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Flexicurity Policies and Europe 2020

Flexicurity Policies and Europe 2020

Daniel Hinšt, Vice President of the Centre for Public Policy and Economic Analysis (CEA)

The article was originally published in 2011

More competitive European Union represents the key challenge of the European Commission’s strategic efforts “Europe 2020”. Flexicurity labour market policies have been put among several important policies which would contribute to the most important strategic target – 75% employment rate among population aged 20-64.

Therefore, the Commission proposes the implementation of flexicurity principles, development of new skills and their adaptability to new market conditions, including potential career shifts. At the EU level, the Commission wants to identify ways of reducing unemployment and raising activity rates. Moreover, being aware of different labour markets, the Commission proposes the implementation of national pathways for flexicurity policies, in order to reduce labour market segmentation.

Flexicurity model can be found in Northern European labour markets, particularly Nordic countries and the Netherlands. Growing unemployment in many European countries has been a consequence of various structural weaknesses, including labour market rigidities. Therefore, further liberalisation of the labour market in EU Member States will be needed, in combination with other important structural free market reforms, in order to increase labour competitiveness and employment rates.

The original Danish flexicurity model can only serve as the benchmark for others, but it cannot be simply copied elsewhere. Although the flexicurity system represents a policy innovation which is highly recommendable for many countries, in the Danish case, it is a consequence of long historic tradition. Therefore, other Member States can implement flexicurity policies, taking into account their national pathways and long-term policy planning.

The Flexicurity model includes the needs for labour market flexibility and security in a single system. Although job security may have been a preferable choice for many workers, rigid labour legislation and collective agreements have negative economic outcomes, resulting in higher unemployment than otherwise. However, security on the labour market could be maintained in cases of a flexible labour market, although in a different form. High level of employability can be reached through a combination of flexible labour market and active labour market policies. This would increase their opportunities for employability by developing competitive skills and qualifications that are needed on the flexible labour market.

Moreover, unemployed people require income security. However, it is not so easy to conclude that the unemployed people need more social security, without considering their individual responsibility to seek employment actively. If unemployment benefits were high enough to provide sufficient income for good living, this would mean no need to seek employment. This welfare trap, based on laziness and the lack of individual responsibility, is a serious problem for many countries, which results in lower activity rate and higher unemployment. Therefore, it is important that governments effectively monitor the usage of unemployment benefits, in order to prevent potential cheating practices. Therefore, social policy needs to be limited to providing adequate transitional income security only for those who are actively seeking new employment. Otherwise, it would be a disaster, as it often is.

Welfare benefits can also be connected with the mandatory minimum wage problem. If benefits were higher than the minimum wage, workers would rather choose the first option. Therefore, unemployment benefits could be seen rather as the obstacle created for maintaining the welfare state. Governments should rather need to consider abolishing the mandatory minimum wage in order to increase youth and low skilled employment. As in the case of health care and pensions, governments should consider the option of privatising unemployment security.

As a conclusion, flexicurity labour market policies need to be based on:

  1. urgent need for full labour market liberalisation in order to increase labour flexibility,
  2. active policies directed towards increased employability and competitive skills,
  3. privatisation of unemployment security.

REFERENCE

European Commission (2010); Europe 2020 – A European strategy for smart, sustainable and inclusive growth
http://ec.europa.eu/eu2020/pdf/COMPLET%20EN%20BARROSO%20%20%20007%20-%20Europe%202020%20-%20EN%20version.pdf

MASTER THESIS for further reading

Danish Flexicurity Model

CITATIONS in other articles

Borghouts, I. W. C. M. (2012). Employment Security for the Young Disabled – Policies and Practices in Europe. In H. Lindberg, & N. Karlson (Eds.), Labour markets at a crossroads : Causes of change, challenges and need to reform (pp. 51-79). Cambridge Scholars Publishing. – Tilburg University
https://pure.uvt.nl/ws/portalfiles/portal/4022180/978_1_4438_3610_4_sample.pdf

“In this model, flexicurity is based on an active labour market policy, strong mechanisms of safety and security in the welfare systems and flexibility within the collective agreements to adapt to different industries’ needs. According to some researchers, the Nordic countries represent a benchmark for flexicurity compared to other countries (Hinst 2011, Sapir et al. 2003) – Page 7

Karlson, N. & Lindberg, H. (2012). Corporative cartels and challenges to European labour market models. Ratio Working Paper No. 193. – Ratio Institute
https://ratio.se/en/publications/working-paper-193-corporative-cartels-challenges-european-labour-market-models/

In this model, flexicurity is based on an active labour market policy, strong mechanisms of safety and security in public welfare systems and flexibility within collective agreements that are easily adjustable based on different industries’ dividing needs. According to some researchers, flexicurity in the Nordic countries represents a level of benchmark flexicurity when contrasted with the other three models (Hinst, 2011; Sapir et al, 2003). – PDF page 6/18

AUTHOR

Daniel Hinšt completed Advanced Master of European Studies and graduated in Political Science with specialization in public policy and public management, as well as international relations and diplomacy, at the University of Zagreb. His policy analysis and research is mostly focused on designing methodologically based policy solutions for institutional and market reforms, and on detecting disinformation and geopolitical risks against values of individual liberty and EU / NATO transatlantic institutions.