Flexicurity in Denmark – threatened by Europeanisation?
Joe Robinson, MSc Public Policy, University of Edinburgh, 2024/25
The labour market model of flexicurity appeals to the EU’s core economic principles and is a key part of the European Employment strategy. It also appeals to their more recent push for a ‘Social Europe’ – a coming together of European social welfare, as set out by the European Pillar of Social Rights. Flexicurity is inspired by the Danish labour market model, which has been praised for its successful balancing of strong flexibility and security. This balance is key to the continuation of the Danish model. The EU have championed flexicurity, yet their position and desire for Europeanisation has begun to threaten this balance.
What is flexicurity?
Flexicurity is based on the ‘golden triangle’ of flexible labour markets, supportive active labour market policies, and generous unemployment benefits. The EU see this as key to becoming a “competitive and dynamic knowledge-based economy”. For this they require a well-trained labour force that can adapt and move seamlessly between jobs and across borders. To support this, a strong security element is needed. The EU have recognised this through a recent push to reduce in-work poverty, encourage collective agreements, and introduce adequate minimum wages across Europe.
The Danish model
High levels of security are vital to the Danish model. Workers don’t necessarily have job security and can be fired with relative ease. But they do have employment security. If they become unemployed, strong active labour market policies encourage them back to work through lifelong learning. They also receive generous unemployment benefits facilitated by trade unions – the Ghent system. This stops labour force participants from falling into poverty.
Denmark’s model must be placed in its context. In Nordic countries, the state and formal legislation play a smaller role in the labour market. Instead, they are based on the strong role of trade unions and a tradition of collective bargaining between social partners. Wages, for example, are not set through government legislation, but through agreements between trade union and employer associations. The Danish balance between flexibility and security, depends on healthy relationships between employees and employers.
A growing imbalance?
Since the early 2000’s Danish security and collective agreements have been challenged. Domestically, a more liberal turn in government policy has seen a restriction of trade union power and a ‘work-first’ approach to lifelong learning.
A fall in security can lead to an increase in ‘outsiders’ to the Danish model – who are subject to the flexibility of the labour market without the guarantee of security. Challenges also come from the EU’s approach – which is one that tends to prefer flexibility over the Danish form of security.
Issues with the EU
The social Europe rhetoric suggests that the EU want to foster a balance between flexibility and security. But their economic focus on free markets, free movement and integration can lead them to favour flexibility. It is also difficult to translate a Danish system dependent on collective agreements and a lack of legislation to the rest of the EU. The challenges of creating a homogenous social Europe only increase as the EU expands – the EU is three times larger than when Denmark joined in 1973, with more diversity between member states. If Danish collective agreements and security falter, then the number of outsiders will increase.
A prominent issue in Denmark has been integrating workers from the EU into their collective agreements. EU labour mobility is non-discriminatory, meaning migrant workers should receive the same social protection as domestic workers. However, companies can get around this by employing posted workers.
The EU’s Rome I regulation and the Rome Convention mean that companies can decide which country’s social legislation to use when they employ workers. Therefore, companies in countries with typically higher wages (like Denmark) can save on labour costs by employing workers from countries with typically lower wages. This has been a longstanding issue, which the EU has recognised – they introduced the Posted Workers Directive to secure posted workers a minimum standard. But ultimately, the EU’s preference is for free movement, and they often clash with countries like Denmark where labour protection is based on collective agreements.
A famous example of this is the Laval ruling by the European Court of Justice. Although this occurred in Sweden it had similar repercussions for Denmark. The European Court ruled that attempts by Swedish trade unions to get Laval to sign a collective agreement were illegal under EU law. Any attempt to move beyond the standards of the Posted Workers Directive was seen as a restriction to the free movement of services. The EU have instead called for Denmark and Sweden to make their regulation clearer to allow for better cross border service.
The number of posted workers has increased from approximately 1 million postings in 2007 to approximately 4.5 million postings in 2019. Most of the workers on the Copenhagen Metro project (2009-2019) came from countries like Italy, Poland and Romania. This creates a large group of outsiders who work in Denmark but are not covered by their security.
Can a Social Europe help?
Another possible threat comes from the social rather than the economic side of the EU. In 2022, the EU introduced a directive, aimed at tackling in-work poverty and ensuring an adequate minimum wage across Europe. The directive encourages collective bargaining and doesn’t explicitly require countries to implement a statutory minimum wage. At face-value it seems to align well with the Danish model and yet many in Denmark and Sweden see it as a further threat.
It is still unclear how strictly this directive will be applied. Ultimately it is down to the European Court of Justice to judge how well the country is complying. As shown by the Laval ruling, the EU has found Nordic collective agreements to be a hindrance and have been pushing for regulation to be clearer. This has caused concerns that the state will be forced to intervene and introduce a statutory minimum wage.
This could lead to a dual system of wage setting – one collectively agreed and one set in law. If this minimum wage is lower than the collective agreed one, companies could see this as another opportunity to cut costs. They are therefore less likely to join employer associations and continue bargaining with Danish trade unions. State involvement and a breakdown of collective bargaining will only further weaken security and create more outsiders who are not supported and represented by a trade union.
Conclusion
The success of the Danish model is based on traditions of strong flexibility and security. Increased Europeanisation has brought challenges and despite the emergence of a social Europe, Danish flexicurity seems to have become more imbalanced. Attempts for a social Europe are commendable but need to be approached with care. What may benefit some countries, could be detrimental to others. In terms of the minimum wage directive, the Swedish government have dropped their opposition as they believe they will be able to opt out. Opt-outs could be the way forward, but this undermines the fundamental idea of an integrated social Europe. The Danish model may not be able to coalesce with a social Europe.