Mobile, yet secure

OECD Observer

Anyone who wonders whether a flexible labour market can exist alongside a robust social security system should look no further than Denmark. There, employment protection legislation is less rigid than in some of its neighbours, but unemployment benefits are higher than in more deregulated Anglo-Saxon countries. On the other hand, seriously hunting for work is a precondition of receiving those benefits.

The upshot is that while many workers may be affected by unemployment every year, most of them return to jobs quickly. Those who do not, must take up demanding job activation programmes to help them get back on track.

Flexicurity, a term coined by the Dutch for a (slightly different) initiative in the 1990s, is how the Danes also describe their “third way” between extreme deregulation and over-protection. It appears to deliver results. In Denmark unemployment averaged just 5.6% in 2003, half its rate of a decade earlier.

How does flexicurity work? Most insured unemployed people in Denmark receive benefits from their first day out of work, which come to some 90% of their previous income, for a maximum of four years. For low-income groups, this income and other income-related benefits go some way to replacing the kind of net earnings a job, which itself may be highly taxed, would pay. This net income replacement rate varies from 63% to 78% for an average worker, depending on the family situation, and climbs as high as 89% for a single individual from a low income group, and to 96% for a lone parent with two children. Clearly, based on income alone, the unemployed would have little incentive to find a job fast. That is where the activation rules come in.

In Denmark, recipients of unemployment benefits are required to seek a job. And a law passed in 1994 made it obligatory for adults that are more than 12 months out of work to participate in so-called activation programmes. Under 25s have only six months to find work before activation becomes mandatory. The result is that Denmark’s long-term unemployment rate, at about a fifth of total unemployment in 2003, was lower than in the UK (23%) or indeed the Netherlands (29%).

A Danish activation period lasts for up to three years and may include private or public job training, job search courses, targeted education, and the like. If, after this period, the unemployed person still fails to find a proper job, they will lose their benefit entitlement, but will still be eligible for means-tested social assistance, whose net income replacement rate is far lower.

Although flexicurity produces results, such programmes can be costly, both in administration and transfers. According to a report by Per Kongshøj Madsen, government spending on labour market programmes, including benefits and active labour programmes, comes to 5% of GDP.

Flexicurity aims not just to cut unemployment, but to boost the size of the active workforce too. Under reforms in 2003, dubbed “more people into employment”, benefits are still available for four years, but activation programmes can kick in from the very first day of unemployment. The aim is to provide faster, more direct paths into work by using focused individual action plans and leaning more heavily on public employment services. By getting people into work, flexicurity can pay its way, but whether it can bear fruit in a less favourable economic climate than that of recent years remains to be seen.


Madsen, Per Kongshøj (2002), The Danish Model of Flexicurity: A Paradise with some Snakes, European Foundation for the Improvement of Living and Working Conditions. 

OECD (2004), Employment Outlook, Paris. 

©OECD Observer No 244, September 2004

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

To order your own paper editions,email

Online edition
Previous editions

Don't miss

  • MCM logo
  • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
  • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019