The Danish Flexicurity Model and Old Age Protection

Abstract

The story of combining labour market flexibility and economic security in old age is in many ways different in Denmark from other European countries, both in terms of the development of the system and its outcomes. On the one hand, flexibility in the Danish labour market is not linked to the creation of atypical jobs. For more than 50 years, labour unions have advocated flexibility as long as it ensured workers had jobs based on standard conditions concerning wages, working hours and social rights. On the other hand, income security in old age is not the result of any recent sweeping pension reform. It is partly based on the universal state old age pension and partly on the development of a second pillar of labour market pensions. The extension of labour market pensions in the 1990s to cover private sector employees was the most important change in terms of income security. Public sector employees had been covered by supplementary labour market pensions since the late 1960s and the state old age pension has not been subject to any major reform since its introduction in the late 1950s. The flexible aspects of the Danish labour market, as well as the extension of the second pillar pension system to cover private sector employees, came about as the result of negotiations between the parties in the labour market.