Unions, Business, and Flexicurity: The Danish Model

While on vacation this month, I’ll be re-posting some of my earliest posts. This one’s from March 2016.

Denmark draws the lines differently. Pro-union doesn’t mean anti-business. Having a strong safety net doesn’t mean squeeze the rich. Maybe it’s more accurate to say that the lines are not there to begin with- that the ideal of ending poverty, facilitating economic mobility, and making sure everyone has access to the basics – healthcare, education, and family services – doesn’t have to pit Most of Us against a Despised Other (or at least an Undeserving Other). In Denmark, it’s more We’re All in This Together for the Long Haul.

Take unions and business: most workers belong to unions, but the unions are much less adversarial in Denmark than in the US. Unions, employers and the government work together in the spirit of “flexicurity”. Unions negotiate pay and working conditions, resolve disputes, and administer unemployment insurance programs. Employers pretty much have the ability to hire and fire at will, allowing them to flexibly respond to changes in production and market conditions. Corporate taxes are low (about 22%). Business regulation is minimal.

Thanks at least in part to Danish flexicurity, labor market participation in Denmark is considerably higher than the EU average (65% to 57%). Young people in particular have an easier time finding jobs than in most other European countries. Employers are less afraid of taking risks on inexperienced workers, because they aren’t contractually bound to retain them if they prove unproductive or market conditions change. As a result, youth unemployment is low in Denmark: just 10.3%, compared to a Euro area average of 22%.

In exchange for job security, workers get a more basic sense of security: the knowledge that if they get sick, lose their jobs, or have a child, the State is there to make sure they’ll be taken care of.