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Danish employment model put to test

KARL RITTER
AP Writer

Copenhagen, Denmark — Dennis Harmon lost his job, but that doesn’t mean he’ll lose his livelihood.

The veteran bricklayer is entitled to the maximum jobless benefits in Denmark: $594 a week. After taxes, that’s enough to cover rent for his two-room apartment outside Copenhagen, utilities and payments on his 1996 Opel Vectra.

“There’s not much left for fun,” said Harmon, a 40-year-old Dane whose surname is tattooed on his right forearm.

Even so, Harmon receives a level of compensation that people losing their jobs in many parts of the world can only dream of.

Robust unemployment compensation is a key feature of Denmark’s labor market model, studied so widely in recent years that it rivals Carlsberg beer and Lego toys among the Scandinavian nation’s most famous trademarks.

Called “flexicurity,” it combines flexibility for employers to hire and fire workers with financial security for the unemployed. And experts say it helps explain why both Danish businesses and workers are entering the global downturn in better shape than most of their Western peers.

“People here are not worried about losing their jobs to the extent that they are in the U.S.,” said Torben Andersen, an economist at the University of Aarhus, western Denmark. “If people get unemployed, it doesn’t mean they will have to sell their house. They know the unemployment coverage is there.”

Harmon’s allowance, financed by union fees and gov

Unemployed bricklayer Dennis Harmon reads job announcements at the local office of the United Federation of Danish Workers in the Valby district of Copenhagen on Feb. 17. Denmark's labor model blending flexible rules for employers to fire workers with ample benefits for the unemployed is being put to the test in the global meltdown.   AP Photo by Karl Ritter

Unemployed bricklayer Dennis Harmon reads job announcements at the local office of the United Federation of Danish Workers in the Valby district of Copenhagen on Feb. 17. AP Photo by Karl Ritter

ernment subsidies, is more than double the maximum jobless benefits paid by some U.S. states. The highest weekly unemployment compensation is $584 in New Jersey, $362 in Michigan and $240 in Arizona.

What’s more, Danes can collect their benefits for up to four years, although that’s rarely needed. U.S. benefits are capped at 59 weeks.

The flip side is that like in the U.S. — but unlike most of Europe — Danish companies can fire workers with little hassle. And as the recession cuts ever deeper, they’re taking advantage of it.

Perhaps more surprisingly, the system also enjoys support from union leaders, who say a flexible labor market is needed to guarantee jobs in the future.

“Our goal in the union is not to defend people’s jobs but to make sure that their next job is available,” said Kristian Madsen, spokesman for the United Federation of Danish Workers, the country’s biggest union. “When I tell my American colleagues, they can’t really wrap their heads around that way of thinking.”

Denmark’s jobless rate has consistently been one of Europe’s lowest, and analysts give flexicurity part of the credit. At 4.3 percent in January, it was significantly below the European Union average of 7.6 percent.

And despite its high taxes — nearly 50 percent of economic output — the World Economic Forum also ranks Denmark as the world’s third most competitive economy, behind the U.S. and Switzerland.

Denmark’s success has not gone unnoticed in Europe. France last year adopted a plan inspired by the Danish model to make its labor market less rigid.

However, the Danish model may appear less attractive in a downturn, because “unemployment will rise faster in a Danish context than in countries with more job protection,” said Aalborg University professor Per Kongshoej Madsen, one of the first economists in Denmark to study the flexicurity concept.

Meanwhile, the pressure on the welfare system grows with the increasing number of people seeking jobless benefits. But the welfare state is so deeply ingrained in Scandinavian DNA that no parliamentary party is against the system, although some argue about what level of taxation is needed to support it.

“On the right we would like to make sure there is incentive to work, but we don’t want people to live in absolute poverty if they don’t,” said Conservative lawmaker Charlotte Dyremose.

Jobseekers must log on to the government’s job site weekly to show they’re searching for a job. They can also be pushed to switch to a profession where chances of getting hired are higher, or risk losing their benefits.

Harmon said many of his colleagues have been forced to switch trades. With construction at a standstill, about 30 percent of Denmark’s masons were out of work in January, according to union statistics.

“I already considered doing something else, but I can’t imagine what kind of job I would do,” he said. “The problem with other lines of work is that you almost get the same pay as when you’re unemployed.”

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