COPENHAGEN — One of the biggest challenges for European policymakers today is helping our societies and labor markets adapt to a modern, digitalized global economy that is developing at great speed.
This requires us not only to create growth and jobs through traditional economic policies, but to create flexible labor markets that allow our economies to adjust while providing citizens with reliable social safety nets. We also need to invest in education and vocational training to allow our workforce to adapt to new needs and new kinds of jobs.
Waiting for “Europe” to solve these problems is not an option. We need to take responsibility at a national level. Failure to act will leave us poorer and unable to preserve our just and generous European welfare states.
That is why I am very enthusiastic about the labor market reforms introduced by President Emmanuel Macron in France. His proposals are needed and make very good sense.
There is, of course, no simple, “one-size-fits-all” solution for lasting economic and social progress in modern societies — not in Denmark, in France or anywhere else. But the challenges we face across Europe are essentially the same, and we should seek inspiration from one another as we strive to optimize our economies for the 21st century.
The impact of globalization is simply more benign if a society is able to embrace change and mitigate globalization’s less desirable effects.
In Denmark, we have a long history of successful national reforms, which I believe other European countries could learn from.
We have created a model that combines high flexibility when it comes to hiring and firing with robust social security: the so-called flexicurity model.
This model has very broad political and public support in Denmark, and it has been developed over many years through close cooperation between consecutive Danish governments — both center-right and center-left — and trade unions, employers and businesses.
The essence of the model is to allow companies and public institutions to respond very quickly to changes in demand and shifts in the economy, while ensuring that workers who lose their jobs are taken care of and given access to training and new skills that will allow them to return to the labor market.
The result is a labor market with a very high job turnover and many job openings — but also low, long-term unemployment. Most importantly, Danes judge it to be a success. Despite their limited formal job protection, Danes rank among the most positive in the EU when they assess their personal job situation. This has been the case for years.
The model serves the interests of both businesses and wage earners, and it has allowed the Danish economy to easily adapt to changes in the global economy.
When our textile industry was no longer able to compete internationally, it allowed us to develop a textile design industry. When our shipyards were no longer competitive, it allowed us to retrain and channel our shipbuilders into the windmill industry.
These examples highlight why our model has been successful, and it probably also partly explains why the Danes are so open to globalization and free trade. The impact of globalization is simply more benign if a society is able to embrace change and mitigate globalization’s less desirable effects.
Of course, as with any other model, the Danish labor market model needs to be adjusted continuously. For instance, we learned that we must be quite zealous regarding availability for the job market. If taking a job is not attractive enough to the unemployed, the system will collapse under the weight of its own cost, which is financed by fairly high taxes.
People sit along an avenue strewn with cherry trees in Copenhagen’s Bispebjerg Cemetery | Sophia Juliane Lydolph/EPA
As a consequence, both center-left and center-right governments have reduced the period with unemployment benefits from seven to two years since 1993 and increased the requirements for recipients in terms of readiness to take jobs on offer and engage in training to improve or learn new skills.
Currently, we are working on lowering taxes for the lowest incomes in order to make it even more attractive to find a job.
The world is ever-changing, and we can never rest. That is why I have established a “disruption council” with the participation of a wide range of societal actors including businesses, social partners, academics and “free spirits” to discuss how to face globalization with confidence.
Such cooperation has been key to the success of Danish reforms. It is my experience that engaging broad forces of society in ownership of reforms is the right way to achieve lasting progress.
Lars Løkke Rasmussen is the prime minister of Denmark.
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