Over recent decades, the Danish labour market has performed comparatively well. Denmark has exhibited not only a low unemployment rate, but also rising employment and high job mobility across shifting economic cycles.
This success is often attributed to so-called Danish ‘flexicurity’: a jobs market model characterized by high levels of external numerical flexibility for employers (relaxed hiring and firing procedures), high levels of security for employees (comparatively generous unemployment benefits), and high levels of support in finding new roles (via well-developed active labour market policies, ALMP). The combination of these different elements distinguishes the Danish system and has generated international interest in the flexicurity model, including the extent to which it might be adapted and adopted in other countries.
Yet accounts of flexicurity often lag behind the reality of labour market trends in Denmark. Over recent decades, highly flexible models of employment often associated with less comprehensive forms of social protection have become increasingly common. Since the turn of the century, contractual flexibility – understood here as non-standard work – has played an increasing role for employers as well as employees.
So-called external numerical flexibility is no longer just about the ease of ‘hiring and firing’ employees in permanent full-time positions, but also about utilizing various forms of short-term, or limited hour, contracts. For example, the share of well-known forms of non-standard work contract such as marginal part-time (less than 15 work hours per week) has more than doubled since 2000. Other forms of non-standard work, such as digital platform work and other forms of solo self-employment, have also become more prevalent in the Danish labour market.
This essay introduces the reader to the flexicurity model, sets out recent changes in Danish employment patterns which mirror trends in many other advanced labour markets (including the UK6), and seeks to draw conclusions about what these trends mean for the future direction of flexicurity. We argue both that the trend towards greater contractual flexibility is a significant challenge to traditional flexicurity, and that the Danish model displays signs of being able to adjust to these changes. There may be lessons to be drawn from this experience as the UK considers the balance between flexibility and security within its own labour market in the context of recent shocks and the ongoing net zero, demographic and technological transitions.
The Navigating Economic Change essays are written by a range of leading economists and national experts and reflect the views of the authors rather than those of the Resolution Foundation, the LSE or The Economy 2030 Inquiry.
They have been commissioned and edited by Gavin Kelly (Chair of the Resolution Foundation and member of the Economy 2030 steering group) and Richard Davies (Professor at University of Bristol and fellow at the LSE’s Centre for Economic Performance).