The document summarizes an OECD report on policies to assist displaced workers in Denmark. It finds that while Denmark's early intervention policies work well for large-scale layoffs, more could be done to help workers displaced from small firms. It also recommends making unemployment benefits and early assistance more universally available, improving training programs, and incentivizing short-term jobs for the unemployed. The overall conclusion is that Denmark's system is effective but could be strengthened by expanding coverage and enhancing support for all types of displaced workers.

1. Gwenn PARENT, Economist
OECD - Directorate for Employment, Labour and Social Affairs
Back to Work: DENMARK
Improving the re-employment prospects of displaced workers Launch OECD report
Ministry of Employment - Danish Economic Council - OECD
Copenhagen, 15 December 2016

2. 1. Background: OECD review on displaced workers
2. The labour market situation of displaced workers
in Denmark
3. Policies to assist displaced workers: strengths,
weaknesses and possible ways forward
- Prevention and early intervention
- Income support and re-employment assistance
4. Main recommendations
Outline of the presentation
2

3. Phase 1: Analytical report focussing on
comparable statistics on job displacement and its
consequences in Employment Outlook 2013
Phase 2: Nine country case studies: Korea,
Canada, Japan, Sweden, Australia, Finland, the
United States, Denmark and New Zealand
Phase 3: A synthesis to be published in the
OECD Employment Outlook 2017 (July)
OECD policy reviews on displaced workers
Definition of job displacement:
Displaced workers are defined as employees with strong labor
market attachment loosing their job because of economic reasons
such as plant closings, business downturns and changes in
technology.
3

4. THE LABOUR MARKET SITUATION
OF DISPLACED WORKERS
IN DENMARK

5.  Labour turnover is high in Denmark: 1 in 5 Danes separate
from their job every year
 Among those with stable labour market attachment,
2.7% lost their job every year as a consequence of mass
dismissal or firm closure (2000-12).
 Some workers are particularly vulnerable to displacement:
o Low-educated
o Youth
o Short job tenure
Job displacement in Denmark: key facts
5
o Transportation and other services
o Elementary occupations
o Working in small firms

6. Job displacement in Denmark is below the
average of OECD countries with similar data
Job displacement rates in Denmark and selected countries
Percentage of employees aged 20-64 who are laid-off from one year to the next
6
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Japan
New
Zealand
France
Canada
Russian
Federation
United
States
Australia
Korea
Germany
Sweden
Portugal
United
States
Finland
United
Kingdom
Self-defined displacement Firm-identified displacement
%%
2003-08 2009-10
Denmark
Source: OECD (2016), Back to Work: Denmark: Improving the Re-employment Prospects of
Displaced Workers, OECD Publishing, Paris.

7. Up to 5.2% in 2009 due to the global financial crisis
Crisis hit particularly hard the manufacturing sector
Uneven recovery across sectors
The Danish labour market reacted promptly to
the global financial crisis in 2008-09
0
2
4
6
0
2
4
6
%%
Firm closure, Denmark Mass dismissal, Denmark Sweden Finland
Source: OECD (2016), Back to Work: Denmark: Improving the Re-employment Prospects of
Displaced Workers, OECD Publishing, Paris.
Job displacement rates in Denmark, Sweden and Finland

8. Denmark is among the better performing
countries in terms of re-employment rates
Re-employment rates in Denmark and other selected OECD countries
Percentage of all displaced workers, averages 2003-2008 and 2009-2010
8
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
France
Korea
Canada
Japan
Russian
Federation
United
States
New
Zealand
Australia
Portugal
United
Kingdom
Germany
United
States
Sweden
Finland
Self-defined displacement Firm-identified displacement
%%
Self-defined displacement Firm-identified displacement
Denmark
Re-employed
within one year
(2003-08)b
Re-employed
within two years
(2003-08)b
Re-employed
within one year
(2009-10)c
Source: OECD (2016), Back to Work: Denmark: Improving the Re-employment Prospects of
Displaced Workers, OECD Publishing, Paris.

9. Job displacement induce significant and
long-lasting earnings and wage losses
 On average, reduction in annual earnings by 5.5% due to
 lack of wages received during periods of
unemployment
 For long-tenured workers, reduction in hourly wage
(by 2.3%)
 More than one displaced worker out of four faces an
wage loss of at least 10%
 Losses are higher and more persistent for older workers,
and the age gap is more pronounced in Denmark than in
its neighbouring countries.
 Job quality worsens following job displacement
9

10. POLICIES TO ASSIST DISPLACED
WORKERS: STRENGTHS,
WEAKNESSES AND POSSIBLE
WAYS FORWARD

11.  Employment protection for permanent workers is close
to OECD average, balanced between flexibility for
employers and security for workers:
 Third-lowest level of difficulty to dismiss permanent
workers (comparable with US, Canada and UK);
relatively low statutory severance payments
 Rigid notification procedures and consultation
requirements including with trade unions when
starting the dismissal process
 Early notification gives the necessary space and time for
dialogue between the social partners, negotiation and
intervention at an early stage
Legislation and collective bargaining protect workers
without hampering labour market dynamism
11

12.  Advance notice periods defined by legislation (white
collars) or collective agreements at the industry level
(for blue collars) → much shorter advance notice for
blue-collar than for white-collar workers
 Distinct industry-specific collective agreements
Large disparities between blue and
white-collar workers
12

13. Preventing “unnecessary” layoffs
 Targeted measures to prevent job losses are not as
developed as in other countries
 Prevention of displacement is limited to temporary
solutions for temporary changes in market demand:
 short-time work (STW) scheme which acted as a
countercyclical measure during the GFC (easing of
regulations implemented in 2009)
 rely on retaining employment by shaping the skills and
employability of employees (take up only 10%)
 The usual risks of overuse (deadweight cost and
displacement effects) are maintained to a low level
 Need to enhance vocational training and formal education
with the possibility for publicly-funded training subsidies. 13

14.  Early implementation of warning pools in cases of mass dismissal
(advance notification to their regional labour market authority, ordinary
warning pools, supplementary warning pools), and additional support
through the European Globalisation Adjustment Fund for 10 large firms
 Reaching soon-to-be displaced workers at the earliest possible stage,
providing them with tailored assistance and counselling so as to:
 Ease transition into new jobs
 Enhance skill-enhancing opportunities (work-sharing, adult apprenticeship,
up-skilling through the Jobrotation scheme)
 Main challenges:
 Early intervention remains concentrated on large dismissals from
large firms
 Early help for workers displaced from small firms or
experiencing individual or small-scale dismissals is limited
Denmark has strong early intervention
policies for some workers
14

15. Collective bargaining in Denmark improved
skills development during the notice period
 Several job changes over a working life call for
continuous upgrading of workers’ skills and employability
 Various trade unions putt skills up-grading at the centre of
the collective bargaining discussions in 2014
 Innovative collective agreements:
 industry sector: training for a minimum of one week
during their notice period, paid from the employer-
funded competence development fund
 transport sector: two weeks of training during their
notice period, extending the notification period
proportionally
 Using the notice period for additional vocational training
and retraining => one of the good practices
recommended by the OECD 15

16.  HQ Sharp in Japan: network of subcontractors of the same employer,
helps preventing displacement of employees whose skills are still in
demand within the network.
 Continuous-Entry Reclassification Committees (CREC) in Quebec:
similar to warning pools but open to all displaced workers in an area
regardless of the size of the firm or the number of dismissals
 Job Security Councils in Sweden: based on collective agreements at
industry level, JSC distribute the risk and costs of restructuring among
its members while allowing access to workers in small and medium
enterprises:
 provide advice and consultation to employers and trade unions
 provide transition services and guidance to laid-off workers
 financed by employers, contribution determined within collective
agreements (0.3% of payroll).
Early intervention policies : good practices
from other countries
16

17. Unemployment insurance coverage is high in
Denmark but unevenly distributed
 UI is a voluntary scheme: only members of a UI fund can be insured
against unemployment
 Three employees out of four are insured (around EU average), but
uneven distribution across income levels
 Only one Danish unemployed (ILO definition) out of two actually
received UI benefit during his unemployment spell in 2012.

18. Income support as a safety net for displaced
workers
 Limited role of severance payments
 Unemployment insurance system provide security to workers:
 high benefits for a rather long period of time
 reduces the poverty risk after displacement
 Great pressure on the income support system during the crisis
 Inequality issues due to combination of two facts:
 voluntary scheme
 tax-financed system, with only a small part of the costs covered by
the members’ contributions to the UI fund.
 Non-insured workers pay taxes but do not benefit from the UI system
 Security provided mostly to those less flexible, leaving behind:
young workers, low-skilled, low-wage workers

19. Strengthening income support
 Recent reforms reduced benefit generosity and increased activation
requirements to ensure sustainability of the Danish income support
system:
 UI duration progressively shortened from four to two years (with
several temporary extensions to smooth the process)
 Re-entitlement conditions to UI benefit tightened
 Social assistance reformed towards more activation
 UI reform (2017): innovative measures to foster the acceptance of
short periods of work while on UI benefit:
 flexible extension of the benefit period for up to one year (one
day work = two days benefits)
 consumption of UI benefit rights in hours instead of weeks
 additional waiting period conditional on short periods of work
 benefit levels no longer adjusted during unemployment spell

20. Denmark has a strong activation strategy with
considerable programme spending
 Third pillar of the Danish flexicurity model:
 Frequent contacts with a caseworker
 Participation in active labour market programmes (ALMP): 10 to 15% of
all still unemployed displaced workers are in ALMP
 Profiling tool (classifying jobseekers based on their distance from the
labour market) with different rights and obligations apply to each of the
three match groups
 Strict job-search monitoring with some inefficient overlap of
responsibilities (Jobcenter/UI funds)
 Denmark remains the world champion of ALMP spending (1.8% of
its GDP in 2013), despite a slight decrease over the past decade
 2015 employment reform implemented a tighter activation process
 most ALMPs have positive employment effects during boom periods
but much lower effects during recessionary periods (Danish
Economic Council, 2012) => regular contact and meetings

21. MAIN RECOMMENDATIONS

22.  Ease access to early intervention reserved for collective
dismissals to:
dismissing firms in the supply chain or in regions facing
multiple redundancies.
workers displaced in small-scale and individual
dismissals
 Provide a level playing field for blue-collar workers:
by making notice periods equal or at least more similar
to those of white-collar workers
to improve access to early intervention measures
before dismissal.
Making early intervention accessible for all
displaced workers
22

23.  Increase UI benefit coverage for low-wage, low-skilled
workers either:
By making the system universal
By changing the financing structure to make
insurance attractive also for low-wage earners
 Remove differences between blue-collar and white-collar
workers (interaction between severance pay and
unemployment benefit entitlements).
 Unemployment reform (2016): better incentives to
accept short-term, fixed-term and part-time jobs
(stepping stone).
Making the unemployment benefit system
available for all workers

24.  Bring the recognition of prior learning forward in time
 Involve employers in this recognition process
 Rigorously evaluate active labour market programmes
and training schemes (with special focus on their
effectiveness for displaced workers)
 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
Making active labour market policies effective
for displaced workers
24

25. For further information:
25
OECD Directorate for Employment, Labour and Social Affairs: www.oecd.org/els
OECD work on displaced workers: http://www.oecd.org/els/emp/displaced-workers.htm
OECD Employment Outlook: www.oecd.org/employment/outlook
@OECD_Social
Contact: gwenn.parent@oecd.org or christopher.prinz@oecd.org