Labour market regulation in Denmark during and beyond the economic crisis

Since the 1950s, Denmark has developed an economy, a social welfare system and an inclusive labour market which have been admired by overseas commentators (Smith, 2011, Auer 2000, Ganssmann 2000). In the process, it has transformed itself from a relatively low wage country to a high-wage, high-skill, internationally integrated economy. There are many reasons for this development and it has been far from a planned, pre-determined development path. In fact, it has not always resulted in positive outcomes and Denmark has had its fair share of international competitive challenges, economic downturns, public policy ‘soul-searching’ and adverse economic and social changes.

The so-called ‘Danish Model’ of employment relations and its ‘flexicurity’ approach has been heralded by many commentators for its ability to being adaptive and creating win-win economic, social and labour market outcomes (Auer, 2000; Due et al., 1993). For example, it has been heralded by the European Commission as a way forward in the new millennium (European Commission, 2006, 2007). It has also been lauded for its ‘path dependency’ and ability to stay successful as other ‘Models’ have fallen into disrepute. While there is no doubt that the ‘Danish Model’ have been relatively successful in the last couple of decades, there have been frequent warnings that the end may be nigh for the ‘Danish Model’ (see Auer, 2009; Smith, 2011). A similar warning is the basic message of this article though in light of the remarkable Danish ability to re-invent and adjust the ‘Danish Model’, we are not going to predict any firm outcomes. Instead we focus on three major ‘threats’ to the ‘Danish Model’: the shift in economic thinking and public policy, the undermining of flexicurity (in particular the equality and equity dimensions), and changes in key employment relations structures and behaviours.

The latter ‘threat’ is the major focus of this article and four main areas of changing structures and behaviour will be reviewed: the weakening of trade unions, the decentralisation of collective bargaining, the influence of the EU and migrant workers, and employment and unemployment policies. The specific discussion of these four areas will highlight the changing relationship between the state, labour and capital and in particular how the changing relationship can influence the future of the ‘Danish model’ and the flexicurity approach. On that background, we end up asking: when are the changes so fundamental that we can no longer talk about the ‘Danish Model’ and flexicurity?