Tackling Denmark's post-crisis labour market challenges

The Danish labour market is widely known for its so-called 'flexicurity' model, combining labour market flexibility with social security and active labour market policies. The model features relatively flexible rules regarding hiring and dismissal, high income compensation in periods between work, and wide use of active labour market policies and lifelong learning. The flexicurity model appears to have served Denmark well. The Danish labour market is characterised by high employment, low structural unemployment, low long-term unemployment, high job turnover and a high degree of wage flexibility. Yet, the work potential of some groups remains underutilised. In 2014, Denmark was recommended under the European Semester country-specific recommendations to take further measures to increase the employability of people at the margins of the labour market. Those with specific challenges include low-skilled, young and elderly people and, most vulnerable of all, migrants and disabled people, which both have low activity rates compared to the rest of the population. The Danish economic model stands out with a high degree of equality and social mobility, a relatively generous welfare system as well as a tax system with extensive redistributional features, trade openness, and an efficient public sector. To support the model, it is important to maintain flexibility on the labour market and high activity rates. There is still scope to improve the labour market integration of immigrants and their descendants. In addition, people with reduced work capacity and disabilities should remain in the focus of the policy makers. This economic brief investigates the resilience of the Danish labour market and the situation of those people who are at the margins. There is no quick fix for solving the labour market challenges that Denmark is facing. Tackling the challenges requires growth-friendly economic policies, which can enhance the dynamic and inclusive features of the labour market.