Danish flexicurity model comes under fire

Although the Danish flexible labour market system is praised by the rest of Europe as an example for reform, experts say the system needs to be remodeled, reports the AFP.

The Danish ‘flexicurity’ model was launched in the 1960s and adjusted three decades later. In essence it allows companies to fire employees with little notice. The logic behind the model is that unemployed people enjoy generous benefits and retraining options, including around 90% of their gross salary for up to four years.

Critics of this system say the safety net for the unemployed is excessively generous, resulting in decreased motivation to find a new job. The 90% of gross salary is capped at about 2,000 euros per month, which provides an ample cushion to continue without work.

Mads Lundby Hansen, chief economist for the Cepos think tank, said: “At a time when Denmark has a labour shortage (unemployment stands at less than 3%), there are still tens of thousands of unemployed. How do you motivate them if you don’t reduce the benefits and their duration?”

“The global economy could easily take a turn for the worse and if that happens, we will see high unemployment, skyrocketing social spending and ultimately, a budget deficit,” Hansen added.

The main change sought by critics is a reduction of maximum benefits time from four years to around two years.

The head of the Danish Metalworkers’ Union, Thorkild Jensen, rejected the idea of such changes.

“Reducing unemployment benefits will not provide the qualified workers that companies need,” Jensen said. “There is only one solution: more education and more training.”