The Danish model is unique because the terms and conditions applicable to the employees have been negotiated by the labour market parties, i.e., the trade unions on the one hand and the employers' associations on the other. The parties negotiate collective agreements, which can determine e.g., minimum wages for particular areas and pension contributions payable to employees. Most employees in Denmark work under the rules of these collective agreements. This is not the case in most other countries, where rules on e.g., working hours, overtime work, notices of termination and wages are determined by politicians and put into statutory form through legislation covering all or parts of the labour market. The unique collective agreements in Denmark, thus give an opportunity for both employers and employees to work together to create the best possible working conditions in specific parts of the labour market.
Being part of something bigger
In Denmark, it is voluntary and common to be a member of a trade union or professional organization. In fact, 70% of Danish employees are members of a trade union or organization representing their specific professional interests. This means that Denmark has one of the highest unionization rates in the world.
Companies can become part of employers' associations and employees can become part of trade unions, that both represent the respective parties and negotiate on their behalf. In most other countries, collective agreements are not nearly as common as they are in Denmark. And the rate of industrial conflict incidents in Denmark is among the lowest in the EU.
Flexicurity
Flexicurity is a portmanteau of "flexibility" and "security". The term is not particularly old, as it was coined by then prime minister of Denmark, Poul Nyrup Rasmussen, in the 1990's. It is however a useful way to describe how The Danish Model works in practice.
It means that employers can easily hire and terminate employment to adjust to the needs of the marketplace. However, it also entails that employees have a secure safety net in-between jobs. This creates a unique system which can accommodate the ever-changing needs of the employers while, at the same time, safeguarding the welfare of the employees.
Flexibility for businesses
As mentioned earlier, The Danish Model implies that the Danish Parliament does not interfere with the determination of terms and conditions applicable on the labour market (if the labour market parties are able to reach an agreement).
This is also the case in the individual workplace, as management and employees may agree on the rules that best match their specific relationship and conditions. For example, highly seasonal businesses (e.g., ice-cream shops) may agree on varying working hours to allow for peak season and off-season periods. Moreover, collective agreements vary from industry to industry, ensuring that the rules are adapted specifically to the different wants and needs of the market.
Security for employees
The Danish labour market legislation is structured to accommodate the flexible rules of the collective bargaining system and ensure that people who become unemployed are entitled to benefits and employment services and in many cases unemployment benefits through unemployment insurance funds, where employees can get up to two years of unemployment benefits.
Furthermore, the Danish government runs education and retraining programs and provides counselling services to get unemployed people back to work as quickly as possible.
An attractive place to work
The Danish labour market is a testament to the idea that a balance between labour market flexibility and job security can be achieved. The system is of course not without flaws, and it continues to evolve. There are however several benefits apart from the beforementioned to The Danish Model:
- The flexibility for employers to adapt quickly and the security for employees create a resilient labour market. This resilience has been particularly valuable during economic downturns, helping Denmark weather the economic crises effectively.
- Denmark consistently maintains low unemployment rates due to the active labour market policies, helping citizens return to work.
- Employees in Denmark report high job satisfaction, largely due to the collective bargaining and security provided by The Danish Model.
- The Danish Model has created an attractive destination for international professionals because it provides a safety net while encouraging innovation and entrepreneurship.
If you want to read more about the foundations and dynamics of the Danish labour market, click the button below, which will take you to an in-depth guide made by The Ministry of Employment