Seminar highlights flexicurity in the labour market

During 2005, international focus has given particular attention to the Danish so-called 'flexicurity' model. Against this background, the Ministry of Employment organised a seminar in June 2005, with the participation of Danish researchers in the field, aimed at identifying the special features of the Danish model and highlighting the links between flexibility and security in the Danish labour market. One of the interventions - presented by FAOS - points to the high degree of decentralisation in the Danish collective bargaining system as a factor underlying the trend towards flexicurity.

The Danish labour market is as flexible as the UK labour market and, at the same time, employees benefit from a degree of security which is at a similar level to that offered by the Swedish labour market. In recent years, numerous international and Danish studies have confirmed this characteristic feature of the Danish labour market. This is one of the conclusions of a new Danish study on flexibility and job security in the labour market. The combination of 'flexibility and security' is called flexicurity in EU terminology.

Background to the seminar

In December 2004, the French Minister of Labour, Gerard Larcher, visited his Danish counterpart, Claus Hjort Frederiksen. Among the themes discussed were the Danish collective bargaining model and, in particular, Danish regulations concerning recruitment and dismissal in combination with the social safety net. This visit was the focus of considerable industry and media attention in France (see Apprendre vraiment du Danemark - reflexion sur le 'miracle danois' de Jean-Claude Barbier, Centre d’études de l’emploi (CNRS)).

In the light of this international interest, the Ministry of Employment invited a number of Danish researchers to present central aspects of the flexicurity model and proposals on 'how to develop the flexible labour market so that we can, also in the future, be at the forefront in the field of employment and the combat against unemployment', as Mr. Frederiksen announced. Contributions to the topic came from the Centre for Labour Market Research (CARMA) at the University of Aalborg; the Employment Relations Research Centre (FAOS) at the Department of Sociology, University of Copenhagen; and the Economic Institute at the University of Copenhagen (published by the ministry in June 2005 in Flexicurity - challenges for the Danish Model). This article focuses on the contribution of FAOS, by Søren Kaj Andersen and Mikkel Mailand, which examined flexicurity in relation to the collective bargaining system.

Flexicurity and the Danish collective bargaining system

Concepts of flexibility and security

The features that account for the high degree of flexicurity in Denmark are the flexible rules on recruitment and dismissal, combined with an active labour market policy concerning the duty and right to activation and a relatively high level of benefits in the event of unemployment. According to the authors, this means that the collective bargaining system plays a major role in the development of flexicurity. Indeed, the efforts to create flexibility for enterprises and security for employees are as old as the bargaining system itself. In this context, 'security' should be seen in a broad sense as a regulation which gives employees job and income security irrespective of the labour market development (for instance, growing unemployment) or developments in the personal situation of the individual employee (e.g. sickness). Thus, security has very much to do with a feeling of safety on the part of employees.

Existing research on flexicurity shows that neither flexibility nor security is an unambiguous concept. Flexibility is often equated with a low degree of job protection while security is equated with income security. However, flexicurity is also connected to issues such as working time, work functions, pay, active labour market policy measures, education and training, leave schemes, etc. The research also shows that flexibility and security are not necessarily contradictions in terms. Flexicurity can be seen as a 'win-win' situation, with both employers and employees, as well as society, benefiting if the right combination of flexibility and security is chosen. Decentralisation of bargaining powers in collective negotiation and the broader scope of the content of collective agreements have, over the past few decades, led to increased flexibility and increased security, resulting in a higher degree of flexicurity in the Danish labour market.

The flexibility is primarily reflected in the rules of the collective agreements concerning dismissal; these rules place Danish regulation in this field among the most flexible in an international context. The content of the collective agreements in this field has been virtually unchanged over several decades: the new rules that have been introduced concerning recruitment and dismissal are the result of EU regulation.

Flexible wages and working time

A new and increased flexibility concerning the organisation of working time, overtime, etc. can be seen in the agreements concluded in the private sector in 2004. Over the past decade, the possibilities for concluding agreements at a local level between employee representatives and management concerning working time issues have been systematically developed.

The possibility of negotiating wages at the local level has existed in the iron and metal industry as long as the bargaining system has existed, i.e. since 1899. In this perspective, it could be argued that, in principle, there is nothing new when it comes to rewarding workers on the basis of performance and results in the industrial sectors. But the room for manoeuvre in local wage bargaining has changed with the decentralisation of the bargaining system over the past decades. The spread of minimal and no-fixed rate wage systems has increased the scope for a flexible adaptation of wage development in individual enterprises.

Employment security

Since the end of the 1980s, it has also been a declared objective for the social partners to ensure the competitiveness of enterprises as well as to maintain employment opportunities for the employees. Since then, the priority for the trade unions in connection with bargaining has been more jobs rather than higher wages (or as the slogan says 'job celebration rather than wage celebration').

The study points to other forms of security which have entered the collective agreements as a consequence of the broader content of those agreements. The introduction of labour market pensions is a key example. The labour market pension scheme secures an income after the active working life. The so-called 'social chapters' and other initiatives aimed at integrating people with disabilities into employment are other examples of the widening scope.

Continued and advanced training

Clauses concerning continued and advanced training were first incorporated into collective agreements during the first part of the 1990s. This can be seen as a development that increases functional flexibility, i.e. the possibility that workers are capable of performing several different functions in the same enterprise. If the employees are offered a broad range of measures to upgrade their skills, this will contribute to increasing their overall mobility in the labour market. The fact that the issue of education and training has become central in the collective agreements can be interpreted as an expression of the broader content of the agreements.

Active labour market policy and unemployment insurance

The FAOS study stresses that flexicurity in the Danish labour market is not solely the result of collective agreements. Public co-financing of the unemployment insurance system and an active labour market policy are two essential elements of the Danish flexicurity model. In terms of the degree of intensity of its flexicurity, i.e. the development stage of the different forms of flexibility and security, Denmark has a high score on intensity. Only the Netherlands can match this level, while other countries such as Belgium, France and Germany are at a lower level. In Denmark, a high numerical flexibility and a high degree of income security form the cornerstones of the model; however, recent developments in labour market policy measures, leave schemes and a decentralisation of working time have also meant that working time flexibility, job security and a combination of security schemes have gained ground.

Commentary

In terms of the future of Denmark’s flexicurity model, there is a risk that the increasingly higher degree of decentralisation might have a sort of boomerang effect: greater autonomy for collective bargaining at company level might lead to a weakening of the coordination between the central and local bargaining levels. Steps toward further individualisation might lead to a subsequent weakening of the Danish model. This same model again captured the headlines after the French and Dutch 'no' to the proposed EU treaty. In the aftermath of this crisis, renewed focus on labour market flexibility has led to speculation in French, British and German media and politics about the Danish model of flexicurity being a kind of 'third way'. (Carsten Jørgensen, FAOS)