Still the Poster Boy? – Danish Flexicurity and the Great Recession

1. 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

2. Per Kongshøj Madsen • Economist • Professor and Director of CARMA, Aalborg University • Member of the European EmploymentObservatory(www.eu-employment-observatory.net)

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-longlearning and (comparative) labour market policy • Flexicurity-research

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?

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

6. Rapidly rising media interest References to flexicurity in Danish media 2001-2008

7. And international research Source: Number of new references to”flexicurity” ongoogle.scholar.com

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”

9. The Wilthagen Matrix Source: T. Wilthagen & Tros (2004)

10. Examples of flexicurity policies

11. Putting countries in boxes

12. The Poster Boy Unemployment rates 1990-2010 Source: Eurostat

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 Rasmussen’s speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning

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 "flexicurité". Anders Fogh Rasmussen’s speach at the congress of the Liberal Party, Sunday November 21, 2004 in Herning

15. Job tenure The Commission: Job Mobility in the European Union, 2008

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,

17. Unemployment benefits Source: OECD (2007) – Average of four family types and two levels of income over 60 months

18. Expenditure for Labour Market Policy 2008 Source: Eurostat Percent of BNP

19. The Danish Golden Triangle • Low job security • High job-to-job mobility • Rapid structural change 30 % The basic Flexicurity nexus Flexible labour market Qualification effects of LMP Educational policy AND MORE!. 20 % 10 % Unemploy-ment insurance Active LMP Income security Threat effect of LMP Employment security

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 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

21. 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

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 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

23. The Commission’s view on flexicurity • 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 systemsthat provide adequate income support, encourage employment and facilitate labour market mobility. Source: Communication from the Commission, June 2007

24. Stop press! Source: Eurostat

25. In the summer of 2008 Source: Eurostat

26. Decline in employment

27. Employment elasticities Change in Employment (%) divided by change in GDP (%)

28. Flexicurity (DK) under stress

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 welfarestateafford flexicurity? • Support from social partners? • Political support?

30. Shelter from the storm? • But alsoindicators of sustainability • Still a relativelylow rate of long-termunemployment • Basicsecurity arrangements seem to be still functioning • Not excessive structural deficits on public budgets • General politicalconsensusconcerning the fundamentals of the Danish labour market model

31. Long-term unemployment

32. Paying the bills Source: Eurobarometer: Monitoring the social impacts of the crisis, Wave 4, June 2010 (data collection: May 2010)

33. Government budgets 2008-2010 Source: Eurostat: Statistics in Focus, 45/2011

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

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

36. Flexicurity policies and the crisis Source: Adapted from presentation by Ton Wilthagen at the conference on "Implementing flexicurity in times of crisis", Prague, March 25, 2009

37. New Skills for New Jobs CommissionCommunication November 2010

38. Mobication? Flexibleeducation Flexible labour market Public support

39. Thankyou 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)

40. Thankyou 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. 365-391 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 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. 321-355 OECD (2010): “Labour markets and the crisis”, Economics Department Working Papers No. 756, Paris: OECD.