Employment challenges in the future By Nina Røhr Rimmer MSc Econ, Associate Professor May 2010

THE BACKGROUND for EU problems Long term situation Demographic change – ageing workforce Globalisation and competitive pressures New economy: knowledge; services Climate changes But how does the crisis influence this trend? Does it alter the labour market fundamentally? What sort of structural impacts?

LABOUR SUPPLY Emphasis on quantity and quality Moving beyond employability A necessity is long term supply Raising employment rates of specific groups Women Youths and older workers More contentiously: immigrants Enhancing human capital Life Long Learning Basic and transferable skills

LABOUR DEMAND Link to macro circumstances Seeking to maintain employment levels Possibilities for forms of job sharing Stimulating demand in ‘new’ sectors Such as ‘green’ jobs Demand for specific segments of Labour Force Mainstreaming atypical contracts Getting rid of the term “atypical” Labour cost considerations Including tax systems

INSTITUTIONS Matching supply and demand Delivering quality employment services The components of flexicurity Facilitating adapatability Making transitions pay Burden sharing Reviewing employment protection laws Diminishing insider-outsider conflicts Especially a problem with immigrants both EU and non-EU

QUALITY Focus on wider aspects of employment Fairness in the labour market Equality Gender Other dimensions Over the life-course Work-life balance Working conditions Avoidance of low wage traps etc.

The European Society – Can we agree on one model? Free-market capitalist society and a welfare society inspired by the socialism project Social spending is high as a percentage of GDP (education, health), A substantial part of income is redistributed through taxation and social protection, There seems to be a large consensus among European leaders in politics, trade-unions or social partners on the point that there is a European Social Model, and that it needs to be maintained and developed. But what ESM ? Can the ESM survive in a global world? The answer will be positive only if social protection is not a handicap but also a factor of productivity and competitiveness. Job stability must be an incentive for companies to invest in workers and for workers to invest in their company.

EU = 4 models of „Welfare Capitalism“: The Anglo-Saxon or Liberal Model The Continental or Social Insurance Model The Mediterranean or Family-oriented Model The Scandinavian or Universalistic Model

EUROFRAME-EFN Special Topic Report, Autumn 2007 Anglo-Saxon Model Pre-dominant role of markets, minimal role of the State Low degree of regulation High competition, sophisticated regulation of utilities Selective social transfers; i.e. means tested benefits Private insurances Welfare-to-work strategies Public health system and publicly-financed schools Anglo-Saxon Europe: United Kingdom, Ireland Anglo-Saxon Model Overseas : USA, Canada, Australia, New Zealand

EUROFRAME-EFN Special Topic Report, Autumn 2007 Continental Model Social protection organised on occupational basis Income-related transfers with low minimum standards High employment protection, generous unemployment allowances Employment rates rather low Contribution-based social insurance system for pensions, and unemployment Low re-distributive efforts, regressive tax structure (low wealth taxation, high taxes on labour and consumption) Co-operative industrial relations and coordinated wage bargaining Germany, France, Belgium, Netherlands, Austria, Switzerland

EUROFRAME-EFN Special Topic Report, Autumn 2007 Mediterranean Model Important role of supportive family networks Low transfers, but generous old-age benefits High gender inequality, low female participation rate High job protection but low replacement rate Some traits of paternalistic society remained Italy, Spain, Portugal, Greece

EUROFRAME-EFN Special Topic Report, Autumn 2007 Based on equality, social inclusion, universality High level of social services, affordable and of high quality High employment rates and emphasis on gender equality Tax financed unemployment benefits and health system Progressive taxation, taxes on property and bequests Low taxes for business High minimum wages, high replacement rates, pensions with high minimum standards & income-related elements Low job protection Cooperation between social partners business, unions and government Trade union operates unemployment insurance and training Sweden, Norway, Finland, Denmark Scandinavian Model

Flexible labour market Unem- ployment benefits Active LMP Low employment protection High job mobility Income security Educational policy etc. Focus on better qualifications Right and duty to accept job offers High degree of compensation Four years in the insurance system The Danish flexicurity triangle

Flexicurity Model = a combination of easy hiring and firing (flexibility for employers) and high benefits (= security) for the unemployed High mobility in the labour market Permanent employments Rather high level of security Equal opportunities (and high employment rates for both men and women + elderly) Strong organisation on both sides of the labour market – very few conflicts High level of unionisation (80 %)

Salary in Denmark Relatively high salaries But high level of tax (marginal tax rate of 51,5%) Collective agreements: for example € 16 per hour for unskilled work Private negotiation and employment contract Other examples: Electrician€ 22 per hour Nurse€ per month Engineer€ per month Spec. Doctor€ per month

37 hrs./week Paid holidays – min. 5-6 weeks per year + 9 public holidays High salaries Flexibility concerning illness, child birth, family benefits The Danish Labour Market

Working culture Informal atmosphere Flat hierarchy responsibility is delegated Team work Professional development – rewarding Working language - English or Danish Effectiveness and efficiency Wide use of technology Social events and activities

Job Satisfaction Per cent of employed, 2006

The lowest unemployment rate in 33 years 2008 = 1,8% = 4.2% Source: Statistical Yearbook 2008, Statistics Denmark

EUROFRAME-EFN Special Topic Report, Autumn 2007 Key elements of a New Welfare State Architecture Child-centred and women-friendly social investments Thus fostering fertility rates Higher investment in human capital The higher the qualification, the higher are activity rates Restructuring from transfers to social services From passive to activation in case of unemployment, invalidity etc. “Flexicurity” or managed and balanced flexibility Jobs with high security and flexible jobs with inadequate protection Active anti-cyclical macro-economic strategy Growth and best technologies are preconditions for welfare

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