Tuesday, January 23, 2007

Globalization, displaced workers and "Flexicurity"

After seeing my first paper on "flexicurity" simply titled "Flexicurity", at a recent "Advances in Applied UK Labour Econometrics" workshop here in Birmingham the word seems to crop up everywhere I look.

A comparison of European and US assistance for, for want of a better phrase, "globalization induced labour market adjustment costs", is not only interesting academically and but also politically. The policy issue for the UK government is whether to attempt to follow more closely the Danish "flexicurity" model. I am yet to be convinced by the long term sustainability of the Danish model.

This is from the Economist via Economist's View.

Helping Displaced Workers

On the Danish model:
An alluring Danish model As a result, it may be better to focus on policies which improve job prospects for all workers. In Europe, Denmark has led the way. The Danish system of “flexicurity” appears to offer the best of both worlds: dynamic labour markets and low unemployment coupled with generous support for those who lose their jobs. ...

Employers hire and dismiss people at will. Around a quarter of the workforce is unemployed at some point in any year. But the jobless enjoy generous welfare benefits while they look for work, around 80% of their previous wage on average. To ensure this does not deter people from finding new jobs, the Danes oblige the unemployed to be trained and to look diligently for work. ...

But Denmark's approach has evolved over decades and cannot easily be copied. Besides, it is extremely expensive. ... Denmark ... spends more than 5% of GDP on the unemployed, including almost 2% of GDP on its “active” training and job-search programmes. ...

The conclusion is:
As public fears of globalisation rise, so will the political appeal of these schemes. But they will have less impact than getting other, more basic, policies right. Globalisation underscores the need for a flexible, dynamic labour market and a well-educated, adaptable workforce. And a worker whose health care is not tied to his job will be less worried about trade than one for whom job loss also spells the loss of medical insurance. The tasks of ... reforming health care ... and improving education ... are far more important than any amount of experimentation with wage insurance or retraining schemes. If politicians really want to respond to the worries caused by globalisation, those are still the best places to start.

No comments: