Wednesday 12 October 2011

EU2020: Denmark aims for high employment

In the blog post Denmark: Competitiveness challenges we found slow productivity growth as well as high and rising wage costs among the major hurdles for the future of the Danish economy.

What does the National Reform Programme (NRP) tell us about growth-enhancing structural reforms in Denmark?

The Danish Government's NRP in English:

Denmark's National Reform Programme (May 2011; 67 pages)

Employment rate

The more people work, the more they pay taxes and social contributions. This is good for the budget balance, especially when the demand for social benefits decreases when people move into employment. The ”work first” principle of the Swedish government guides decisions not only on taxes and benefits, but practically every aspect of government policy.

The more successful societies seem able to mobilise more talent than the governments in the less competitive countries. Participation by women and real retirement ages are obvious factors, as are youth, people with an immigration background, the unemployed and various marginal groups.

Denmark is well known for its flexicurity model, but the government of the day promised further reforms in order to reach an employment rate of 80 per cent among 20-64 year olds by 2020 (page 14).

Denmark, like some of the other highly competitive EU member states, targets a clearly higher employment rate than the EU2020 headline target of 75 per cent.

According to Eurostat, the Danish employment rate 76.1 per cent already surpassed the EU end goal in 2010.

The European Union as a whole (EU-27), with an employment rate of 68.6 per cent, has a steep climb ahead of it to reach even the 75 per cent target by 2020.

The Danish NPR offers inspiration based on a constant stream of Initiatives to promote labour supply and employment (Box 2.1, pages 15-16).

The NPR of Denmark (page 17) found that the national efforts were in line with the Annual Growth Survey COM(2011) 11 from the European Commission, where the recommendations to mobilise the labour markets and to create job opportunities are found on the pages 5-7.

However, the AGS found that the European Union as a whole was going to miss the much lower headline goal of 75 per cent on existing trends, so there is a great need for effective labour market reforms in the EU member states.

Ralf Grahn

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