Flexicurity

“Flexicurity” is a term used to describe the special Danish three-sided mix of (1) flexibility on the labour market combined with (2) social security and (3) an active labour market policy with rights and obligations for the unemployed. The actual word is a contraction of flexibility and security. The system is also sometimes described as “a golden triangle”.

One side of the triangle consists of flexible rules for hiring and dismissing. Flexible rules make it easy for the employers to dismiss employees during periods of recession and to hire new employees when things are improving again.

The second side of the of the triangle consists of security for the wage earners in the form of a guarantee for a legally specified payment on a relatively high level  if you become unemployed - regardless of your spouse’s income.

The system builds on an effective labour market system that offers guidance, a job or  education to all unemployed – and this active labour market policy makes up the third side of the flexicurity triangle.

Seen from the employers’ view: they have a flexible labour force, and from the wage earners’ view: they have a safety net, consisting of an unemployment benefit system and an active employment policy. To a large extent, this system is financed by the state.

In a way, the Danish type of flexicurity works as a kind of unwritten “contract” – or historical compromise - between the state, the employers and the wage earners. Without the approval of all three parties, flexicurity does not work.

In this context, it should be noted that the flexible Danish labour market is strongly rooted in history: The employers’ right to freely hire and fire the employees dates all the way back to the so-called September Settlement of 1899 between the workers and employers. The unemployment benefit system has existed for almost one hundred years.

In Denmark, approximately ½ million wage earners or nearly 1/5 of the work force are struck by unemployment each year. The vast majority quickly find a new job, while a small remaining group of people are unemployed for a longer period of time.