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Jan had two young children waiting at home when
he got the pink slip. "I knew our operation
was downsizing so I was not surprised" he said.
While most would dread the uncertainty after losing
their job, Jan just saw change. Is he just a confident
employee? In some sense, yes, "I am confident
about Denmark’s labor system. I know I will
be taken care of until I find a new job."
Denmark’s Labor market is one of the most
fluid in Europe, according to a survey by the European
Commission. The flexibility of the Danish labor
market model, coined "flexsecurity," enables
employers to hire and fire liberally without having
to pay an expensive social cost which explains the
"flex" of the title.
The "security" benefits employees, who
enjoy a high level of social welfare and the chance
to benefit from government subsidized retraining
programs if they lose their jobs. Foreign Minister
Per Stig Moeller explained, "Our flexsecurity
system has garnered a lot of attention globally,
many countries are looking at it as a model."
According to Newsweek, "Denmark’s GDP
is expecting to grow 2.7 percent this year, compared
with 1.2 percent in the euro zone." No wonder
countries are seeking to import this Danish made
system.
Flexsecurity "does not create jobs but helps
to maintain a high level of employment by giving
employee’s security and employers the freedom
to be particular. The mobility of our labor market
is the highest in the European Union and has been
remarkably successful," said Director of Invest
in Denmark, Elisabeth Manford.
In Denmark, terms of notice are relatively short,
ranging from three to six months for management-level
jobs and even shorter for blue collar workers. The
Danish system, introduced in 1993 as one of several
infrastructure projects created to boost the economy,
has helped bring down unemployment from 12 percent
to 4.7 percent; almost half the European average
of approximately 9 percent.
The key of the system is that managers do not see
hiring as a financial risk since welfare is financed
by income taxes rather than by employers. As a result,
each year approximately 30 percent of Denmark’s
workers change jobs and collect generous benefits;
90 percent of an employee's salary up to a ceiling
of 2,245 US dollars a month.
The Government also gives citizens guidance in
finding new jobs during the switching process. The
employees are protected, the employers can be fastidious,
and, "are not obliged to pay social security
or healthcare for employees so labor costs are transparent"
explains Manford. As a result, "with the flexsecurity
model, the workforce can continually be realigned
so that we have the best people for the job,"
said Manford. While India and China have attracted
foreign direct investments by gained global recognition
for providing cheap and reliable labor, Denmark
is competing on the basis of a flexible and highly
skilled labor force. Recently, a Norwegian smoked
salmon producer has decided to take advantage of
Denmark’s flexibility. Producing salmon can
often times be unprofitable since sa_mon harvesting
comes in waves and in Norway, as in most countries,
you have to pay your employees whether the salmon
is available or not. Therefore, an entire fleet
of employees may have days and weeks waiting for
fish to be brought in for processing and collecting
compensation. This company decided that it would
be economical to ship the harvested salmon to Denmark
from Norway and have it processed there. Each time
the shipment came in, the company just hires a new
fleet of labor from Denmark which they can lay off
during draughts.
With Flexisecurity the Danish welfare society is
organized so that employers pay competitive rates
and employees enjoy high salaries. Happy employers,
happy employees, few strikes, little unemployment…
is it all possible? In Denmark it is.
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