The magic ‘flexicurity’ potion

Article published on Oct. 24, 2005
Article published on Oct. 24, 2005

This article has not been vetted by an editor at Paris HQ

The Danish invention ‘flexicurity’ is now the latest craze in European politics. But is it a miracle remedy for the crisis facing the European social model?

Flexicurity is a political strategy which aims to make the labour market more flexible but at the same time assure good social protection, especially for the most vulnerable workers. It seems that the economic success which neighbours of the Danish Crown envy so much owes much to flexicurity. Even Austria, who will take presidency of the EU in January 2006, has put it on the EU agenda.

Flexibility, security, and activation

Imagine an unemployment rate of 6% - including an exceptionally high employment rate for women and young people - with only 1.2% of the active population affected by long-term unemployment. All this spiced up with a GDP of €34 772 in 2003. Add a pinch of revenue equality, investment in education to the order of 8.5% of GDP that is reflected in students' success, and mix with a highly consensual social context… And there you have something which resembles the “Danish miracle”.

Flexibility is evident in the mobility of workers (between 600,000 and 700,000 Danes change job every year) but also in the ease with which people can be dismissed. In this way, employees can be fired with 3 days’ notice, without any compensation from the company. In other countries, this could lead to numerous strikes. However, in Denmark, employers and unions are generally in agreement, for the simple reason that it is they who set the rules of the labour market.

On the other hand, the Danish can rely on comfortable unemployment benefits. They can receive up to 90% of their salary for a maximum of 4 years; a practice which would prove ineffective if it was not accompanied by "activation measures". Based on notions of rights and duties, which are important to Danish culture, the primary aim these measures is to encourage the unemployed to find work quickly. Someone looking for work must follow an “individual activation plan", allowing him to undertake training and (thanks to job rotation) replace those who are absent or in training.

Consensus before all else

Although our politicians may not wish to use this magic potion which would invigorate economic and social policies, the Danish success is embedded in a long process which only bore fruit in 1994, under the Social Democrats. When putting the first activation politics into practice, the aim was to give work to as many people as possible while also reducing the unemployment benefits period. This policy was continued by both right-wing and left-wing governments, thanks to an exemplary social consensus dating from 1899, the year of "the September Compromise" between the Danish Employers' Organisation and the Danish Confederation of Trade Unions. For more than a century, corporate culture has been anchored in Danish society, where 80% of citizens belong to a union. This alliance is also political, since the election of minority governments leads them to govern with the opposition's support. This is a key part of the "Danish miracle" and is why it is impossible to adapt to other countries.

How durable is the Danish system?

Since 2001, the liberal-conservative coalition run by Føgh Rasmussen accentuated the “flexibility” aspect by using individual responsibility and "moral recovery of the Danish people" as the main driving forces. The Flere i Arbejde (More people in work) programme intends to put a maximum number of people back in employment, not hesitating to proceed with cuts in social benefits or tax freezing. These measures challenge the subtle balance of flexicurity.

An ageing population and the challenge of immigration calls the durability of this model into question. Between now and 2040, at least 1.2 million people (compared with 0.8 million today) will be aged over 65. The intended solution is persuading workers to retire later and later, whilst encouraging the young to work earlier and earlier. So how does one ensure the consensus will survive when faced with immigrants excluded from this “Danish miracle”? Nourishing the popularity of racist tinged discourse, the Danish Prime Minister has reduced social benefits for immigrants by up to 40% during their first 7 years in Denmark, with the aim of encouraging them to find employment. The miracle is not easily shared…

It is high time that a new social contract be proposed to European citizens, centred on an increased employment level for women, investment in new generations, work flexibility combined with a better system of social protection, and high quality public services. A Lisbon programme of some sort, accompanied by a real political will. So maybe other miracles will only be developed elsewhere in Europe.