3.1 General context
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The Danish labour market is known for high job mobility, flexibility, competitiveness and high-quality working conditions.
The Ministry of Employment is responsible for measures in relation to all groups of employed and unemployed persons, i.e. development, implementing and follow-up on employment policy in Denmark, recruitment of necessary foreign labour, ensuring occupational safety and healthy working environments and research on working environments. For further information, see section 3.2.
However, pay and working conditions are typically laid down by collective agreements concluded between trade unions and employers' organisations. This system of labour market regulation is referred to as the Danish Model.
Areas that may be covered by collective agreement:
- Pay and pay increases
- Working hours, overtime work, and pay supplements
- Education and training
The ‘Danish model’ is based on a long tradition of involving social partners in labour market policy. Hence, on the national and regional level have a strong influence on labour market policy.
The Danish model has its roots in what is known as the ‘September Agreement (Septemberforliget) of 1899, where it was agreed that employers have the right to distribute and lead the labour, while labour unions have the right to bargain over wages and working conditions.
After five months of conflict, employers (DA) and trade unions (LO) laid down principles in the first Main Agreement. The current Main Agreement is a revised version of the agreement of 1899.
The Danish model demands a high level of organisation
The extent of organisation by employers and employees respectively is a very important part of the Danish model.
In 2018, 66.5% of Danish employees are organised in trade unions. The number has stabilised after some years of declining membership.
Most members are organised in trade unions under trade union confederation (hovedorganisationer), (FH, AC, and Lederne) that participate in collective negotiations, but the number of members in alternative and neutral unions (yellow trade unions) that do not participate in collective negotiations is rising.
Danish employers are organised in five main central federations, two on the private sector labour market (DA, FA) and three in the public sector labour market (Local Government Denmark (KL), Regional Denmark, and the Ministry of Finance). More than half of the employers of the private sector labour market are organised, whereas all employers in the public sector labour market are organised.
The Danish parliament refrains from interfering in collective negotiations
As long as the social partners can agree on sound solutions, the parliament refrains from intervening in the negotiations. As a consequence, in Denmark there is no minimum wage established by law. Collective agreements are settled within the different trades every 2-3 years.
If the social partners are not able to reach a compromise, a number of state institutions are ready to take over the negotiation.
The Conciliation Board and the official conciliator seek to settle the disagreements, and if the social partners are too far apart, strike action and sometimes lockouts are the result.
In case of lengthy strike action and lockouts, parliament is compelled to react and will pass a new collective agreement as a law.
Danish employment law protects employees in their terms of employment and against discrimination
In addition to collective agreements, the labour market is regulated by laws passed in parliament. Some laws ensure basic minimum rights for all employees, for instance:
- The Consolidation Act on the Employer's Obligation to Inform Employees of the Conditions Applicable to the Employment Relationship (Ansættelsesbevisloven, LBK nr 240 af 17/03/2010)
- The Holiday Act (Ferieloven, LOV nr 60 af 30/01/2018), which regulates annual holidays
- The Consolidation Act on the Entitlement to Leave and Benefits in the Event of Childbirth (Barselsloven, LBK nr 106 af 02/02/2020)
- The Consolidation Act on the Protection Against Dismissal Related to Association Membership (Foreningsfrihedsloven, LBK nr 424 af 08/05/2006)
Other laws grant rights to certain groups of employees, for instance:
- The Consolidation Act on Employers’ and Salaried Employees’ Legal Relationship (Funktionærloven, LBK nr 1002 af 24/08/2017)
- The Consolidation Act on Assistants (Medhjælperloven, LBK nr 712 af 20/08/2002)
Finally, some laws protect employees against discrimination, for instance:
- The Consolidation Act on the Prohibition of Differences of Treatment in the Labour Market etc. (Forskelsbehandlingsloven, LBK nr 1001 af 24/08/2017)
- The Consolidation Act on Equal Pay to Men and Women (Ligelønsloven, LBK nr 156 af 22/02/2019)
- The Consolidation Act on Part-Time Work (Deltidsloven, LBK nr 1142 af 14/09/2018)
Some employment laws are the result of tripartite negotiations in which the government and the social partners negotiate labour market challenges that demand broad and overall solutions. The tripartite negotiations can be formal or informal, national or local; they can deal with ad hoc, regular or continuous problems; with single questions or involve complex and cross-sectoral problems.
Other employment laws are passed in parliament based on ordinary bills or directives from the EU.
List of Danish employment laws. (In Danish)
Before and after the financial crisis of 2008
In 2013, a committee commissioned by the Ministry of Commerce published its report on the causes and consequences of the crisis on Danish society and the Danish economy. In the years before the 2008 financial crisis, the gross unemployment rate decreased in the private sector labour market. In 2004, the unemployment rate was approximately 8%, and in 2007 the unemployment rate was approximately 2%. The pressure on the labour market caused salary increases and increased consumer spending.
At the same time, the government pursued an expansionary fiscal policy, and this increased economic activities. Furthermore, government platforms from 2000 onwards focused on increasing the workforce in order to avoid bottlenecks, for instance the 2006 Welfare Agreement and tax cuts in 2004, 2007, and 2009.
In the following years, the main trend in the government’s employment policy was that more people should provide for themselves and not live on public support. Early and intense active labour market policy measures were introduced with the purpose of moving the unemployed and people on social security into education or employment. Target groups were the long-term unemployed, immigrants (both newly arrived and descendants of immigrants), NEETs (Not in training, employment or education) and people with reduced ability to work. Furthermore, the retirement age was raised from 65 to 68 years for people born after 1963, and pensioners on the state pension were allowed to work a fixed number of hours a year without a reduction in benefits.
The financial crisis in 2008 had a great impact on Denmark. According to the commission report, Denmark experienced a large drop in GDP from an average of 2.4% a year in 2004-2007 to an average of -0.9% a year in 2008-2012. Furthermore, the unemployment increased.
The committee estimated a total loss of production in the 2009-2013 period of about DKK 200 billion. Especially the building and construction sector, industry, as well as the trade/hotel and restaurant business were affected by declining consumer spending and thus a loss of jobs.
In 2010, a reform of the unemployment benefit reduced the period in which insured unemployed people can receive benefits from four years to two years.
Young people were especially affected by the crisis. An increased number of young people was supported by social security. From 2007 to 2012 the number of young social security recipients (age 18-27) doubled, compared to a 5% increase in the working age population.
Labour market situation in Denmark today
In general, the Danish labour market has experienced a positive development since the financial crisis in 2008 and until spring 2020. The record high level of employment resulted in a decline in the number of citizens in the active labour force who received social benefits, and general unemployment was low.
The Danish labour market was severely affected by the first lockdown that was implemented due to the COVID-19 pandemic in spring 2020 and again by the second lockdown in the beginning of 2021. The payroll employment declined by 2,3 % from the first quarter of the year to the second quarter in 2020, and the unemployment rate rose from 3,6 % in February 2020 to 5,5 % in May 2020. The employment rate rose again concurrently with the gradual reopening of society, and in spring 2021 the employment rate had grown significantly. The employment rate was higher in August 2021 than in February 2020 right before the lockdown, and according to Statistics Denmark the unemployment rate in September 2021 was at its lowest since January 2009.
The reopening of society after the pandemic is also reflected in the number of failed recruitment initiatives in businesses. In September 2021, the level of failed recruitment initiatives was at the highest level since spring 2008.
Some sectors are currently experiencing labour shortages, for instance in sectors such as construction, cleaning and service industries (e.g. hotels and restaurants).
The government has a focus on increasing the total workforce and moving people from social assistance to employment or training. Target groups are:
- NEETs (Not in education, employment or training)
- Long-term unemployed
- People with reduced work capacity and disabilities
In Denmark, local initiatives were established early on in the crisis. The aim of the initiatives was to meet the needs of the impacted areas, both geographical and sectoral, for instance wage compensation to subsidise the companies and the risk of financial crises and bankruptcies due to the lockdowns.
Some sectors were at special risk of financial difficulties during the pandemic. Because of the high risk, it was necessary to implement local solutions for certain sectors, such as the travel industry, where airports provide a high number of workplaces, apprenticeships, etc. Normally, people who have been dismissed are obliged to contact their local municipality. Instead, relevant partners, including the municipality and the airport, set up an office in the airport so that dismissed staff who went to work in their notice period could get help and guidance during their workday. airports provide a high number of workplaces, apprenticeships, etc. Normally, people who have been dismissed are obliged to contact their local municipality. Instead, relevant partners, including the municipality and the airport, set up an office in the airport so that dismissed staff who went to work in their notice period could get help and guidance during their work day.
Furthermore, the Danish parliament was aware that COVID-19 could lead to a situation where students and apprentices were not able to get an apprenticeship or complete their education. Hence, in May 2020 the government and the relevant social partners agreed to a number of ambitious measures to make it financially possible, even for companies that are in a difficult situation due to COVID-19, to create new and maintain existing apprenticeships and ensure access to internships, especially for persons who have lost their apprenticeship due to the financial situation.
Furthermore, the Ministry of Children and Education has taken measures to ensure continued education, guidance about education and access to education. For instance, the ministry has changed procedures for accessing courses focusing on upgrading basic skills and prolonged the deadline for handing in applications due to COVID-19.
In June 2020, as a consequence of the COVID-19 pandemic, the parliament agreed to establish a further 5 000 student places in higher education institutions in 2020/2021 to mitigate problems with youth unemployment in Denmark and young people who would have used a sabbatical year to travel or work abroad.
Youth employment and youth unemployment in Denmark
In September 2021, The AKU unemployment rate among the 15-24-year olds was 9.6% (adjusted for seasonal variations), which is the same level as in Spring 2008 and far below the approximately 17% in 2012. In the last three months of 2022 the AKU unemployment percentage among the 15-24-year-olds was between 12.4 (adjusted for seasonal variations).
In the wake of the financial crisis in 2008, the NEET rate rose from 56 833 persons in 2008 to 65 728 in 2009. Since then, the NEET rate (Not in education, employment or training) has increased slightly, but in 2017 the rate declined.
|NEETs||72 772||70 356||69 133||69 812||61 219|
Data from Statistics Denmark
Main challenges of getting more Danish youth into the labour market
At present, the overall main challenge is to ensure that more young people start an education or enter the workforce.
One of the challenges on the Danish labour market is the combination of labour shortage in the construction sector and the lack of apprenticeships for young people enrolled in vocational education programmes. Furthermore, after COVID-19 there can be a situation where students and apprentices are not able to complete their education or get an apprenticeship.
This is the reason that the tripartite agreement II of 2016 focused on increasing the number of apprenticeships by establishing several bonuses for enterprises and established a list of advantageous education programmes (fordelsuddannelser) with high possibility of apprenticeship and employment. With the new tripartite agreement of May 2020 (see below), it was agreed to discontinue ‘advantageous education programmes’ as of 1 January 2022.
The agreement of 2016 was followed up by a new tripartite agreement in May 2020. The agreement comprises a number of ambitious measures to make it financially manageable, even for companies that are in a difficult situation due to COVID-19, to create new and maintain existing apprenticeships and ensure access to internships, especially for people who have lost their apprenticeship due to the financial situation.
Another main challenge is the high rate of early school leavers from vocational educations. Hence, in 2020 the Ministry of Employment and the Ministry of Children and Education have established initiatives with an overall aim to ensure that young people are not overlooked and thereby to reduce the high rate of early school leavers. The initiatives are implemented at local and national levels.
Following COVID-19, Denmark has faced a labour shortage crisis in 2021, and with a new tripartite agreement in October 2021 a new trial is set to enter into force in 2022. With the trial, job centres can exempt young cash benefit recipients from an education-first approach and instead focus on a job-first approach.
- In 2030, at least 90% of 25-year-olds must have completed an upper secondary education programme.
- In 2030, the NEET rate must be reduced by 50%.
Danish national surveys on young people's participation in the labour market
Statistics Denmark provides statistics on the labour market, unemployment, and the NEET rate. Statistics Denmark is the central authority on Danish statistics. Statistics Denmark is a state institution under the Ministry of Digital Government and Gender Equality, see section 1.6.
The Danish Agency for Labour Market and Recruitment, under the Ministry of Employment, monitors the labour market by combining own statistics and surveys with data from Statistics Denmark. Furthermore, the agency produces its own statistics about people on all types of unemployment benefits and the situation regarding labour shortages and recruitment by private enterprises, see section 3.3.
The employment system in Denmark is centered around the so-called Danish flexicurity model, which combines flexibility for employers and security for the citizen.
The Danish employment system’s combination of flexibility and security is often described as a ‘golden triangle’. The triangle combines high mobility between jobs with a comprehensive income safety net for the unemployed and an active labour market policy.
Relatively low employment protection legislation (EPL) allows employers the flexibility to reconfigure the workforce to adapt to changing market conditions (although collective agreements and legal provisions are in place). There is a high level of external numerical flexibility, as can be seen by high levels of job-to-job mobility and worker flows in and out of employment and unemployment.
Unemployment in Denmark
In Denmark, different terms and definitions are used in statistics about unemployed persons (Statistics Denmark, 2014):
- Net unemployed: Insured unemployed persons and persons in the cash benefit scheme in the 16-64 age group
- Gross unemployed: Net unemployed persons and all unemployed persons enrolled in active labour market measures
- AKU unemployed (Labour Force Survey): Unemployed persons according to the definitions used in ILO and Eurostat
Yellow trade unions
Yellow trade unions refer to trade unions that do not acknowledge the fundamental conflict of interest between employer and employee. As a result, yellow trade unions do not participate in collective negotiations.