907 (1969)

Arbejdsmarkedspolitikkens trusselseffekt (2001-)

Opvalificering og omallokering (1994-2001)

Fleksibeltarbejds-marked

Generøse overførsels-indkomster

3

2007/09: Governance reform

Insured (unemployment

benefits)

Uninsured(means tested

social assistance)

Local government(91 Municipalities)

One-stop-shop jobcentres

Ministry of EmploymentState financesu.b. and

activation

Local gov.partly finances

social assistance

Local government take over full responsibility

(50/30 % of benefit payments

reimbursed)

Small adjustments during 2009

• Activation of young persons between 15 - 17• Immediate activation of people between 18-19

year old (ordinary education on ordinary conditions or job training on similar benefit).

• Stronger effort to combat long term unemployment among people aged18-30 (task force, screening of writing skills, regional planning)

• Altogether 500 mio. DKK

2010: Economic restoration plan

Unemployment benefits maximum duration cut from 4 to 2 years (1,3 billion DKK)

Eligibility rules tightened

CVT-allowance reduced by 20 percent

Tax deduction for trade union membership fee reduced

+ loads of other initiatives

Altogether public spending cut by 24 billion DKK

2011: Reform package 2020

• Further initiatives to cut down public spending (23 billion DKK)

• Most importantly reforms of the early retirement scheme (efterløn) and old age pension

Retirement age will increase according increase in average

lifespan

Early retirement scheme will be reduced from 5 to 3 years and

become less attractive for people with labour market pensions

Incremental developments since the 1990s

• Falling UB compensation rates• Traditional trade unions loose members• Active labour market policy much more focused

on “work first”

UB replacement rates

0

10

20

30

40

50

60

70

80

90

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Bricklayer Average LO-worker Cleaning operative

Independent UB insurance funds in growth

0

50000

100000

150000

200000

250000

300000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Reduced use of ordinary education in the ALMP

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total number of participants Participants receiving ordinary education Adult apprentices

Conclusion: Denmark beyond flexicurity