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Hard Questions For Denmark’s Soft Unemployment Cure

'Flexicurity,' the Danish labor approach, where it's easy to be fired but also rehired, has helped unemployment remain among the lowest in the world. But the lack of skilled labor creates new demands.

Working on the line in Copenhagen
Working on the line in Copenhagen
Antoine Jacob

COPENHAGEN — Brian Winther Almind, a senior executive of DSV, a European transport and logistics company, has a logistical problem of his own: finding the right people to get the job done.

"It is one of the reasons why we set up our new headquarters off the beaten path," said Almind, standing in the ultra-bright atrium of the building in question, a large cube built about 30 kilometers to the west of the Danish capital. "Here, we are near the countryside. It is easier to find people here than closer to Copenhagen where companies fight each other for available employees. There's also a university right next door that we can recruit young people from."

Denmark's unemployment rate remains notably low 4.2%. Although it's not yet at the level it was before the financial crisis of 2008, when it was close to 2.5 percent, Denmark's unemployment rate has been steadily declining since 2013. Compared other countries In Europe, Denmark is part of the privileged few where unemployment is not a national obsession.

"We prefer to not use the term ‘full-employment" because you will always find people who are looking for a job," says Per Callesen, Bank of Denmark governor, from his paneled office overlooking the Copenhagen canal. "But we can affirm that the Danish labor market is operating at almost full capacity."

To explain this situation, economists and trade unionists use the term "flexicurity." This system is based on three pillars: a radical flexibility that allows an employer to quickly hire and fire workers according to the company's changing needs, a safety net provided by a generous social protection system, and unemployment training programs that help people find a new job faster. "A lot of people lose their work and a lot quickly recover without going through the intermediate period, which is from 12 to 13 weeks on average," says Torben M. Andersen, an economics professor at the University of Aarhus.

No shame in being fired

"There is no real shame in being fired, it happens to your neighbors and your colleagues," says Callesen. "Flexicurity," instead, focuses on encouraging companies to hire more easily.

Jørgen Tang-Jensen, the general manager of Velux, a world leader in the roof and window industry, pointed out differences with the notably inflexible French labor market. "There are a lot of companies that avoid hiring new employees in France because they know that if, for one reason or another, they must part ways, it is a nightmare," says the Danish executive, whose French subsidiary employs nearly 1,000 people.

If "flexicurity" is well established in the Danish labor market, it's also because trade unions broadly support it. Since they make up two-thirds of the total workforce, they have the numbers to talk to employers. But decisions aren't written in stone. Governments that come to power, whether center-right (as it has been since summer 2015) or center-left, introduce legislative modifications from time to time.

The general trend is toward a gradual decline of the planned safety net. Symbolic of this evolution, is the reduction from four years to two the maximum period a person without a job can receive unemployment benefits. Beyond two years without a job, a much stingier regime comes into force. "The effect is guaranteed. The unemployed, at the end of his rights, then crosses from the job of his dreams to take what is available," says Lise Bayer, who runs an employment agency in Copenhagen. Adopted in 2010, the measure was justified by the need to save money when the unemployment rate reached 6.2% — its peak during the economic crisis. Since then, growth has returned, even if it's modest (from 1 percent to 1.5 percent each year since 2012). But there's been no corresponding push to again extend the duration of unemployment benefits.

Crosswalk in Copenhagen — Photo: Malouette

Anita Vium Jørgensen, an official of 3F, a trade union representing low wage-earning workers such as drivers, employees of cleaning companies, hotels and the like, says the income gap is rising — and so too is a backlash against the jobless. "It is not uncommon to hear that the unemployed are lazy and ready to exploit the system," she notes.

Thomas Søby, chief economist at Dansk Metal, a trade union for metal workers, says that nonetheless the overall salary level in Denmark remains fairly high, compared globally. Unlike countries like Germany, there are no small, underpaid jobs. Although minimum wage doesn't exist, negotiated collective agreements result in compromises that take into account heavy Danish taxation. "There are however, shortcomings in the sectors that call on the workers of Eastern Europe," especially agriculture, says the trade unionist.

Retirement age pushed back

At a Copenhagen conference center, some of the 1,400 unemployed gathered recently ask themselves if they live in the same universe as the one described by the central bank. "Full employment? Let me laugh!" says Jeanette Sevelsted, who has been looking for a job for the last year and a half. "It is good for carpenters or computer scientists but for a 59-year-old former secretary like me, or other low-qualified people, it's another story," she says during a coffee break.

The event was created by an association called "Powerjobsøgerne" or Power job seekers. "In employment agencies, you often have to go through an overcrowded training and it does not go very far," says Malene Gregaard Wilsly, the founder, who had been unemployed in the past. "We try instead to recreate the atmosphere and the rituals of a workplace so that our members don't lose their skills, they share their networks and invite companies."

Governments are seeking to tap into a pool of unemployed adults who are not included in the unemployment statistics — students, people on sick leave, people who have taken an early retirement or are receiving disability benefits. Little by little, Danes are postponing retirement; and the current government has proposed to bump the retirement age to 67-and-a-half years by 2025, while cutting down the possibility of taking an early retirement. To not lose skilled workers, a number of employers would like the country to open more of its doors to highly-skilled workers who come from outside the EU. But, politicians are hesitant to implement this request, which raises a whole other set of issues.

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