Intensive Programme Finland

Intensive Programme Finland FLEXEM (ter) 2007 Oulu

Flexicurity

= flexibility plus security

Prepared by: Marije Bosman Inholland University Kevin De Bruycker Plantijn University College Mathias Settele University of Nürtingen Gabriele Grosso University of Bologna Andreas Michael University of Florence Egle Arcisauskaite Mykolas Romeris University Irmantas Berzauskas Kaunas University College Mercè Valldeperas Sumarroca University of Girona

Flexicurity IP Flexem (ter)

Table of contents

1. PREFACE______3 2. CONCEPT______4

2.1. FLEXICURITY______4 2.2. THE DANISH MODEL: A “GOLDEN TRIANGLE” OF FLEXICURITY.______4 3. FLEXIBLE LABOUR MARKET______6

3.1. WORKER MOBILITY______6 3.2. EMPLOYMENT PROTECTION______7 3.3. TYPES OF CONTRACTS______8 4. GENEROUS WELFARE SYSTEM______11

4.1. UNEMPLOYMENT BENEFITS______11 4.2. UNEMPLOYMENT RATE______12 4.3. PENSIONS______12 4.4. GDP RATE FOR SOCIAL SECURITY______13 4.5. MINIMUM WAGES______13 4.6. CONCLUSION ABOUT SOCIAL SECURITY______14 5. ACTIVE LABOUR MARKET POLICY______15

5.1. LIFE LONG LEARNING (LLL)______15 5.1.1. Financing concept______15 5.1.2. LLL for the employed______16 5.1.3. LLL for the unemployed______16 5.2. JOB ROTATION______16 5.3. CONCLUSION ABOUT ACTIVE LABOUR MARKET POLICY______17 6. TRADE UNIONS______18

6.1. COLLECTIVE BARGAINING______18 7. GENERAL CONCLUSION______19 8. RECOMMENDATIONS AND DISCUSSIONS______21

8.1. IN ORDER TO REACH A MORE FLEXIBLE LABOUR MARKET:______21 8.2. TO IMPROVE A MORE GENEROUS WELFARE SYSTEM:______21 8.3. FOR AN ACTIVE LABOUR MARKET POLICY:______21 8.4. IN PARTICULAR, ACCORDING TO THE 2007 ANNUAL PROGRESS REPORT:______22 9. REFERENCES______24

9.1. PAPERS______24  FLEXICURITY IN THE NETHERLANDS______24  FLEXICURITY ITALY______24  FLEXICURITY IN SPAIN______24  FLEXICURITY IN BELGIUM______24  FLEXICURITY IN GERMANY______24  FLEXICURITY IN LITHUANIA______24 9.2. BOOKS______24 9.3. INTERNET______24

Finland, Oulu March 2007 1 Flexicurity IP Flexem (ter)

Fact and figures

Table 1: Overview leave schemes per country, 2006...... 6 Table 2: Length of employment (years in average)...... 7 Table 3: Employment protection per country, 2006...... 7 Table 4: % of Part-time work in Europe, 2006...... 8 Table 5: Overview unemployment rates...... 12 Table 6: GDP rate per country...... 13 Table 7: Participation in LLL and Public expenditure on education in % of GDP,2006...... 15 Table 8: Financing of study and education by government, companies and/or workers...... 16

Figure 1: The golden triangle...... 5 Figure 2: % of total national union membership in 2003...... 18

1. Preface

Labour market and the best (maybe even universal) model for it is an ongoing and topical issue in Europe. The objective remains the same – economic growth, high level of employment, generous social security – in order to achieve social welfare in the state. The answers to the question ‘how to achieve that’ differ from state to state, however, at the same time looking at Danish-style flexicurity model as a possible answer to the arising question.

FLEXEM TER Flexicurity group consists of eight students from six European Union countries: Bel- gium, Germany, Italy, Spain, The Netherlands and Lithuania. Last year Flexicurity group concen- trated on comparing the participating countries using the matrix of prof.dr.Wilthagen. This year we decided to use the Danish flexicurity model, defined as a ‘golden triangle’ and its aspects as a criteria for comparison in order to see this topic from a different approach. Trade unions in the form of collective agreements play a major role in Denmark flexicurity model and as they have a great impact on all the dimensions of the triangle we decided to have a separate paragraph, underlining their importance. The main mean of preparing the paper was working in small groups in order to in- volve each member of the group and make the work as effective as possible.

These are the main objectives of the Flexicurity group, which are purposefully followed in this paper:

 To describe the concept of flexicurity as the ‘golden triangle’. This is shortly done in the introduction and is further on used in a comparison with the participating countries.  To define the current situation comparing the aspects of the ‘golden triangle’ separately and trying to find the points of similarities and differences in the participating countries.  To make conclusions using the comparison on the possibilities to have a universal flexicurity model working for whole Europe.  To give recommendations resting upon the analysis of current situation on what could be done on the European level using the ideas and concepts of flexicurity.

2. Concept 2.1. Flexicurity

At the moment, the so called “Flexicurity” model for the labour market appears to be proposed as a “miracle cure” for Europe’s employment/growth problems1. The model is being promoted as offering the potential for creating the “best of all worlds”, by combining in one single strategy the seemingly divergent needs of companies and workers/unemployed.

This package is promoted as offering, on the one hand greater flexibility for businesses to hire and fire, seen to be essential to support growth in a globalised economy, and on the other hand, providing “employment” although not “job security” for workers or aspiring workers, and a safety net of income support for those in between jobs.

The main attention has been focussed on the Danish labour market model, which appears to have achieved new jobs and low unemployment rates, combined with guaranteeing an effective safety net during unemployment, backed by dynamic and high quality activate labour market policies.

The key elements of this strategy are described as the “Golden Triangle: ( P. K Madsen.)

1. High labour market mobility and easy hiring and firing 2. Generous social protection (both unemployment benefit and social security for those without adequate contributions). 3. Active labour market policy, involving counselling, training/education and support for re-skilling and upgrading competences as well as active support for getting a job.

The European Commission’s Joint Employment Report in 2006, reflected in the June Council de- cision, emphasizes a separate specific element of life-long learning.

There is great concern among anti-poverty organisations that EU approaches will result in greater flexibility and weaker social protection for employees and the unemployed.2

2.2. The Danish model: a “golden triangle” of flexicurity3.

The arrows in the model (figure 1.) indicate flows of persons between different positions within work, welfare and active labour market programmes. The two arrows linking the flexible labour market and the generous welfare system indicate that between 20 and 25 percent of the Danish work- force is affected by unemployment every year, but that the majority of the unemployed returns to employment after only a short spell of unemployment. Active labour market programmes assist those who do not quickly go back into employment, before re-entering a job.

The dotted eclipse (figure 1) indicates the basic flexibility-security nexus combining a high level of numerical external flexibility (linked to a low level of employment protection) and a generous system of economic support (income security) for the unemployed. The main role of active labour market policy is to support the flows from unemployment back to employment by upgrading the skills of the unemployed. This reflects the element of employment security in the Danish model.

1 EAPN (Europe) Press release on Flexicurity on the eve of the meeting of EU Informal Summit of Prime Ministers in Finland on 19/20th October 2006. 2 European Foundation for the Improvement of Living and Working Conditions page on flexicurity 3 Madsen, P.K. (2006); The Danish Road to “Flexicurity” Where are we? And how did we get there? Finland, Oulu March 2007 4 Flexicurity IP Flexem (ter)

Figure 1: The golden triangle

Thus the Danish experience points to the economic feasibility of a “hybrid employment system” combining on the one hand the traditional virtues of a liberal labour market with few restrictions on the employment contract with - on the other hand - a reasonable level of economic protection of the individual wage earner. The Danish model therefore fits the picture of a possible “trade-off” between a very flexible employment relation and a social protection system combined with active labour market programmes (ALMP), which defends the individuals from the potential costs of a low level of employment security4. In this respect the model represent a genuine alternative to the common idea of making the individual employers responsible for income and employment security by having a high level of individual employment protection for the employees at the company level.

4 Auer.P and Cazes, S. (2003);: Employment stability in an age of flexibility. Evidence from industrialized countries, Geneva: Internation- al Labour Organization Finland, Oulu March 2007 5 Flexicurity IP Flexem (ter)

3. Flexible labour market

Globalisation, technological change, increasing international competition, enormous unemployment in some countries, new forms of family life - all these reasons let the request of more flexibility of the labour market becomes known. Labour market flexibility refers to the degree in which labour markets quickly adapt to fluctuations and changes in society as well as in the economy or production. As in the past years flexibility came together with deregulation (in the employer’s favour), nowadays the flexibility concept (in the employer’s and employee’s favour) is understood as a co- ordinated implementation of various attempts of the typical flexibility variants, which are numerical, functional or wage flexibility. The following paragraph will summarise the different approaches, which are already realised in the participating country.

3.1. Worker mobility

Worker mobility refers to the different possibilities and regulations of changing the job. First of all the employee’s period of notice is a indicator for the level of the worker’s mobility in the different countries. Generally one can say that concerning this fact there is a relative huge flexibility in all participating countries because for the employees the period of notice is relatively short compared with the employer’s period of notice. In detail the most shorten period has Lithuania with only two weeks and the longest period can probably occur in Belgium (depending on the length of service, the amount of the pay and whether it is a blue-collar or a white-collar worker up to six month), but even in this case it is half as much as the employer’s period of notice.

The possibility for employees to take leaves approves their internal mobility within the company. It makes it possible to combine their work with their social lives. The following table shows the existing leave schemes in the participating countries.

Netherlands Lithuania Belgium Italy Spain Germany Annual/ordinary Yes Yes Yes Yes Yes Yes Maternity Yes Yes Yes Yes Yes Yes Parental Yes Yes Yes Yes Yes Yes Carer’s Yes Yes Yes Political or public Yes Yes/No duties Study/learning Yes Yes Yes Yes Yes Part-time pension Yes Yes Yes Yes Sabbatical Yes Yes (Yes) Sickness Yes Yes Yes Yes Yes Yes Table 1: Overview leave schemes per country, 2006 Another indicator for the worker’s flexibility is the transfer of personnel and the question how easy it is for the employer to assign a new task or a new workplace to his employees. In almost all countries it is not possible for the employer to give the employee a new function or to transfer him to another location if in the contract is a clause, which defines the function and the location. Only in Italy it is possible if there is a particular reason to change the contract and in Germany such as in Spain exist special procedures, which give the employer a possibility to enforce a modification if he can’t achieve an agreement with the employee.

The worker mobility can be limited by a restriction of the employee’s freedom to elect a new employer. In Belgium such as in Germany, the Netherlands and Italy it is possible and common that the employer and the employee sign a agreement, which prohibits the employee to work for another employer in the same branch after the termination of the employment.

In this case in almost all of these countries it is regulated by law that the agreement must contain a clause which appoints the maximum period of this deal, the geographical validation and the coven- ant of compensation. In Lithuania and Spain this approach is not known.

Besides this in several countries worker mobility can be restricted trough the risk to loose a part of the company pension in case of changing the employer.

A general figure, which summarises all the indicators, is the average length of service. The table shows that in almost all participating countries the labour market is not yet as flexible as in Den- mark.

Belgium 11.7 Germany 10.6 Italy 12.1 Lithuania 7.6 Spain 11.0 The Netherlands 10.4 Denmark 8.7 Table 2: Length of employment (years in average) 5 3.2. Employment Protection

In almost all participating countries employers still complain about a lack of flexibility because of the strict rules of Employment Protection and so most of them differ much from Denmark because talk- ing about the Danish model, this flexicurity approach is always characterised through a huge flexibility of hiring and firing.

Employment Particular restrictions against maximum proba- Maximum period of no- Protection le- dismissal of specific persons tionary period tice gislation Denmark Yes Yes 3 months 6 months Netherlands Yes Yes 2 months 2 months Lithuania Yes Yes 6 months 4 months 14 days/ Belgium Yes Yes 8 weeks/18 months 6 months collective labour agree- Italy Yes Yes 6 months ment Spain Yes Yes 6 months 30 days Germany Yes Yes 6 months 7 months Table 3: Employment protection per country, 2006

Though in Denmark such as in all the other countries of course exists Employment Protection Le- gislation and also particular restrictions against dismissal of specific persons (members of the worker’s council, pregnant women, disabled persons or similar), the easiness of firing is quite different. In the several countries there are various causes for a justified dismissal. An important indicator is also the maximum period of notice, which depends in the several countries also on various reasons such as the length of service, the amount of pay or in Belgium it depends on whether it is a blue- collar or a white-collar worker. The maximum period of notice diversifies from 2 months (Nether- lands) up to 18 months (Belgium), but often - mainly in the Netherlands, Italy and Germany - devi- ant regulations are stipulated in collective labour agreements.

5 Source: OECD (2006) Finland, Oulu March 2007 7 Flexicurity IP Flexem (ter)

The employer can reach flexibility arranging a probationary period. This procedure is actually very common in all participating countries.

3.3. Types of contracts

Employers can hire workers with different kinds of contracts and each of them involves different powers regarding firing, changing work hours and so on. In order to decide how flexible a labour market is, we must take a look to which contracts are allowed and how they are spread in practice.

Concerning the relationship between labour contract and flexibility, there are two aspects that are particular relevant: the ground of termination of the contract and whether, and with which extension, it gives the employer the right to decide the working hours of the employee. In fact the ground of termination of contracts affects the so called external numerical flexibility, which is the easiness of hiring and firing. The right to decide the working hours is an indicator of temporal flexibility. Moreover other economical advantages that the law provides for employers in order to encourage the hiring of personnel could be relevant (for example inserting labour agreements).

All the labour markets of the countries involved in this paper show how the former domination of the basic labour contract (the one with indefinite duration and full-time work) is giving up towards new forms of agreements, in particular fixed-term contracts and part time job.

The open-ended labour contract is an expression of job security as for his termination it is neces- sary that there exist some reasons without the mere will of the employer (plus a period of notice). Concerning the temporal flexibility the most important institute is the part-time labour agreement, which involves weekly working hours which are less than the normal duration. Different kind of part-time work exists: horizontal part-time (daily working hours less than the normal one), vertical part-time (working only in certain days, weeks or months of the year), mixed part-time (it is a mix of the other two) and all of these are allowed under the laws of the countries related with this paper. In Germany in particular it is the most important contract, besides the standard employment relationship (25.9% of labour agreements are of such nature; but even 45.8% of labour contracts of women are part-time).

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

EU (15 16.0 16.3 16.9 17.3 17.7 17.9 18.0 18.2 18.6 19.5 - 20.9 countries) Belgium 13.6 14.0 14.7 15.7 19.8 20.7 18.5 19.4 20.6 21.6 21.9 23.2 Denmark 21.6 21.5 22.3 22.3 20.8 21.7 20.1 20.6 20.9 22.5 22.0 23.6 Germany 16.3 16.5 17.5 18.3 19.0 19.4 20.3 20.8 21.7 22.3 24.2 25.9 Spain 7.4 7.9 8.2 7.9 8.2 8.1 8.1 8.1 8.3 8.9 12.8 12.2 Italy 6.6 6.6 7.0 7.4 7.9 8.8 9.1 8.6 8.6 12.7 12.8 13.4 Lithuania - - - 8.5 - 9.1 8.8 9.8 9.1 8.6 6.5 9.1 Netherlands 37.3 38.1 38.0 38.8 39.4 41.2 42.2 43.8 45.0 45.6 46.2 46.3 Table 4: % of Part-time work in Europe, 20066 Concerning the external numerical flexibility it is really important and wide-spread nowadays the fixed-term labour agreement (it is for example the most popular in Spain, involving 32% of workers), in this case the contract will expire automatically at the end of the period.

6 Eurostat Finland, Oulu March 2007 8 Flexicurity IP Flexem (ter)

This kind of contract is both flexible and rigid: it is flexible because at the end of the period it is sure that the employee can be dismissed, but on the other hand, before that the term is expired it is very difficult to fire the employee because the law requires a serious non-fulfilment.

About fixed-term contract we can see difference among countries concerning with the limits that the legislation set out for such agreement; the limitation of maximum duration and requirement of justifying grounds ( the need of work for only a determinate period has to be caused by objective reasons) are the two possible kinds. The Netherlands’s law allows this contract only for not more than 3 years but it does not t require any justification, Belgium and Germany require a justifying ground (but the German law allows a fixed-term contract without any justifying ground within 2 years of duration), instead Lithuania, Italy and Spain use both the limitation.

At last, temporary agency works is allowed under the law of every country. Among a-typical contract deserve a word the on-call labour agreement, it is no so widespread but it is very flexible. This type of contract provides that the employer can decide if and when to call the employee to work, and the latter is bounded to remain at the disposal of the former (the parties also agree that the worker cannot refuse the “call”); Dutch and Italian law provide for such contract.

Now there are following some particular characteristic of single national labour market that we can point out:

Belgium and the Netherlands: Temporary agencies play a very big part in the demand for temporary workers; many people find jobs trough those agencies.

Germany: Since the “Hartz-Act II” in 2003 the so called “mini jobs” increased enormous because of their lower cost for the employer (no contribute to social insurance, regularly has to be paid only a lump-sum for health insurance, social pension fund and tax). Tempor- ary employment is still on increase.

Spain: The contract of relief: it contains two subjects, a worker that assembles the conditions to obtain a contributory pension of retirement, and an unemployed, which will cover the day that remains free part-time. This contract is really important for the promotion of the employment, as it involves two workers, and so provide for two jobs.

Italy: Here it is very common the so called “job on project” ruled by the Biagi’s reform7. This is a case of self-employment where the collaboration has to be connected to a specific project or program and the contract; this contract is really affordable for enterprises because the worker is not an employee but a self-employment. Moreover it involves also some pure economical advantages for employers; first of all the social security contributions is the 19% on the pay, while the one for employees is the 32.7%, secondly these workers don’ t have protection in case of illness, they don’ t have neither the right for annual holiday nor for TFR (end of service allowance).

Thus what level of flexibility already exists in Europe? Concerning the employee’s quite short period of notice in all participating countries one can say that employees are very flexible to elect their employers. In contrast the latter ones are still relatively restricted to hire and fire because of the strict rules of Employment Protection. Only the Netherlands, Belgium and Spain are already relative flexible concerning the period of notice even though strict regulations concerning to the reason for dismissal are still remaining.

7 decree legislative n° 276/2003 Finland, Oulu March 2007 9 Flexicurity IP Flexem (ter)

As demonstrated the limitation of the employee’s freedom to elect a new employer restricts the worker mobility. But respecting the employer’s interest in protecting company’s knowledge, this should be accepted if an adequate compensation exists. Therefore the employees enjoy huge flexibility through the different and in all countries increasing leave schemes. But under the precondition of a high skilled labour market (the keyword is life-long learning) where the employer can quickly find adequate replacement, leave schemes can also be an advantage for the employer, because with new employees also new knowledge and motivation comes into the company. Facing to the transfer of personnel, the possibilities of flexible actions for companies are still limited. A liberal- isation of the existing rules seems to be inescapable, but could be more agreeable for employees through an increased employability.

Coming to the link between types of contracts and flexibility we can state that every country has already a pretty high level of flexibility, thanks to the huge number of agreements that are available. From a practice point of view it is possible to notice how the rigid side of the labour market is caused not directly by the law of labour contracts but by the high level of litigation that follow a firing especially in case of open-endend contract.

In some countries (for example Denmark, The Netherlands, Lithuania) the level of litigation is lower than in others (Italy, Belgium, Spain) and, if we try to analyse the reasons, probably we will find that the main one is not the law on termination of labour contracts but the low unemployment rate and the high level of social security; in fact these could works as a disincentive to go to court.

Concerning, in specific, the easiness of hiring the main point is how law rules weigh on the costs of the employee; each country adopts types of contracts with discount in labour costs in order to promote hiring, in particular of young people with lack of labour experience, low-skill unemployed and in general weak workers, notwithstanding this way to improve employment is not good in a long- term view.

4. Generous welfare system

Social security is to be understood in the broadest sense, as regulation that gives the employees security for employment and income irrespective of developments on the labour market or developments in the employee’s own situation. Security is thus very much about the employees’ feeling of general, over- all security.8 High level of social security is seen as a precondition for flexible labour market. The most precise word defining social security in Denmark is generous and that’s why it is often compared with the one of a Scandinavian welfare state. We will compare the social security systems in the participating countries in the following aspects: unemployment benefits, unemployment rate, pensions, GDP rate for Social Security and minimum wages.

4.1. Unemployment benefits

Denmark: Can be drawn for up to four years. The maximum gross wage-replacement level is 90% of previous income.

The Netherlands: 2 criteria: “week criterion” and “for-out-of-five criterion”. According to the first, the worker should have worked for at least 26 weeks during the 39 weeks previously to the first day of unemployment. It is not required that these 26 weeks are full working weeks, one day a week is sufficient to have this qualifying to a “working week”. According to the second criterion, the worker should have worked for a minimum of 52 days during at least 4 (calendar) years during the 5 years proceeding the first day of unemployment. It is not required that those 52 days are a continuous or interrupted period of time. There are two types of benefits, the wage related benefit and the short time benefit. The first is about the 70 percent of the daily wages (maximum 5 years), and the second one is about the 70 percent of the minimum wage, and the duration is 6 months. After this period a person can apply for welfare (WWB).

Belgium: The unemployed person can be allowed in three manners to the scheme of unemployment: on the basis of labour in paid employment, on the basis of studies, and because the unemployed has received already unemployed benefits in the past. Unemployment benefits for unemployed person who is allowed to the unemployment insurance on the basis of labour performance. Guard benefits, on the basis of studies.

Spain : Requirements to accede to the benefit: 1. To be affiliated in the Social Security in a regime that contemplates the contingency by unemployment. 2. To be in a legal situation of unemployment. 3. To credit availability to look for a job, and to accept a suitable job and to subscribe a compromise of activity. 4. A minimum period of contribution: 360 years in the last 6 years. You receive the 70% of the wage during the first 180 days, and the 60% from the 181 a day.

Italy : There are two kinds of unemployment benefits: the ordinary and the ordinary with reduced requirements. The first can be requested by who is dismissed and by employees suspended by enterprises hit by temporary events caused by neither workers nor employer.

You need: -at least 2 years of insurance for involuntary unemployment -at least 52 weekly contribute in a 2 years period before the date of the end employment relation.

8 Soren Kaj Andersan and Mikkel Mailand ‘The Role of the Collective Bargaining System’, 2005, 2p. Finland, Oulu March 2007 11 Flexicurity IP Flexem (ter)

The benefit is given for 180 days, possibility of extension until 9 months for unemployed older than 50 years old. The amount is about 40 % of the retribution of the last 3 worked months. The second is for those workers who don’t have 52 weekly contributions in the last 2 years and have worked for at least 78 days in the last year. The amount cannot be over the 30% on the average of the daily retribution and not more than 830,77 per months. It is paid by INPS (national institute of social insurance) for a period no longer than 156 days.

Lithuania: Unemployment benefit consists of two parts, one constant and one varying on the wage of an unemployed person and other factors (max 260 euros per month). The duration of paid unemployment varies from 6 to 9 months.

Germany: Obligatory unemployment insurance. Unemployment benefits are given to everyone. Benefits are paid in three steps: first the unemployed can get at most 67% of a lump-sum net remu- neration of his former income (maximum period 18 months). Unemployed benefit II is paid in the amount of 345 €, plus costs for home and heating. People who are not entitled to one of these two benefits can get social welfare.

4.2. Unemployment rate9

The dream of every State is to reach the lowest possible unemployment rate; it is one of the goals of any labour market policy and also an important point for the functioning of every welfare system. Indeed, the unemployment rate is intimately connected to the unemployment benefits, in the sense that, given a certain amount that a State can allocate to social security and in particular to unemployment benefits, the lower is the unemployment rate the higher or longer could be the sum of unemployment benefit for every unemployed.

As you can see below Denmark is really close to a natural unemployment rate while the other Countries are more or less at half of the way, except The Netherlands. It is thanks to the lowest unemployment rate in Europe (besides Norwa) that everybody is looking to the Denmark model of flexicurity; this is probably the most important indicator concerning the efficiency of a labour market model.

Denmark Netherlands Belgium Spain Italy Germany Lithuania Europe 3,2% 3,6% 7,7% 8,5% 6,7% 7,9% 5,7% 7,6% Table 5: Overview unemployment rates

4.3. Pensions

Denmark: There is no statutory retirement age. However, eligibility for social old age pension is reached at 65 years. The national pension is based on a residency criterion and is paid to anyone who has lived in Denmark for at least ten years between the ages of 15 and 65, of which five years must be immediately before the pension is paid. National pension benefits are divided into a basic amount, paid to everyone, and a pension supplement depending on the amount of other income. In addition to the national pension, there is a Supplementary Labour Market Pension Fund, which is statutory pension insurance for all wage earners, as well as a number of unemployment pension schemes which are agreed as part of the collective bargaining process, and cover the majority of Danish wage earners. The tax system encourages individual, private pension savings.

9 Eurostat, news release 15/2007 – 31 January 2007 Finland, Oulu March 2007 12 Flexicurity IP Flexem (ter)

The Netherlands: Retirement age: 65 years old. You can retire earlier. No differences between men and women. There are two ways to arrange the pension: about the 70% of the last earned wages (last wage regulation) and about the 70% of the average wage you earned while you were working (middle wage regulation).

Belgium: Retirement age: 65 years old for men and 64 years old for women (in january 2009 this will be 65 years old). Pension is proportional to worked years.

Spain: Ordinary retirement: 65 years old (possibility of early retirement in some professional activities), special retirement at 64 years old. The amount of the pension is determined applying to the regulating base the percentage that corresponds based on the paid years.

Italy: Flexible between 57 and 65 years old (both for men and women). At least 5 years of contribution related to an effective labour activity are required. The amount given is proportional to the years of contribution. The pension is provided by the INPS.

Germany: Arranged by the government. Retirement age: 65 years old but pensionable age will step up to 67 years until 2029. The pension amount depends on the paid contribution, the real age of retirement and the actual annuity value.

Lithuania: Retirement age: 62 years and 6 months old for men and 60 years old for women. Pub- lic pension consists of two parts: basic and additional, which depends on work experience, incomes and other factors.

4.4. GDP rate for social security

The title of this chapter is really appropriate according to the figure below, Denmark has the most “generous” expenditure for social security, as percentage of GDP, compared with the other countries involved in the analysis.

Denmark Netherlands Belgium Spain Italy Germany Lithuania Europe Public expenditure 34% 28,5% 29,3% 20,0% 26,4% 29,5% 17% 27% for social security Table 6: GDP rate per country

4.5. Minimum wages

Denmark : No minimum wage is provided. Wage rates are fixed by local bargaining, the same passes in Belgium where minimum wage is set per branch by collective agreements (in 2005 the average was € 1234 per month).

The Netherlands: Is set by the government. If you are 23 years or older, the gross minimum wage is € 1300,80.

Belgium: The minimum wage is set by the government. If you are at least 21 years the minimum wage is € 1258,88.

Spain An amount of € 19.02 per day or € 570.60 per month is given. Fixed by the government who consults Trade Unions and enterprise associations taking into account the Consumer Price In- dex, productivity reached in Spain and the economic situation in other countries.

Italy: The article 36 of the Constitution provides for a minimum wage for employees, related with the quality and quantity of their labour, but also sufficient to guarantee a free and decent life to the worker and to his family; in practice the minimum wage is the basic wage set by the collective bargaining, for each type of labour, there is not a law that fixes a minimum wage.

Germany: There are no minimum wages regulated by law. Thus German workers only profit from minimum wages if their employers are bound by collective labour agreements.

Lithuania: The minimum wage of €173 per month, and € 1 an hour, is set by the government.

4.6. Conclusion about Social Security

In continental Europe (Germany, Belgium, The Netherlands), welfare systems have developed based on the relationship between social needs and merit/work performance, funded from employer and employee contributions to social or national insurance schemes and some direct taxation. Southern Europe (Spain, Italy) have less developed welfare systems based largely on family and voluntary systems of support and limited state involvement. The family remains the main instrument of solidarity between the generations, and employment in the social public services remains relatively low. In the recent members of the EU (Lithuania) the social security systems still are in the transitional period and can hardly ensure the minimum living standard.

5. Active labour market policy

Active labour market policies (ALMP’s) are government programmes that intervene in the labour market to help the unemployed find work.

There are three main categories of ALMP:

- Public employment services, such as job centres and labour exchanges, help the unemployed improve their job search effort by disseminating information on vacancies and by providing assistance with interview skills and writing a curriculum vitae. - Training schemes, such as classes and apprenticeships, help the unemployed improve their vocational skills and hence increase their employability. - Employment subsidies, either in the public or private sector, directly create jobs for the unemployed. These are typically short-term measures which are designed to allow the unemployed to build up work experience and prevent skill atrophy.

When we speak about those three main categories of ALMP’s, you see there are connections with Flexibility of the labour market and the Social Security which are discussed in earlier chapters. We’ll show how those categories are implemented in the six different countries, compared to the Danish situation by discussing life long learning and job rotation.

5.1. Life long learning (LLL)10

The concept is that "It's never too soon or too late for learning", a philosophy that has taken root in a whole host of different organizations. Lifelong learning means that one can and should be open to new ideas, decisions, skills or behaviours. Lifelong learning throws the axiom "You can't teach old dogs new tricks" out the door. Lifelong learning sees citizens provided with learning opportunities at all ages and in numerous contexts: at work, at home and through leisure activities, not just through formal channels such as school and higher education.

According to the Lisbon Strategy 2005, member states have to invest more in human capital by improving education and skills. By 2010 the level of adults participating in Life Long Learning should be 12.5 %.

Denmark Netherlands Lithuania Belgium Italy Spain Germany Participation in 27.4% 15.4% 6.0 % 8.3 % 5.8% 10.5% 7.7 % LLL Public expenditure edu- 8.4% 5.3% 5.2% 6.2% 4.9% 4.5% 4.8% cation % GDP Table 7: Participation in LLL and Public expenditure on education in % of GDP,2006

5.1.1. Financing concept

In Denmark labour and the Government co-operate in regulating LLL. The Danish government funds the training for the employee and continues to pay his/her salary. In the Netherlands companies often finance the whole or a part of the study for the employee. The government offers subsidy for some educational projects and they offer fiscal benefits that make LLL more attractive also the government pays for the unemployed. In Lithuania, Italy and Germany LLL is sponsored by the government for the unemployed. If you are employed, in Germany and Italy, the company pays for the study, in Lithuania mostly it is you or the company that pays for the study.

10 LLL = Life Long Learning Finland, Oulu March 2007 15 Flexicurity IP Flexem (ter)

In Belgium the employee and the employer can both buy education cheques. Half of the costs of those cheques are paid by the government. In Spain the companies pay for several kinds of studies. Other kinds are paid for by the employee itself.

Denmark Netherlands Lithuania Belgium Italy Spain Germany Government X X X X X X X Companies X X X X X X Worker X X X Table 8: Financing of study and education by government, companies and/or workers.

5.1.2. LLL for the employed

In Denmark it is meant to increase the employability of employees by making time available for training outside the business, so an unemployed person can temporarily replace the employee. In the Netherlands, Lithuania, Belgium, Italy, Germany and Spain, it is possible to follow courses outside the business, but there are also courses given within the companies, especially with bigger companies.

5.1.3. LLL for the unemployed

If you are unemployed in Denmark, you go to an unemployment office. They give guidance and consultations every 3 months. They advise on training and courses to follow. If you can’t find a job, they force you to work in a subsidised job to get some working experience. In the Netherlands there are a number of, partly overlapping, measures for training unemployed persons. If you are unemployed in the Netherlands and Germany, you go to an unemployment office where they give guidance and advise you on training and courses as well. Just like in Denmark. In Italy, less than 25 per cent of the country’s unemployed are eligible for any form of unemployment compensation, and families have traditionally been expected to support their unemployed members. There’s no national scheme or assistance for the long-term unemployed in Italy, although there’s a limited degree of support for low-income families in the south. Therefore there is also no assistance on what kind of courses or studies to follow. In Spain the guidelines for vocational training for the unemployment person arise from the EU, and are concretised by the national government and the self-government at different levels. In Belgium you also go to a regional employment agency where they give guidance and advice on what studies or courses to follow. Those studies or courses are organized by the unemployment office or by the trade unions. Also in Lithuania you have the choice to go to a job centre where they give guidance and advise to guide you back to job.

5.2. Job rotation

Job rotation – cross training is a transfer of employees among a number of different positions and tasks within jobs where each requires different skills and responsibilities.

In Denmark job rotation is geared towards increasing the employability of employees and making time available for training outside the business, while an unemployed person temporarily replaces the employee. In the Netherlands there is a high level of job rotation. One of the reasons for this is that there are a lot of temporary work agreements. In the Netherlands many people find jobs trough temporary employment agencies. This makes it easier for workers to change jobs. So there is no obligation for employers to temporarily hire an unemployed. In Lithuania and Germany job rotation is defined in the law, but it is not working practically. There is a certain level of job rotation in Italy, but it has to respect the qualitative content of the previously done job. The new job assigned to the worker must have content similar to the original job and requires skills and abilities which match those acquired by the worker. In the Spanish context, job rotation, or the alternating of tasks is usu- ally most successful within semi-autonomous work groups. In Belgium job rotation is set by law.

Outplacement is obliged for people older than 45 years. In the Netherlands, Germany, Belgium, Lithuania, Spain and Italy the employer is not obliged to fill the vacancy with an unemployed person like in Denmark.

5.3. Conclusion about Active Labour Market Policy

If we look at LLL, we see that in every country you have the possibility for it. In Denmark the participation level is very high; one of the reasons for this is probably because it is financed by the government. Another reason for this can be that in Denmark an employer is obliged to hire an unemployed. Other countries in which LLL has a high participation level are the Netherlands and Spain. The level which is set by the European Union in the Lisbon strategy is set at 12.5%. Lithuania, Bel- gium, Italy and Germany have still a long way to go to reach this level.

In the Netherlands and Germany you go to an employment office when you get unemployed where they give guidance and advice on trainings and courses, like in Denmark. In Belgium and Lithuania they have a similar system. The biggest differences compared to Denmark are there in Italy and Spain.

Job rotation is a concept that is working in the Netherlands and Belgium. In Germany and Lithuania it is set by law, but it is not working practically. In Italy and Spain there is a certain form of job rotation, but it is bound to a lot of rules.

6. Trade unions

Trade unions in the form of collective agreements play a major role in the Danish ‘flexicurity’ model, having an impact on all the axes of the ‘golden triangle’. High level of unionisation, tight social partnership and reciprocal recognition by the opposing parties in Denmark are seen as a precondition for a working and effective flexicurity model. The collective agreements cover around 85 per cent of all employees and include regulation on wages, pensions, working time, redundancies and various pay arrangements for employees when ill, on maternity/paternity leave etc. Social partners in Denmark have decentralised the bargaining process with the aim of increasing flexibility - especially with regard to wage setting and working hours. Considering the role of trade unions in European countries, there can be a conclusion drawn that it is unequal and divergent taking into consideration their purposes, autonomy and membership. In most countries social partners still see each other as rivals, having bad impact for both: employees and employers.

6.1. Collective bargaining

The role of trade unions in European countries is unequal and divergent taking into consideration their purposes, autonomy and membership. In most countries the social partners still see each other as rivals, having bad impact for both: employees and employers. Competence of trade unions in some countries (Belgium) has broadened comparing to the common understanding of a trade union.

Looking to the level of bargaining in the different countries, we can quote that practically all the countries bargain on National, Sector and on Company level, some states will be more bargaining on Sector level or more on the other levels.

In the Denmark case: here the National level is used to set a couple of basis rules, this regarding to bargain on branch or company level without large restrictions. The advantage of this kind of bargaining is that you can look to case of the branch or to the company.

When you look to the graph we see that Denmark is on top of the race so we can quote that how more we make use of collective bargaining you have on Sector or on Company level and the social partners work together, how more workers will become a member of a trade union.

Trade union representativity s ' y r t n u o C

0 % 20 % 40 % 60 % 80 % 100 % percentage

Belgium Denmark Finland Germany Italy Lithuania Spain The Netherlands Figure 2: % of total national union membership in 200311

11 www.eurofound.europa.eu Finland, Oulu March 2007 18 Flexicurity IP Flexem (ter) 7. General Conclusion

At a time of increasing debt, persistently high unemployment, and aging populations, many Europeans see globalisation as a detriment to their way of life. Some European politicians are turn- ing to the Danish “flexicurity model” - a combination of easy hiring and firing, generous unemployment benefits and an active labour market policy - in an attempt to reinvigorate their sluggish labour market.

According to the Danish model workers who lose their jobs receive generous benefits, almost as high as the worker's wages themselves, but they are also required to aggressively search for a new position. If that fails, the Danish government pays to retrain the workers in a new field. The result is; a labour market in which workers must adapt to different working conditions. Companies remain competitive by having the best possible workers.

The level of flexibility in the European countries is quite similar. The legal rules are more or less the same, there are just some differences. There can be differences in how the law is applied in prac- tise by judges and social actors. The biggest differences among the investigated countries and between those and Denmark concern social security and ALMP.

The point is; in order to achieve flexibility, it is quite enough to change the law, but in order to improve social security and ALMP besides changing the law; you also need money, planification and evaluation on all levels of authorities.

The only country that has succeeded to raise the participation level on life long learning to over the standard set by the European Union is the Netherlands. But still it is much lower than the level in Denmark. The other countries still need to work hard on increasing this level. Spain is almost there, but especially Lithuania and Italy have a long way to go.

Would there be a possibility to have a general flexicurity model in Europe? If we compare continental Europe (the Netherlands, Belgium and Germany) to Southern Europe (Spain and Italy) and the more recent member states (Lithuania), we see they are growing more towards each other, but there are still some major differences

The analysis made comparing the participating countries in the context of ‘golden triangle’ implies the conclusion that there is a great distinction between the countries concerning the level of flexicurity and the ways it has been implemented. It is important to bear in mind that there is a dynamic interaction between the flexible labour market, income security and the active labour market policy, and that changes in any of these elements will therefore have consequences for the others.’ Having in mind different economical, historical and cultural backgrounds of the compared countries, Danish flexicurity model should not be seen as an unchangeable or holy model.

There are cultural differences between the different countries. The size of the countries and the number of inhabitants makes a big difference to make it possible to implement the Danish system. Between the countries, but even inside countries there are still differences if you compare one re- gion to another, especially looking at the economic situation. In Italy you have the north and the south, in Belgium the Flemish and French speaking parts and in Germany you have the East and the West).

However the idea itself as well as objectives and ways how to achieve that should be taken into serious consideration, as well as the policies of other countries, when trying to find a working and effective flexicurity model for each country.

Each country has to look for a way of flexicurity that will work within the boundaries that are work- able for them. Besides looking at how other countries are dealing with similar problems, the EU could set minimum levels to which each country should live up to. Maybe it is still to early to really set those minimums for the whole of Europe, because there are still to many big differences. But we can start with making guidelines. And in the future those guidelines should be bent into a general policy for the whole of Europe.

8. Recommendations and discussions

According to our findings, European participating countries could:

8.1. In order to reach a more flexible labour market: attempt to build security by investing in employability supporting skills improvements in targeted groups, working alongside national and regional priorities; facilitating exchange of ideas and developing collaboration between employers and schools to increase their understanding of needs, develop responses to these needs and thereby increase the employability of school-leavers; increasing the participation of women. A more flexible level of contracts could help, for example by shorting the period of advice and defining better and more precisely the reasons for dismissal. That could imply the introduction of a legal discipline for dismissal in those countries in which it misses and the dismissal is related with “general clauses” applied by Courts.

8.2. To improve a more generous welfare system: a minimum percentage of GDP could be destined by each European country to social security, trying to give real effectiveness to unemployment benefits. Moreover, as seen in the Danish situation, to improve an efficient model of flexicurity a substantial expenditure in social security is needed, and that could be possible only on the base of an effective system of taxation. That means first of all the fight against tax evasion and undeclared work. This is even more urgent due to the actual increase in life expectation, which brings about the need for a rise in the retirement age. In this sense, for ex. Germany is going to rise the retirement age up to 67 years for 2029, while in Italy reforms are on the way, in order to encourage people to retire later and start younger. Also in Belgium the retirement age for women will rise up to 65 by 2009.

8.3. For an active labour market policy: invest more in education and life-long learning (LLL) as a key pillar of flexicurity to ensure transition between different employment situations. The objective is to increase workers’ competencies and qualifications in order to support the return to employment and transition between jobs, also to achieve better possibilities for job rotation. Access to education at all levels must be guaranteed for all including older workers who tend to face reduced access to training and life-long learning compared to their younger counterparts. Working with public, private and voluntary sector employers to influence national developments around vocational learning and qualifications. Besides, increase the expenditure on active labour market policies, working with Employment Ser- vice to identify groups of potential labour market returners and solutions to barriers they may face in attempting to return, including updating skills. Supporting Intermediate Labour Market initiatives to gain permanent employment for those returning to the labour market. To follow Danish experience (“rights and duties”) including a disciplinary factor in active labour market policies. Promote employment private agencies too: employment agencies should be promoted as an appropriate way to implement a flexible approach. Access channels to the labour market should be en- hanced, especially for current outsiders (long-term unemployed, returning women, first-time entrants, elderly people) by making effective use of the stepping stone function of private employment agencies, for instance by removing limits for renewals as well as cross-border assignments. Removing obstacles to temporary agency work could significantly support job opportunities and job matching.

An improvement of the effectiveness of labour market institutions could also be helpful by strengthening social dialogue especially across the stages of the policy cycle from definition of goals to monitoring and evaluation of commonly agreed principles and guidelines, in accordance with the very principles of the open method of coordination. In this sense the role of trade unions should be empowered in those countries where their participation is not strong and representative in order to encourage signing collective agreements by the social partners and to stimulate reciprocal recognition by the trade unions and employers and a comprehension of social partnership as useful for both sides. In 2005, the Lisbon Strategy was streamlined and renewed and the focus placed firmly on growth and employment. The 2006 Spring European Council welcomed this assessment and urged Mem- ber States to implement their National Reform Programmes with vigour. It also identified some priority areas as investing more in knowledge and education and increasing employment opportunities for priority categories.

8.4. In particular, according to the 2007 Annual Progress Report12:

Belgium should reduce the tax burden on labour and reduce regional disparities in unemployment. It has been recommended to undertake further efforts to reduce the tax-burden on labour while continuing fiscal improvement and take further measures aimed at reducing regional disparities in unemployment through active labour market policies, reintegration and education policies. Also increasing the employment rate for older workers and vulnerable groups, in particular by tightening the eligibility criteria for early retirement schemes and by enhancing active labour market policies. About flexibility in hiring and firing the gap of protection between the blue and the white collars should be reduced.

In Germany the strengths are evident in the field of knowledge society, as well as in the higher vis- ibility given to measures for the integration of older unemployed people.

A fiscal consolidation, tackle structural unemployment including by integrating the low-skilled into the labour market through better access to qualifications, pursuing the proposed taxbenefit reform and by providing more effective employment services for the long term and young unemployed. Speeding up business start-ups and facilitating hiring the first employee and building on existing measures to improve lifelong learning, including by developing adults' vocational training. Spain should modernise employment protection, including legislation in order to promote flexibility and security in the labour market and to increase the diffusion of part-time work, it should invest more in the educational sector, especially integrating the training systems to provide a better response to labour market needs.

In Italy the employment policy needs to be reinforced in certain key areas. The highest priorities are fiscal sustainability, increasing formal employment and improving education and lifelong learning. Italy should pursue fiscal consolidation, reduce regional disparities in employment by tackling undeclared work, ensuring the efficient operation of the employment services throughout the country; develop a comprehensive lifelong learning strategy and improve quality and labour market relev- ance of education.

In Lithuania many important measures at the conceptual stage had been taken, there remains much to do in terms of implementation. It should place a stronger emphasis on measures to promote labour mobility and taking additional steps to increase participation in lifelong learning, especially by older workers.

12 European Concil and COREPER 6465/07

It has been recommended that Lithuania intensify efforts to increase the supply of skilled labour by improving regional mobility of labour and by promoting lifelong learning. Also improving youth employability and expanding entrepreneurship education, strengthening occupational health and safety.

The Netherlands should take further measures to improve labour supply, notably of older workers, women and disadvantaged groups.

Generally Euro Area Member States should improve flexibility and security on labour markets inter alia by better aligning wage and productivity developments, balancing employment protection and security in the market and enacting measures to promote labour mobility across borders and occu- pations. The Euro Area Member States should aim at deepening policy co-ordination and strengthening governance, nor only in the European context, but also in the international one. This would significant contribute to more effectively address policy challenges in Europe and in the global economy.

In order to achieve a well-working and balanced model of flexicurity, that necessarily go with the modernization of labour law and with a more flexible security (according to the Green Paper by the European Commission), Member States should not forget that the main aim of the labour regulation is not only to follow market and economic needs, but still to give workers an adequate level of protection. In this sense it could be based on the correct balance between the flexibility of the product- ive organization and the security of the job, not only to give to the employers better conditions of hiring and firing or reducing costs of production, but also to guarantee workers’ standard of life and dignity. Flexibility should not only be functional to increase the quantity of job, but also to improve its quality; moreover flexibility not determined only by the employer or the State, with a top-down approach, but democratically negotiated, according to a more bottom-up approach. A minimum and common level of workers’ fundamental rights should be aimed in the EU area, as they have been established in the Treaty of nice and as already recognized by many pronunciations of the European Court of Justice.

9. References 9.1. Papers

 Flexicurity in the Netherlands  Flexicurity Italy  Flexicurity in Spain  Flexicurity in Belgium  Flexicurity in Germany  Flexicurity in Lithuania

9.2. Books

 Innovation at work: The European Human Capital Index” by Peer Ederer. Lisbon Council Policy Brief (2006)  Social Agenda: “Flexicurity: greater flexibility and employment security”. The European Commission’s magazine on employment and social affairs. Issue nº 13. March 2006.  The Danish Flexicurity Model: The role of the collective bargaining system”. Soren Kaj Andersen & Mikkel Mailand. Employment Relations University of Copenhagen.  ‘A way out of here? Training and upward mobility for flexible workers in the value added logistics industry,’ Van Velzen, M. (2004)  ‘The Flexibility-Security Nexus: New approaches to regulating employment and labour markets Wilthagen, Dr. Ton (2002)  ‘ Towards“flexicurity” - balancing flexibility and security in EU member states’ Berlin, September 2003, Wilthagen, T. & Tros, F. & van Lieshout, H. (2003)  The European Social Model by Roger Blanpain, Michele, Colucci and Salvatore Sica, Intersentia, 2006.  The evolution of labour law (1992-2003), employment and social affairs, European Commission (2005)  The Human Development Report (2006)  European Economic and Social Committee ‘Flexicurity: the case of Denmark’, 2005  Claudia Bogedan ‘Activation and flexicurity in Denmark’, 2005  European Commission Green paper ‘Modernising labour law to meet the challenges of the 21 st century’, 2006  Baltic International Centre for Economic Policy Studies ‘The governance of employment and economic development in the Baltic States’, 2006  The programme of employment and development of labour market implementing the goals of Lisabon strategy in the Republic of Lithuania in 2005-2008.  Centre for Labour Market Research (CARMA), Research paper, 2005

9.3. Internet

Europe

 http://ec.europa.eu/  http://europa.eu/  http://eurostat.eu  http://www.eiro.eurofound.eu.int/  http://www.eu2006.at/  http://www.euractiv.com/  http://www.reference.com/  http://eesc.europa.eu/lisbon_strategy/events/09_03_06_improving/documents/ces1468- 2005_rev_d_es.pdf  http://crell.jrc.ec.europa.eu/documentation.htm  http://hdr.undp.org/hdr2006/statistics/indicators/183.html

 http://www.euractiv.com/en/socialeurope/flexibility-social-security-key-employment-experts-agree/article- 144592  http://publications.eu.int  http://crell.jrc.ec.europa.eu/

Denmark

 http://www.ambhaag.um.dk/  http://www.adir.dk/  http://www.bm.dk/  http://www.denmark.dk/  http://www.dst.dk/  http://www.ordbogen.com/  http://www.sam.sdu.dk/  http://www.statbank.dk/

 http://www.tilburguniversity.nl/faculties/frw/research/schoordijk/flexicurity/publications/papers/

Finland, Oulu March 2007 25