DENMARK: Danish employment model put to test in meltdown - 29 Mar 2009

By KARL RITTER – 22 hours ago

COPENHAGEN (AP) — Dennis Harmon lost his job, but that doesn't mean he'll lose his livelihood.

The
veteran bricklayer is entitled to the maximum jobless benefits in
Denmark: $594 a week. After taxes, that's enough to cover rent for his
two-room apartment outside Copenhagen, utilities and payments on his
1996 Opel Vectra.

"There's not much left for fun," mutters Harmon, a 40-year-old Dane whose surname is tattooed on his right forearm.

Even so, Harmon receives a level of compensation that people losing their jobs in many parts of the world can only dream of.

Robust
unemployment compensation is a key feature of Denmark's labor market
model, studied so widely in recent years that it rivals Carlsberg beer
and Lego toys among the Scandinavian nation's most famous trademarks.

Called
"flexicurity," it combines flexibility for employers to hire and fire
workers with financial security for the unemployed. And experts say it
helps explain why both Danish businesses and workers are entering the
global downturn in better shape than most of their Western peers.

"People
here are not worried about losing their jobs to the extent that they
are in the U.S.," says Torben Andersen, an economist at the University
of Aarhus, western Denmark. "If people get unemployed, it doesn't mean
they will have to sell their house. They know the unemployment coverage
is there."

Harmon's allowance, financed by union fees and
government subsidies, is more than three times what an average worker
makes in Hungary. And it's more than double the maximum jobless
benefits paid by some U.S. states. The highest weekly unemployment
compensation is $584 in New Jersey, $362 in Michigan and $240 in
Arizona.

What's more, Danes can collect their benefits for up to
four years, although that's rarely needed. U.S. benefits are capped at
59 weeks.

The flip side is that like in the U.S. — but unlike
most of Europe — Danish companies can fire workers with little hassle.
And as the recession cuts ever deeper, they're taking advantage of it.

"We
have closed down two plants in recent weeks, so I have been telling
between 800-900 people that they will lose their jobs," says Jan
Winther, human resources director for Danish Crown, the world's biggest
pork exporter.

He says the notice period ranges from one to six
weeks for blue-collar workers and one to six months for white-collar
workers. The advantage of the Danish model, Winther says, is that it
allows companies to adjust to market conditions.

"We're not
afraid of hiring, knowing we can sack them if the market goes down and
that the government takes care of them," he says.

Perhaps more
surprisingly, the system also enjoys support from union leaders, who
say a flexible labor market is needed to guarantee jobs in the future.

"Our
goal in the union is not to defend people's jobs but to make sure that
their next job is available," says Kristian Madsen, spokesman for the
United Federation of Danish Workers, the country's biggest union. "When
I tell my American colleagues, they can't really wrap their heads
around that way of thinking."

Denmark's jobless rate has
consistently been one of Europe's lowest, and analysts give flexicurity
part of the credit. At 4.3 percent in January, it was significantly
below the European Union average of 7.6 percent.

And despite its
high taxes — nearly 50 percent of economic output — the World Economic
Forum also ranks Denmark as the world's third most competitive economy,
behind the U.S. and Switzerland.

Denmark's success has not gone
unnoticed in Europe. France last year adopted a plan inspired by the
Danish model to make its labor market less rigid. The EU head office in
Brussels believes flexicurity is key to making the 27-nation bloc more
competitive.

"The crisis will be a test of the concept of
flexicurity, but our analyses still suggest that it's the right model,"
says Chantal Hughes, a spokeswoman for the European Commission.

The
buzz around flexicurity appears to have subsided, however, as the
recession prompts European countries to go into damage control. France
is now talking less about a flexible labor market and more about
protecting jobs in the sputtering auto industry.

The Danish model
may appear less attractive in a downturn, because "unemployment will
rise faster in a Danish context than in countries with more job
protection," says Aalborg University professor Per Kongshoej Madsen,
one of the first economists in Denmark to study the flexicurity concept.

Meanwhile,
the pressure on the welfare system grows with the increasing number of
people seeking jobless benefits. Denmark already spends more than any
other European country on helping the unemployed: About 4 percent of
gross domestic product is devoted to jobless benefits and an active
labor market policy, according to EU statistics.

Danes have
little problem with that. The welfare state is so deeply ingrained in
Scandinavian DNA that no parliamentary party is against the system,
although some argue about what level of taxation is needed to support
it.

"On the right we would like to make sure there is incentive
to work, but we don't want people to live in absolute poverty if they
don't," said Conservative lawmaker Charlotte Dyremose.

Still, the center-right government, in power since 2001, is trying hard to make sure people don't abuse the dole.

Jobseekers
must log on to the government's job site at least once a week to show
they're searching for a job. They can also be pushed to switch to a
profession where chances of getting hired are higher, or risk losing
their benefits.

"Within the model of flexicurity we need to make
sure the unemployed have skills in the areas that will need labor,"
says Jens Sibbersen, manager of Denmark's biggest unemployment office
in Vesterbro, a working-class district of Copenhagen. "When we deal
with the unemployed we try to divert them toward those areas."

Harmon,
the bricklayer, says many of his colleagues have been forced to switch
trades. With construction at a standstill, about 30 percent of
Denmark's masons were out of work in January, according to union
statistics.

"I already considered doing something else, but I
can't imagine what kind of job I would do," he says. "The problem with
other lines of work is that you almost get the same pay as when you're
unemployed."

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