The Danish Labour Market

Characteristics of the Danish labour market
The Danish labour market is characterised by a high unionisation rate. Around 82 per cent of Danish employees are members of a trade union.

Another characteristic is a high degree of dynamism and flexibility.

For instance, recent years have seen the shedding of 200,000 jobs a year, but at the same time 220,000 new jobs have been created every year. Furthermore, more than one third of the workforce change jobs in the course of a year.
The high flexibility means that the labour market finds it easy to adapt to fluctuating economic conditions.

One of the reasons for this flexibility is that Danish businesses are generally fairly small. Therefore, they find it easier to adapt to changes in external conditions. And besides, Danish employees are generally well educated and therefore well equipped to handle change.

Another element of significance to the flexible Danish labour market is that, compared with the situation in other countries, Danish businesses incur only low costs and few duties when hiring or laying off labour.

The reason why this is acceptable to the trade union movement is that thanks to the unemployment benefit system, the level of compensation is relatively high. Seen from an international perspective the level of compensation, i.e. the ratio between employees’ pay and the amount paid in unemployment benefits, is fairly good.

Unemployment benefits correspond to app. 80-85 per cent of an LO-member’s average pay.

Reforms without lowering benefits
LO has succeeded in pushing the labour market reforms through without a general lowering of benefits.

The governing idea behind the labour market reforms has been that the answer to structural problems is not a general reduction of benefits.
The crux of the labour market reforms has been the upgrading-of-skills strategy.
Via a range of activation offers the unemployed are given a right and a duty to update their qualifications so that they are at all times ready to enter the labour market in case of a job opening.
Further, as a result of the reforms, labour market policy decisions are to be implemented at a decentralised level, which means a high degree of involvement of the social partners.