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


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

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • “Nizip” refugee camp visit
    July 2016: OECD Secretary-General Angel Gurría visits the “Nizip” refugee camp, situated between Gaziantep and the Turkish-Syrian border, accompanied by Turkey’s Deputy Prime Minister Mehmet Şimşek. The camp accommodates a small number of the 2.75 million Syrians currently registered in Turkey, mostly outside the camps. In his tour of the camp, Mr Gurría visits a school, speaks with refugees and gives a short interview.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • Queen Maxima of the Netherlands gives a speech next to Mexico's President Enrique Pena Nieto (not pictured) during the International Forum of Financial Inclusion at the National Palace in Mexico City, Mexico June 21, 2016.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • OECD Environment Director Simon Upton presented a talk at Imperial College London on 21 April 2016. With the world awash in surplus oil and prices languishing around US$40 per barrel, how can governments step up efforts to transform the world’s energy systems in line with the Paris Agreement?
  • Happy 10th birthday to Twitter. This 2008 OECD Observer interview with Henry Copeland said you’d do well.
  • 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.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.

  • Message from the International Space Station to COP21

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa.
  • Pole to Paris Project
  • In order to face global warming, Asia needs at least $40 billion per year, derived from both the public and private sector. Read how to bridge the climate financing gap on the Asian Bank of Development's website.
  • How can cities fight climate change?
    Discover projects in Denmark, Canada, Australia, Japan and Mexico.
  • Climate: What's changed, what hasn't, what we can do about it.
    Lecture by OECD Secretary-General Angel Gurría, hosted by the London School of Economics and Aviva Investors in association with ClimateWise, London, UK, 3 July 2015.
  • Is technological progress slowing down? Is it speeding up? At the OECD, we believe the research from our Future of ‪Productivity‬ project helps to resolve this paradox.
  • Is inequality bad for growth? That redistribution boosts economies is not established by the evidence says FT economics editor Chris Giles. Read more on
  • 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 .

Most Popular Articles


What issue are you most concerned about in 2016?

Euro crisis
International conflict
Global warming

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 2016