Danish Flexicurity Under Siege?

Denmark has enjoyed a run of strong economic performance until quite recently.  The Danes rank at or near the top in many international comparisons of economic competitiveness, such as the annual Global Competitiveness reports from the World Economic Forum. Analysts have pointed to a number of factors leading to this strong performance, but most agree that the Danish system dubbed flexicurity has played an important role. Briefly, flexicurity refers to the Danish labor market system that combines very flexible labor markets (where it is relatively easy to fire workers) with a generous social safety net and aggressive retraining programs.   The success of this model has generated lots of interest among American workforce development researchers and practitioners.

Flexicurity’s performance in the current economic downturn is the subject of an interesting new analysis at VOX, an excellent web portal for new economic research from Europe.   The researchers note that the Danish economy has been severely challenged in the current recession, and underpeformed similar economies in Germany and the Netherlands.  Not surprisinly, Danish firms responded with more lay-offs–this is to be expected in the flexicurity model. However, as recovery proceeds, the expected uptick in hiring has not yet materialized and long-term unemployement rates are rising.   The jury is still out–but the power of the flexicurity system as a model for other nations may still be an open question.

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