Flexicurity

Definition

Flexicurity is a portmanteau of 'flexibility' and 'security', referring to a welfare state model and active labour market policy that combines labour market flexibility in a dynamic economy with security for workers.

The Government of Denmark describes it as a 'golden triangle': a three-sided mix of (1) flexibility in the labour market, (2) social security, and (3) an active labour market policy with rights and obligations for the unemployed. The European Commission defines it as an integrated strategy that enhances flexibility and security at the same time, reconciling employers' need for a flexible workforce with workers' need for security, understood as confidence that they will not face long periods of unemployment.

Denmark's official labour-market description states the model rests on three core elements. First, employers can hire and fire at will without excessive dismissal costs. Second, employees who join and pay fees to an A-kasse (unemployment insurance fund) can receive up to two years' dagpenge (unemployment benefit) after losing a job. Third, the government runs education, retraining and counselling to return the unemployed to work quickly.

The state also provides kontanthjælp (subsistence payments) for people who lose their livelihood through illness, divorce or unemployment and who do not qualify under other schemes such as pension or unemployment benefit. Wages and conditions are set by collectively-negotiated agreements and there is no legal minimum wage; around 67% of Danish workers are union members, and roughly 25% of private-industry workers change jobs each year.

History

The Danish model's roots lie in the September Compromise of 1899 (also called the Labour Market Constitution) between employers and trade unions. It was revised in 1960 and renamed the Basic Agreement, settling freedom of trade-union association and the managerial prerogative to hire and dismiss labour when necessary, with legislation and state interference kept to a minimum.

In the early 1990s Danish policymakers adopted a fiscal policy to break the unemployment trend, coupled with the first active labour market policy (ALMP) of 1994. The flexicurity model emerged with the 1994 and 1996 labour market reforms, which linked newly introduced flexibility to security through generous welfare schemes and 'activation' of the labour force, regarded as 'a right and an obligation'.

Flexicurity was adopted as a leitmotiv of the European employment strategy and the revised Lisbon Strategy. Guideline No. 21 of the Integrated Guidelines for Growth and Employment calls on Member States to promote flexibility combined with employment security and to reduce labour market segmentation. The European Commission published the Communication 'Towards Common Principles of Flexicurity: More and better jobs through flexibility and security' in June 2007, and common principles were adopted on 5 December 2007 by the Employment and Social Affairs Council. The ETUC timeline records the Commission Communication as adopted on 26 June 2007 and a European Council expected to agree on common principles in December 2007.

Relations

In the European Commission's approach, flexicurity is designed across four policy components: flexible and reliable contractual arrangements; comprehensive lifelong learning strategies; effective active labour market policies; and modern social security systems providing adequate income support during employment transitions. The main EU outputs are the Commission Communication on the common principles of flexicurity and the Council conclusions on those principles, supported by initiatives such as the European Pillar of Social Rights and A new Skills Agenda for Europe.

The EU monitors flexicurity at national level through the Employment Committee (EMCO) and the annual Joint Employment Report, using a set of indicators agreed by the Employment Committee in 2012.

Flexicurity is presented as a way to make labour markets more inclusive by tackling segmentation between insiders (workers in stable, quality jobs) and outsiders (unemployed or precariously employed persons who lack the advantages linked to a permanent contract, frequently young people, migrants and others). Its relevance was recognised by the European Trade Union Confederation and BusinessEurope.

Distinctions and criticism

The Common Principles state that flexicurity approaches are not about one single labour market or working-life model, nor a single policy strategy, but should be tailored to each Member State's specific circumstances, implying a balance between the rights and responsibilities of all concerned. Internal (within-enterprise) and external flexicurity are held equally important, and flexicurity should support gender equality and rest on social dialogue and collective bargaining.

In the Danish case flexicurity is not merely deregulation: although statutory job protection is comparatively low, workers cannot be fired at will, and Danish collective agreements oblige employers to give retrenched workers advance notice. Trade union organisation and collective bargaining cover 80 to 90% of workers. The ETUC argues that Denmark's social-protection spending per head is second only to Luxembourg, that employers' social contributions are the lowest in the EU-25, and that public spending on active labour market policies is among the highest, at almost 4.5% of GDP.

In a November 2007 factsheet the ETUC stated that European trade unions are alarmed the principle is being redefined to justify eroding established job-security rights without simultaneously reinforcing the social welfare network and collective bargaining. The ETUC fears flexicurity is being interpreted as a licence for easier dismissal and the expansion of precarious and casual work, producing a more segmented labour market and social exclusion for the most vulnerable workers, and rejects the distinction between 'job security' and 'employment security' as a false trade-off.

There is also conceptual criticism. Maarten Keune and Amparo Serrano, in Deconstructing Flexicurity, criticised it as 'a purely linguistic combination of opposites that can be applied to virtually any policy mix'. The concept's flexibility encompasses both numerical flexibility (easier to hire and fire) and functional flexibility linked to lifelong learning, and a widely-cited alternative definition is that of Wilthagen and Tros (2004), which couples job, employment, income and combination security for workers in weak positions with numerical, functional and wage flexibility for adjustment.

Examples

The Netherlands implemented flexicurity policies suited to its market. In 1998 significant changes were made to labour laws to support workers with sickness and workplace-hazard benefits, with costs borne by employers, which created a long-run burden for employers. The flexicurity law let them hire temporary workers on flexible contracts with direct cost savings; despite low unemployment, the outcome was an unequal balance between security and flexibility.

Denmark's recent reality has also changed. A 2023 Resolution Foundation essay by Anna Ilsøe and Trine Pernille Larsen notes that over recent decades highly flexible employment models associated with less comprehensive social protection have become increasingly common in Denmark. Since the turn of the century non-standard work has grown, with the share of marginal part-time work (under 15 hours per week) more than doubling since 2000, alongside digital platform work and solo self-employment. These trends are presented as a significant challenge to traditional flexicurity, though the Danish model shows signs of adjusting.

Attribution dispute

The single-origin claim that the term was coined by Danish Social Democratic Prime Minister Poul Nyrup Rasmussen in the 1990s is contested. The scholarly literature credits the coining to Wilthagen and others and locates the concept's origin in the Dutch 1995 and 1996 'Flexibility and Security' memorandum and the 1998 Dutch Flexibility and Security Act. Neither single origin should be presented as settled fact.