Danish labor market model - interesting

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Hire, fire, retrain: Danish labour market model eyed by Europe

Mon Oct 24, 2:25 AM ET

COPENHAGEN (AFP) - At 43, Niclas Jensen is a perfect example of Denmark's successful labour market model: he has scuttled from unemployment queues to new jobs to retraining centres under a flexible system that lets employers hire and fire easily thanks to a social safety-net for employees.

Jensen, hired eight months ago by a graphic design group, says he "likes work to be well done".

And everyday, the Dane feels that he "is useful, learning something, and most importantly, avoiding the idleness of unemployment" when he hops on his bicycle to ride to work at the Vangsgaard company in a Copenhagen suburb.

An employment agency found him the job, which is temporary but may be extended. He earns a gross monthly salary of 16,000 kroner (2,150 euros, 2,566 dollars), considered low by Danish standards, which is subsidized 50 percent by the state and municipality.

"I don't have any job security ... since the boss can let me go if he doesn't have any more work for me. But that wouldn't be the end of the world. I would get almost the same amount on unemployment," Jensen tells AFP in an interview.

In Denmark, unemployment benefits equal 90 percent of an employee's salary up to a ceiling of 14,000 kroner (1,850 euros, 2,245 dollars) a month.

The flexibility of the Danish labour market model, dubbed "flexsecurity", enables employers to hire and fire easily without having to pay expensive social costs.

At the same time, employees enjoy a high level of social welfare and the chance to undergo government-subsidized retraining programs if they lose their jobs, in a country where taxes are among the highest in Europe.

Jensen worked as an electrician for seven years in the 1990s, "changing employers several times, and then my private life fell apart," he says.

He ended up homeless, surviving on 8,000 kroner a month from the welfare office.

But he pulled his life together and got his high school diploma -- while living on welfare -- and went on to complete a bachelor's degree in biology at Copenhagen University while receiving a monthly retraining subsidy from the state of about 12,000 kroner.

Despite his higher education, "there were no jobs available when I graduated," he says. The local employment agency recommended that he sign up for a nine-month "activitation" internship at a local radio station.

At the end of the nine months, the station was not able to offer him a job so Jensen, like the 800,000 or so other Danes (almost a third of the workforce) who switch jobs every year, changed direction again and accepted the job at Vangsgaard.

"I've signed up for a three-year course on production innovation and optimisation, paid for by my employer," he says, stressing that he is keen to continuously hone his skills to make himself attractive to the labour market.

Several of his friends, in particular those who work in construction, "change jobs often, and are laid off from one day to the next if there are no building projects," he says. And "no one complains."

The Danish model, which is being studied by a number of other European countries, "is not a miracle, and does not create more jobs," says Dorte Mongaard, an advisor to LO, the Danish Confederation of Trade Unions which groups most workers.

"But it does lead to a greater mobility of employees, the highest in the
European Union, and helps maintain a high level of employment and to preserve that level and develop it with an increasingly qualified labour market."

In Denmark, collective wage and work condition agreements are hammered out between employers and unions on a regular basis. 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 under the then-Social Democratic government as one of several infrastructure projects to kickstart the economy, has helped bring down unemployment from 12 percent to 5.7 percent in August 2005.

But there is a flipside: according to experts, one in four Danes aged 18 to 65 lives off state subsidies, including those who are jobless, on sick leave, early retirement and students. That is the highest level ever in the country.