According to Daniel Schwammenthal (WSJ, April), about 30 percent of the Danish work force changes jobs each year. There are few guarantees of job security, and the Danish government spends a great deal of worker retraining. These training recipients face strong moral and financial pressure to take jobs which are offered to them. There is also a new NBER paper on the miracle of the Danish labor force.
…we briefly describe some key features of the labor market in Denmark, some of which contribute to the Danish labor markets behaving quite differently from those in many other European countries…We show that mobility is about as high, or even higher, as in the highly fluid U.S. labor market. Finally, we describe and examine the wage structure between and within firms and changes therein since 1980, especially with an eye on possible impacts of the trend towards a more decentralized wage determination. The shift towards decentralized wage bargaining has coincided with deregulation and increased product market competition. The evidence is, however, not consistent with stronger competition in product markets eroding firm-specific rents. Hence, the prime suspect is the change in wage setting institutions.
Starting in the late 1980s, wage bargaining in Denmark became increasingly decentralized, and that is considered to be a major reason for Danish labor market successes.
“Starting in the late 1980s, wage bargaining in Denmark became increasingly decentralized, and that is considered to be a major reason for Danish labor market successes.”
It’s relevant certainly but it’s not a major reason. The major reason is that employers can hire and fire at will and employees’ unemployment benefits are dependent on them taking any job offered to them. By contrast, in Finland it’s quite hard to get rid of people unless your company is in financial trouble (then it’s quite easy). At the same time, if you’ve been employed for 10 months and paid a €65 annual fee to have unemployment insurance, you get about 60 – 70% of your salary for two years if you become unemployed. No McDonalds for me then.
They’ve got high labour mobility but also high taxes and a problem with long-term unemployment.
Denmark does indeed in many ways have a splendid labor market model, but
in political economy terms the more interesting issue is that this model
was never a designed one, but rather came about largely through trial and
error – irrespective of what Danish politicians/academics would have you
think. Even more important is the fact that due to the historical lack of
heavy industry in Denmark (unlike say in Sweden), Danish unions never
crawed for strict EPL – Hence Danish politicians never had to implement
the flexibility part of flexicurity (it was always there), but “only” had
boost the training aspects, enforce job search requirements and trim
excessive benefit durations. That made the task of political implementation
far easier than in say Sweden, Germany or France, where gerontocratic
unions with an ageing membership will do anything as the expense of every-
else to hold on to their treasured job guarantees.
Is that a less direct way of saying union-like activities are not a factor, or am I way off?
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