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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 characterised by high flexibility, job mobility, and strong collaboration between social partners. Employment policies are primarily developed and implemented by the Ministry of Employment, ensuring occupational safety, labour market regulation, and foreign labour recruitment.

The Danish Model: Collective Bargaining and Social Partnership
Labour market conditions in Denmark are largely regulated through collective agreements between trade unions and employers' organisations, known as the ‘Danish Model’. This model relies on a high level of organisation among employees and employers, ensuring negotiated agreements on wages, working conditions, and benefits without direct government intervention. In 2021, 66.2% of Danish employees were members of trade unions, demonstrating the strength of social partnership.

Employers are represented by  five main central federations: two in the private sector (DA, FA) and three in the public sector (Local Government Denmark (KL), Regional Denmark, and the Ministry of Finance). Most employers in the public sector are organised, while a significant proportion of private sector employers are also affiliated with these organisations.

The Danish parliament refrains from interfering in collective negotiations

Denmark does not have a statutory minimum wage; instead, wages and employment conditions are determined through collective agreements negotiated every 2-3 years. The Danish parliament typically refrains from interfering in these negotiations unless prolonged disputes lead to state intervention.

Employment laws complement collective agreements by ensuring fundamental rights for workers, including protections against unfair dismissal, discrimination, and provisions for parental leave and holiday entitlements. Key legislation includes:

• The Holiday Act (Ferieloven, LOV nr 60 af 30/01/2018) regulating annual leave
• The Act on Equal Pay (Ligelønsloven, LBK nr 156 af 22/02/2019) ensuring gender pay equity
• The Act on Working Conditions (Funktionærloven, LBK nr 1002 af 24/08/2017) defining employee rights
• The Act on Protection Against Discrimination (Forskelsbehandlingsloven, LBK nr 399 af 05/04/2024) preventing workplace discrimination

Some labour laws originate from tripartite negotiations involving the government, trade unions, and employer organisations, while others are based on EU directives or parliamentary decisions.

Youth Employment and Labour Market Trends
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. Before the 2008 financial crisis, Denmark experienced low unemployment rates and strong economic growth, leading to rising wages and increased consumer spending. However, the crisis resulted in a sharp economic downturn, causing job losses, particularly in construction, industry, and the service sector.

Young people were disproportionately affected, with a significant rise in the number of NEETs (Not in Education, Employment, or Training) and youth relying on 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. To counteract this, the government introduced active labour market policies aimed at integrating young people into education or employment through targeted initiatives, including vocational training and job placement programs.

Additionally, reforms raised the retirement age and encouraged labour market participation to address long-term economic challenges. Policies continue to focus on equipping young people with skills to meet labour market demands and ensuring their smooth transition into stable employment.

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 labour force inquiry (Arbejdskraftundersøgelse, 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 the International Labour Organisation  (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.