Against the wind. An analysis of the Danish flexicurity-model during the economic crisis

Abstract

The Danish model was recognized for its performance during the 1990s and the beginning of the 2000s and became a model for the European Employment Strategy and a much cited example of a real life flexicurity model. Like most other European countries Denmark has now fallen into a deep economic crisis. This has created debates about the ability of the Danish model to sustain external chocks. Some have further argued that Danish employment will be more vulnerable to economic downturns due to the low level of employment protection legislation (EPL). An additional issue is the degree to which the main institutional characteristics of the Danish employment system will themselves be sustainable, when facing an economic downturn. These issues are in the focus of the present article, which describes the reactions of the Danish employment system to the economic crisis and the relationship between the crisis and some main institutional characteristics of the Danish labour market model. Applying a comparative approach, the article firstly discusses, whether the concrete manner in which the crisis has taken form on the Danish labour market is related to the specific balance between flexibility and security that characterises the Danish model. The main result is that the decline in the number of employed persons has been rather large and thus in line with the expectations based on the low level of employment protection. Following the analysis of the Danish labour market performance during the crisis in a comparative perspective, the article furthermore gives an overview of the actual Danish policy responses to the crisis and discuss the degree to which they do – or do not – reflect a distinct approach linked to the Danish flexicurity-regime. Here the article points to the important role of automatic stabilisers both with respect to macroeconomic policy and labour market policy. However reforms have also been implemented, which represent attacks on the traditional foundations of Danish flexicurity. Finally the article assesses the outcomes of the functioning of the Danish flexicurity model during the crisis. Has the Danish model been able, in effect, to provide shelter against the wind? Here the answer is mainly positive, but if the basic elements of the Danish model are further eroded, there is a risk of a gradual movement away from “flexicurity in Danish”.