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1. Labour market situation in the country

2. Main concepts

Labour market situation in the country

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, implementation 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
• Pensions
• 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, social partners at the national and regional levels 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 2021, 66.2% of Danish employees were organised in trade unions. It was the ninth year in a row when there has been an increase in the total number of members (dst.dk).

Most members are organised in trade unions under the 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 in 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 in 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, there is no minimum wage established by law in Denmark. 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 conciliators 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, the 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 LOV nr 2189 af 29/12/2020
• 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.

Here is a 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 education, employment or training) 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, 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 benefits 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 (aged 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. At the end of 2023, the number of wage earners increased to over 3 million, which has not been seen before. The record high level of employment means that the number of citizens in the active workforce receiving unemployment benefits is low.  

Some sectors are currently experiencing labour shortages, for instance in sectors such as construction, cleaning, health care, 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
• Migrants
• People with reduced work capacity and disabilities

Youth employment and youth unemployment in Denmark

In the last three months of 2023, the AKU unemployment percentage among the 15-24-year-olds was between 12.2 (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.

Data from Statistics Denmark

Main challenges of getting more Danish youth into the labour market

At present, the overall challenge is to ensure that more young people start an education or enter the workforce.

One of the challenges in 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 a 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 education. Hence, in 2020, the Ministry of Employment and the Ministry of Children and Education established initiatives with an overall aim to ensure that young people are not overlooked thereby reducing the high rate of early school leavers. The initiatives were implemented at local and national levels.

Following COVID-19, Denmark faced a labour shortage crisis in 2021, and with a new tripartite agreement in October 2021, a new trial was set to enter into force in 2022. With the trial, job centres could exempt young cash benefits recipients from an education-first approach and instead focus on a job-first approach. The trial has been made permanent with a new agreement for new thinking in the employment sector.

Another challenge is the NEET rate. With the Preparatory Basic Education and Training Programme (FGU) (see section 3.11), new targets have been established by the Ministry of Children and Education:

• 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 its 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.

Main concepts

The employment system in Denmark is centred around the so-called Danish flexicurity model, which combines flexibility for employers and security for citizens.

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):

1. Net unemployed: Insured unemployed persons and persons in the cash benefits scheme in the 16-64 age group
2. Gross unemployed: Net unemployed persons and all unemployed persons enrolled in active labour market measures
3. 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.