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Tuesday, March 21, 2006

Flexicurity

When asked how to help workers affected by globalization, economists often recite the stock phrase "education and retraining." But the evidence on the effectiveness of job retraining programs is mixed and it's hard to push strongly for costly job retraining programs without demonstrable benefits. One place to look for evidence of benefits from job retraining programs is Denmark. In the Danish system, workers are protected, but jobs are not. Danish workers are among the most easily laid off workers anywhere, but only one in ten workers expresses concern over job security:

For the Danish, A Job Loss Can Be Learning Experience, by Marcus Walker, WSJ: After graduating from high school, Susanne Olsen spent 10 years at the local slaughterhouse... It was arduous, unskilled work that left her ill-equipped for most other jobs. Then the slaughterhouse closed down last year, leaving 500 people without jobs... But unlike ... laid-off workers in similar circumstances elsewhere in Europe, Ms. Olsen was sure she was going to find a new job. Now she's an apprentice golf landscaper, with her salary subsidized by the state while she takes four years of training paid for by the government and her new employer...

Most of Western Europe is fighting to hold on to its traditionally strong job protections... Denmark has gone the other way. The government allows liberal hiring and firing as in the U.S. And it has imposed limits on the duration of its high unemployment benefits. But it also invests more than any other country, as a percentage of its gross domestic product, in retraining the jobless -- a combination it calls "flexicurity." Its unusual mix of the free market and big government has helped Denmark cut its unemployment rate in half, from about 10% in the early 1990s to U.S.-style levels of under 5% now. The economy has been relatively robust, growing 3.4% last year. Meanwhile, France and Germany are at or above the Danish jobless rate of a decade ago.

Even though Danes are among the most easily laid-off workers in Europe, polls show the country's workers are the most secure about their future. ... Danes change jobs more frequently than any workers in the developed world except Americans and Australians... But fewer than 10% say they're concerned about job security, compared with nearly 40% in Germany and more than 60% in Spain. Most Danes believe they can always find work... In the interim, they get security from a dole that replaces up to nine-tenths of their last wage, the highest level in Europe.

Critics say the experiment might not be easy to replicate. For one thing, Denmark is small, with just 5.4 million people. And close-knit Scandinavian countries historically have had a higher tolerance for taxes. The system isn't cheap: Denmark spends about 4.4% of its GDP every year on supporting and retraining the jobless, the most expensive labor-market policy in the world. ...

Kirsten Thomsen prepares the "bottleneck analysis" that makes Denmark's peculiar hybrid possible... Every three months, Ms. Thomsen has the ... polling firm Gallup survey employers ... on what jobs they will need in coming years, and uses the feedback to identify the next labor shortages. ... The consultants who deal directly with unemployed people use her reports in picking training courses for individuals. "In our system, we can make supply and demand match," Ms. Thomsen says.

The true test is how the system deals with low-skilled, manual laborers in declining industries. ...  Finding new work for the 500 laid off at Hjørring ... was a double challenge. Most of the workers didn't want to leave their home town. ... In addition, the meatpackers weren't qualified for new employment, says Jim Jensen, ... Despite Hjorring's spate of large-scale factory closures, new vacancies keep appearing in Denmark's flexible labor market. ... Where qualifications are lacking, the state pays for courses at vocational colleges, often sharing the cost with a new employer...

Ten months after the slaughterhouse closed, some 300 ex-workers have found new professions in addition to the 80 who got other jobs as meatpackers. Others from Hjørring are in full-time education, or chose retirement... Today, only 60 of the 500 laid-off workers from Hjørring are still on unemployment benefits.

    Posted by on Tuesday, March 21, 2006 at 01:40 AM in Economics, Unemployment | Permalink  TrackBack (0)  Comments (38)

          

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