Flexicurity: A brief history
In a 2003 report for the European Commission, economist André Sapir of the Bruegel think tank classified European social models into four groups:
- The Mediterranean model (Italy, Spain, Greece): Social spending concentrated on old-age pensions and a focus on employment protection and early retirement schemes - inefficient both in creating employment and in combating poverty.
- The Continental model (France, Germany, Luxembourg): insurance-based, non-employment benefits and old-age pensions and a high degree of employment protection - good at combating poverty but bad at creating jobs.
- The Anglo-Saxon model (Ireland, the UK and Portugal): Many low-paid jobs, payments linked to regular employment, activating measures and a low degree of job security - relatively efficient at creating employment but bad at preventing poverty.
- The Nordic model (Denmark, Finland and Sweden, plus the Netherlands and Austria): High spending on social security and high taxes, little job protection but high employment security - successful at both creating jobs and preventing poverty.
Employment Rates and Probability of Escaping Poverty in European Social Systems:
FRA=France; GER=Germany; DEN=Denmark; EU=EU average; Cont=average of continental systems (BE, DE, FR, LU); Nord=average of Nordic systems (AU, DK, FI, NL, SV); Med=average of Mediterranean systems (HE, IT, ES); Anglo= average of Anglo-saxon systems (IR, PT, UK)
Source: André Sapir / BRUEGEL; edited by EURACTIV
Making flexicurity work across the EU
The secret behind the success of the Nordic models was found to be the 'flexicurity' approach, which was implemented in Denmark in the early 1990s, and - with some variations - in other Nordic countries, the Netherlands and Austria. The approach is based on social dialogue between employers' organisations and trade unions, and it was initially promoted by Social Democratic politicians such as Poul Nyrup Rasmussen, who was Danish prime minister from 1992 until 2001.
The concept rests on the assumption that flexibility and security are not contradictory, but complementary and even mutually supportive. It couples a low level of protection for workers against dismissals with high unemployment benefits and a labour market policy based on the obligation and right of the unemployed to receive training. The concept of job security is replaced with employment security.
Much of the discussion since the publication of the Sapir report has focused on features of the more successful economies - namely the Nordic ones - which could be applied to those lagging behind. In particular, the systems of Germany and France, which used to be the motors of the EU economy, have found themselves under scrutiny.
In Sapir's presentation, France and Germany are in the 'continental' sector. Both countries' social systems are characterised by a relatively high degree of employment protection: businesses argue this makes it tough for them to hire people, as they would then have difficulties firing them again.
Average tenure in years with the same employer
Original flexicurity concepts in the Nordic countries arose from work relations and the acceptance of taxation and trade unions, issues which date back to the early years of the 20th century. It has thus been argued that they cannot simply be transplanted into other countries.
When the Commission drafted its Communication 'Towards Common Principles of Flexicurity: More and better jobs through flexibility and security' (published on 27 June 2007), it was aware of this dilemma. It limited itself, therefore, to defining some components of successful flexicurity policies, which can be incorporated into any country's labour-market policies without altering the concept's underlying principles, namely:
- Flexible and reliable contractual agreements;
- comprehensive lifelong learning;
- effective active labour market policies, and;
- modern social-security systems.
The Commisison paper then tackled the difficult task of making suggestions on how to proceed with labour-market reforms. In order to avoid giving specific advice to member states, it defined a typology of four different challenges that labour markets in different countries may be facing, leaving governments to assess which of the recommendations apply to them.
For each of the situations, the authors suggested a 'pathway' out of the respective labour-policy impasses, touching on each of the four elements of flexicurity. The typology comprised the following situations:
- Key challenge: Contractual segmentation. The labour market is divided between 'insiders' and 'outsiders', or workers holding permanent contracts and those on short-term contracts with low levels of social protection. Typically, these countries are marked by a high rate of early retirement. Examples include Spain, Italy, France and Portugal.
Suggestion: Aim towards a more even distribution of flexicurity and security to create 'entry points into employment' for newcomers and promote their progress into better contractual agreements.
- Key challenge: Developing flexicurity within the enterprise and offering transition security. A high percentage of large enterprises leads to low job mobility within the workforce. This is the case in Germany, Belgium, Luxembourg and France.
Suggestion: Invest in employability and life-long learning to increase workers' adaptability to technological change; provide for better and safer transitions from one company to another.
- Key challenge: Skills and opportunity gaps among the working population. In countries with high employment rates, such as the UK, the Netherlands and even Denmark, the cradle of flexicurity, low-skilled groups have little chance of finding a better job than the one that they currently hold.
Suggestion: Promote opportunities and develop the skills of low-skilled workers in order to enable upward social mobility.
- Key challenge: Improve opportunities for benefit recipients and informally employed workers. This situation is typically encountered in countries that have joined the EU since 2003 and have undergone intensive restructuring, resulting in a high percentage of the potential workforce being dependent on long-term benefits.
Suggestion: Introduce or reinforce active labour-market policies and life-long learning to improve opportunities for benefit recipients to move from informal to formal employment.
The European Council in December 2007 adopted an agreement on 'Common Principles of Flexicurity,' and throughout 2008, the 'Mission for Flexicurity' saw the European Commission examine how the common principles could be merged into national processes across the EU.
Will the economic crisis derail flexicurity?
Since late 2008, a steady worsening of Europe's financial and economic crises has been raising the question of whether the EU institutions, busy responding to the escalating crisis with recovery packages and solidarity funds, will de-prioritise the drive towards EU-wide flexicurity.
The 'Mission for Flexicurity', the conclusions of which were presented in December 2008, argued that despite the escalating downturn, "the long-term challenges for labour markets are still the same".
Indeed, the conclusions claimed that flexicurity is "without doubt the strategy that European labour markets must adopt in order to adapt to new requirements, while providing the necessary degree of protection, particularly in the current context of economic slowdown".
A June 2009 summit of EU leaders followed in a similar vein, concluding that the crisis need not weaken the flexicurity push, but that the policy could instead become a central plank of economic recovery. The goal they sought was "a balanced policy mix" to "help member states, and the social partners when and where relevant, to manage the impact of the global crisis".
However, as 2010 sees the dawn of a new EU treaty, a new European Parliament and a new European Commission, the policy arguably stands at a crossroads, and despite the many rhetorical commitments to maintain flexicurity as a flagship EU policy, it is still unclear precisely how far the institutions and EU leaders are willing to go.
A Bruegel report offering strategic advice for the incoming Commission, while broadly supporting the continued EU promotion of flexicurity, claimed that the policy's survival is threatened by the current crisis as governments lose faith in flexible labour markets.
With this loss of faith likely to increase further in 2010, the report presents the incoming EU employment and social affairs commissioner with a stark policy choice – "the most important strategic decision of your tenure: whether actively to promote an ambitious flexicurity agenda against the odds […] or whether to shift emphasis and attempt to develop a less controversial agenda based on longer-term challenges such as ageing and migration".