henning gade: the flexible labour market in denmark
DESCRIPTION
Henning Gade from the Confederation of Danish Employers spoke about the flexible labour market in Denmark.TRANSCRIPT
The Flexible Labour Market in Denmark Embassy of Finland 11 April 2011
Henning GadeConfederation of Danish Employers
Confederation of Danish Employers
• The main organisation for labour market policy in
Denmark
• 13 member organisations f.x. in areas as industry,
building and construction, service, retail, newpapers -
banks and agriculture are not members
• 30.000 enterprises are members
• Main tasks: political influence in the Parliament, in EU,
and coordination of negotiation of collective bargaining
Facts about Denmark
• 70 per cent of the Danish companies have less than 20 employees– many small companies and few large companies
• Big public sector - 1/3 of all employees are employed in the public sector –> high taxes
• Public garanty of child care – high employment of women
• „Educational aid from public funds“ (SU) for all student – education for all is highly prioritied
• Flat leadership structure in Danish companies
High mobility
• High mobility– 800.000 of 2.8 mill. change jobs each year
• Many job offers– 300.000 new jobs each year– 300.000 disappears each year
Employment Security
0
2
4
6
8
10
DK AT NL SE DE FI BE IE UK IT FR ES PT GR
0
2
4
6
8
10
Scale from 1-10 – the higher the number the more secure, 2001
NOTE: Figures in brackets are unemployment rates in 2006.SOURCE: CEPS (2004) and Eurostat.
(3,9) (4,8) (3,9) (7,0) (8,4) (7,7) (8,2) (4,4) (5,3) (6,8) (9,4) (8,6) (7,7) (8,9)
Job Satisfaction
Per cent, 1999
50
60
70
80
90
100
DK NL AT BE SE FIN EIR DE UK FR ES PT IT GR
50
60
70
80
90
100
SOURCE: European Foundation for the Improvement for Living and Working Conditions (2004).
4
6
8
10
12
US DK UK EI NL NO ES CH Fl PT PL DE GR FR SE BE IT
4
6
8
10
12
Job Tenure in OECD
Average number of years in same job
SOURCE: CEPS (2004), A New European Agenda for Labour Mobility
OECD
Life long learning
Share of population participating in education and training, aged 25-64, per cent, 2006
QUELLE: Eurostat
0
5
10
15
20
25
30
35
HU
N
PO
R
SK
PO
L
LT
CZ
E
ITA
ES
T
LAT
GER
IRE
FR
A
BEL
LUX
EU
-27
ES
P
AU
T SI
NL
NO
R
FIN UK
DK
SW
E
0
5
10
15
20
25
30
35
Danish flexicurity model
Flexible labour market
Active LMPHigh compensation for unemployed
Qualification effect of LMP
Motivation effect of LMP
” Danish flexicurity model”
Elements of the Danish flexicurity Model
The Model favours job creation instead of job protection by focusing on :
• A flexible labour market with easy access to both hiring and firing
• A high level of social security with priority for those with the greatest risk of unemployment’
• An active labour market policy – with focus on jobs• Understanding of mutual interest between the social
partners and the government • Well functioning rules for tripartite negotiating • Common striving for consensus rather than conflict
Collective Agreements 2010
• Basic principles established more than 100 years ago – September Compromise from 1899
• Peace Obligation – Employer Prerogative – Right to be member of a trade union – Right to Strike
• Collective agreements are the primary regulation
• Disputes are handled by the two sides of industry
Collective agreements and legislation
• Legislation is built on and in respect of provisions
in Collective Agreements
• The Social Partners have the prerogative when
implementing EU-Directives
Collective agreement
DA LO
The General agreement
The Coorporation agreement
”The Norm”
Employers’ associations
Collective agreements
Trade unions
EmployeesLocal agreements
Firms
Flexibility in Wage Setting
Per cent of employees where wages are negotiated:
NOTE: DA/LO areaSOURCE: DA
1989 2007
34
62
16
62
Locally
22 4
Centrally Locally, but minimum wage centrally negotiated
Flexible Working Hours
The 37 hours of work per week is calculated as an average over:
Share of employed per cent
1998 2008
No flexibility 7 1
3 weeks – 5 months 24 4
6 months to 11 months 13 12
1 year or more 56 83
Workers’ rights placed in funds
• Labour market pensions
– 1989 -> now 12.8 per cent (1/3 employee, 2/3
employer)
• Competence funds
• Maternity leave fund
- not in companies
Wage flexibility
• Wage negotiations are in the companies – without
the right to strike
• The Collective Agreement can include a minimum
wage
• No minimum wage decided by law
Job protection is also present in Denmark
Denmark
“Blue collar worker” Collective agreement
“White collar worker” Law
Social obstacles upon dismissal?
None
… but Light Protection against Dismissal
• No general prohibition against arbitrary dismissal (Law or collective agreement)
• ”Hire and fire” is generally accepted
Dismissals in Denmark – principles
• Employers are entitled to fire a worker, and also to decide who and how to fire
• No regular principle of re-hiring
• Period of dismissal and compensation only according to law or collective agreement
• Dismissals must generally be well reasoned for (compensation only if agreed in advance)
Protection against Dismissal in Denmark
• ”White collar” employees – Law
Limits for notice after length of employment
- 3 months notice after 5 months of employment in the enterprise
- 4 months after 2 Years and 9 months- 5 months after 5 years and 8 months- 6 months after 8 years and 7 months
Protection against Dismissal
• Blue collar workers – notice periods are stated in collective agreements
- Differences between branches
The daily cash benefit system and flexicurity
• Compensation of up to 90 per cent for low-income
groups
• Low compensation for high-income groups
compared to the rest of Europe
• Benefit periode of 2 years
Net replacement rate of unemployment
CountryUnemployed a full year, with
varying former income levels for insured single
Former income, per cent of APW 75 100 150 200
Denmark 79 61 46 37
Sweden 81 70 50 40
Finland 62 59 49 45
Austria 57 56 56 45
Germany 59 58 58 49
Netherland 73 72 67 53
United Kingdom 25 20 14 10
Canada 55 56 42 33
NOTE: APW is income for average production worker. The replacement rate is net of taxesSOURCE: Hansen (2002)
Youth initiative
• Introduced in 1996
• For young persons under 25 years old without a
qualifying education receiving unemployment benefit
• Obligation to participate in an education of at least 1½
years
• Benefit corresponds to 50 per cent of unemployment
benefit
• Effect: Youth unemployment fell dramatically
Expenditure on Labour Market Policy
Per cent of GDP, 2004
KILDE: OECD, Employment Outlook, 2006
Welfare State Challenges
• Pressure from voters for more public service – childcare, hospitals, care for old people
• The work force is decreasing – demographic – and a smaller work force must pay for a larger group of pension receivers
• Not enough budget discipline on state and municipal level the recent years
• Too many in the work force are outside the labor market – early retirement, disability pension, low employment rate for migrants
• The public sector is not effective enough – lack of leadership, little completion with the private sector, not enough market orientation, old work force
• The education system has problems – to much drop-out, quality problems in the primary school and also generally
• The productivity is too low and the wage level is too high
Solutions
• The politicians must choose the right level of public service –prioritize or decide incentives to minimize the pressure on public service
• More effective public sector – better leadership, incentives in the wage systems, more private competition
• The early retirement system (efterløn) and the system for disability benefits and Flexjob must be reformed – we have to remain longer in the labor market and the pressure to work must be stronger
• Better educated labor force – more quality in the educational system from top to bottom
• Reduce drop-out rates and make incentives for the municipalities to take care of the drop-outs
• Pro-active migrant policy for highly skilled from EU and third countries – Green card, jobcard, strategy for attracting highly skilled, strategy for receiving and integrating migrants
• Higher productivity in the industry• Lower wage increases in the coming years
Advantages
• Accept of a flexibel labour market model from unions• Common aggrement between the social partners that
the state should regulate as little as possible on the labour market
• Generel accept of the global approach – few streiks by outsourcing
• Good cooporation between the social partners on firm and central level
• Big Danish enterprises have managed the crisis better as enterprises in other EU countries – dismissal
• The wage finding in Denmark is decentralized to enterprise level - great fklexibility
Problems
• The unions have problem to accept necessary changes in the model in crise situations
• The periode of receiving unemployment benefits is to long and should have more incentives to get people back to work
• The active labour market policy is expensive and could be more effective
Outlook for Denmark
SOURCE: The Danish Economic Council (Report from October 2010)
2009 2009 2010 2011 2012
Level in million kr.
Change in percent
GDP 1,662 -4.7 2.2 1.1 1.8
Exports 785 -10.2 3.5 2.3 3.1
Public investments 34 12.4 11.2 10.0 -10.0
Business investments 191 -14.0 -3.7 2.7 9.3
Private consumption 818 -4.6 2.8 1.7 2.2
Level in 1.000 people
Change in 1.000 people
Private employment 1,993 -110 -65 -5 3
Public employment 830 17 15 -12 0
Total workforce 2,921 -46 -33 1 0
unemployment 98 46 18 18 -3