Danish Flexicurity Model
Observational StudyReview
Labor markets struggle to achieve high employment rates and labor mobility while simultaneously providing robust social safety nets. Unconstrained social safety nets tend to prolong unemployment durations, whereas low benefits cause social insecurity and worker resistance to economic adjustments.
Picture this
Flexicurity operates like a three-legged stool: employers enjoy flexible hiring and firing rules, workers receive high government income protection during unemployment, and public employment agencies enforce intensive job-search requirements so individuals remain motivated to re-enter the workforce.
What the evidence says
Cost-benefit calculations by the Danish Economic Council establish that an intensified active policy regime delivers a net societal value of €2,000 per unemployed individual exposed to the intensive regime.
- Who was studied
- Danish national labor force data spanning reforms from 1980 to 2008, evaluated alongside RCT trial data of N = 4,513 unemployed benefit recipients.
- How
- Policy evaluation and cost-benefit analysis incorporating administrative register data from the National Labour Market Board and CRAM database.
What to do
Structure labor market systems by pairing flexible worker termination laws and high income protection with mandatory job search monitoring.
From the source
"Basically, the Flexicurity model consists of three components; 1) flexible hiring and firing rules and regulations, 2) a generous unemployment insurance and unemployment assistance system, and 3) a very active labour market policy ensuring the availability and the qualificational level of the work force."
bc5b372e-5470-4162-9864-568cdcec4a00-Experimental Evidence on the Nature of the Danish Employment Miracle.pdf