Denmark could do more to help vulnerable laid-off workers


15/12/2016 - Denmark should boost benefit coverage for low-skilled and low-wage workers and improve the support available to blue-collar workers as part of a series of reforms to help laid-off workers get back into work more quickly, according to a new OECD report.  


Back to Work: Denmark says that 2% to 3% of Danish workers with at least one year of job tenure are laid off every year as a consequence of mass dismissal or firm closure. In normal times, about three in four of these workers find a new job within a year. But the global financial crisis hit Denmark particularly hard, doubling the number of workers laid off and significantly decreasing their re‑employment prospects to only one in two workers, and the return to the better pre-crisis outcomes is slow.


Denmark’s flexible labour market allows employers to hire and fire workers in line with fluctuating demand. With the country’s strong focus on activation and high spending on measures geared at helping jobseekers back into employment, many displaced workers receive the support and encouragement needed to find a new job. The unemployment benefit system also provides effective income support to insured jobseekers in periods of unemployment.


Nevertheless, challenges remain: despite the 2016 unemployment insurance reform fostering incentives to accept short-term, fixed-term and part-time employment, as a stepping stone back into jobs, benefit coverage remains a major challenge as many low-wage and low-skilled workers are not covered by the system.


Equity issues also arise in the provision of early intervention before dismissal. In particular, workers affected by collective dismissals in larger firms receive faster and better support than those in small firms or involved in small or individual dismissals. Blue-collar workers are also treated less favourably than their white-collar counterparts. More generally, low-skilled and older displaced workers struggle the most to re-enter the labour market and bear the largest cost of job displacement.


To help address these challenges, the OECD recommends that Denmark:


  • Improve unemployment insurance coverage of low-skilled and low-wage workers by either making the system universal or making membership more attractive for them.
  • Provide a level playing field for blue-collar workers in terms of their possibility to access early intervention measures before dismissal by making notice periods equal or at least more similar to those of white-collar workers.
  • Ease access to early intervention (usually reserved for collective dismissals) for workers at risk of displacement from firms in the supply chain of large dismissing companies or in regions facing multiple redundancies in small and medium-sized companies.
  • Make better use of the notice period to promote efficient early intervention and successful job-to job transitions. Bring the recognition of prior learning forward in time and involve employers and municipal Jobcentres in the recognition process to assure displaced workers can benefit systematically and, ideally, before their dismissal.
  • Reinforce training and pre-training counselling to ensure people choose and get the right training at the right time and avoid costly but ineffective training. Promote the take-up of publicly subsidised, employer-provided training among workers who need training most, especially low-skilled and older workers.


For further information or comments, journalists should contact Gwenn PARENT, economist at the OECD Employment Policy Division and author of the report (+33 1 45 24 75 01) or Christopher PRINZ, manager of the OECD Back-to-Work project (+33 1 45 24 94 83).


For a copy of the report, please contact OECD’s Media Division (+33 1 45 24 97 00).


Working with over 100 countries, the OECD is a global policy forum that promotes policies to improve the economic and social well-being of people around the world.


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