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A Fat Danish Model for Europe?
No thanks, says IMF
 Most
European countries are facing chronically high unemployment rates and
poor growth.
The ruling classes including The European Commission, the OECD and the
World Bank all praise the Danish flexicurity model for its
high employment rate and high degree of labor
market flexibility as well as a high level of social protection.
While and
the needed labor market reforms often face strong political opposition,
the flexicurity model looks increasingly attractive to policymakers in
Europe.
The
cost of Big Government: Early School leave and exploitation of the
elderly.
 Denmark has indeed a very high
participation rates as compared to the rest of Europe. However
a
closer look at the figures shows
that the high overall participation rate is due to extremely high
participation
rates in the in the very old and very young age groups. Danish employment
rate
in the 15-24 year olds stands at 62.3% as opposed to 39.8% for the
EU-15 average. (source:
Eurostat). The high Danish participation is in fact
due to very early school leavers. Denmark has
indeed a very short school duty. Children can leave school
after having received
regular education for nine
years only. In Denmark it is indeed fully legal to
employ Children as young as 15 years ( see
details here )
Back to the 1900's ?
One
can ask questions if early the so praised Danish Model
which school leave is a progress for a nation, and a guarantee to
future success. In
Denmark children of 15 years
old having fulfilled their statutory duty to receive instruction are
able to take on work.
High participatiopn ra
Is it progress
to leave School at 16?
Is it progress
to work till 67 ? Employment rates
in the 15-24 year olds are at 59.5% as opposed to 44.1% for the
EU-15
The European Commission, the OECD,
the World Economic
Forum and the World Bank all think very highly of Denmark. But what
about the IMF?
In their latest consultation with Denmark the
IMF Public Information Notice states:
that the Danish flexicurity model has worked well,
contributing to Denmark's low unemployment. At the same time, the IMF
observed that it involves costly benefits and active labor market
policies, which may make it less applicable to countries with high
unemployment and weak public finances. Nonetheless, the model merits
study by other countries, as a possible way to increase labor market
flexibility.
However the accompanying report, Denmark: Selected Issues, is not quite
as fulsome. It contains a 22 page paper by IMF economist Jianping Zhou
entitled Danish for All? Balancing Flexibility with Security: The
Flexicurity Model. The concluding remarks start off pleasantly enough:
But then
point out some of the potential problems in adopting the flexicurity
model:
However, whether the Danish model should and can be adopted by other
European countries to reduce unemployment is not obvious. First,
Denmark has traditionally had a combination of a flexible labor market
and a high level of income protection. Economic performance under this system has varied, as demonstrated
by the  economic crisis during the
early 1980s and the remarkable labor market performance in recent
years. Second, other countries have been able to reduce their high
unemployment rates to low levels with rather different social models
(e.g., Ireland, Sweden, and the United Kingdom). Finally, generous
unemployment benefits often raise moral hazard issues that might hinder
effective implementation of the Danish model. In this regard, a strict
job search requirement and tight eligibility criteria for unemployment
benefits are key.
The Danish
model is costly. The tax burden in Denmark is heavy because
of the need to finance the country’s high spending on labor market
programs and unemployment benefits. As most countries that are tempted
to adopt the Danish model will typically start from a high unemployment
level, a move toward the Danish model will, in the short run, trigger a
sharp increase in the cost of unemployment benefits and active labor
market policies, thereby widening the tax wedge, with an adverse impact
on labor demand and supply. This implies that the Danish model may not
be suitable for countries facing high unemployment and budgetary
difficulties. Using a calibrated model for France, the paper finds that
implementation of the flexicurity model could be costly, and reduction
in structural unemployment during the first few years might be limited.
Nonetheless, certain key aspects of the Danish model could usefully be
studied and considered by other countries...
So the countries which could benefit the most from a more flexible
labour market - those with high unemployment - would face high up-front
costs and at best modest short-term reductions in unemployment were
they to move to the Danish model. That's why the Danish (or Swedish or
Dutch) model has not spread more widely - few politicians are prepared
to bear the short-term fiscal and political cost for medium-term gains
that may not occur until after they've left office. Gerhard Schroeder
is a notable exception - and Germany is now starting to see
unemployment rates fall. But how many other European politicians would
dare follow his brave example?
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News from Brussels' leading think-tank..
 WorkForAll
is een onafhankelijke en pluralistische denktank. We onderzoeken
sociale modellen en structuren op hun efficiëntie in de realisatie
van
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solidariteit en individuele vrijheid.
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The
Path To Sustainable Growth
Lessons From 20
Years Growth Differentials In Europe
Martin De Vlieghere and Paul
Vreymans
Abstract: While the rest of the
world is booming, Europe lags
behind. Europe's performance is
weak in
spite of high productivity and knowledge, high level of
development and good labour ethics. Growth is also remarkably
dissimular among regions. France, Germany and Italy are stagnating, and
so do Denmark,
Sweden and Finland. All gained less than 44%
prosperity over the last 20 years. The Irish
economy grew 4 times faster, gaining 169%
wealth over the same period. In half a generation Ireland so
metamorphosed into Europe's second
richest country creating jobs for all.
"
Big government
" is the main cause of Europe's weak performance. The oversized Public-Sector lacks productivity and undoes the
entire productivity gains of the Private Sector, eradicating
all of its outstanding performance and
productiveness. Europe can improve its overall performance by copying
the Irish
success formulas: Scaling down Public Spending, downsizing
bureaucracy, and shifting the tax burden
from
income on
consumption. This book demonstrates why the Lisbon
Agenda and decades of Keynesian inflationist demand stimulation have
failed. It devellops alternative and workable
supply-side strategies as well as effective cures for humane growth
and a financially sustainable social
security.
This
book reads as a step-by-step manual for economic
recovery.
It is a data-reference for students and politicians
interested in growth, wellfare and in social modelling. It is a
classic
for economists concerned about Big
Government, poor public sector productivity and for parents worrying
about their declining standard of living and their children's future.
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free
download here
Vindt U deze info
belangrijk?
Link ons op Uw web-site aub. Dank U
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Opmerkingen
of suggesties?
Mail ons aub op:
paul.vreymans@workforall.net
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