Nordic labour market crisis: Professor sees hope

“A hopeful wakeup call”. That is how one of Denmark’s leading labour market researchers describes the coronavirus’ consequences for the Nordic labour markets. Henning Jørgensen is a Professor at Aalborg University and the co-author of a new book on the past 25 years of Danish labour market policy.

In the book, Jørgensen and two research colleagues predict that without rapid changes to labour market policies, Danish businesses will pay dearly and inequalities will increase. Current measures to get Danes working – the employment measures – are, according to Henning Jørgensen, reactive and focusing on unemployed people being the problem. 

According to the book, a deep and long-lasting labour market crisis can only be prevented by labour market policies that are far more “proactive”, where the social partners and the state cooperate to create a more social and green vision for society.

Hoping for new understanding

The book was written just before the corona crisis hit, and even though corona can lead to mass unemployment and recession, Henning Jørgensen believes the crisis could bring even more hope for great positive changes for Nordic labour markets in coming years.

“Through the corona crisis we clearly see a greater understanding of the need to help each other, and that we must act together in order for society to function. This can be seen in the labour market in particular, where the only way of getting out of this crisis is to help each other. New understanding is emerging, and that creates hope in the middle of all this,” says Henning Jørgensen.  

He points out that during the corona crisis, the governments and the social partners in the Nordic countries have demonstrated their ability to execute rapid, wide-ranging and solidary changes. 

This could be because a carefully calibrated cooperation between the parties already exists, built on the Nordic tradition of finding broad solutions and of cooperation – the Nordic model or the flexicurity model. The Nordic welfare model and the Nordic welfare state is about to see a renaissance thanks to the corona crisis, the Professor believes.  

“Something completely new is about to happen. The crisis has allowed the welfare state and the Nordic model to showcase their strengths, and the Nordic populations have demonstrated through the corona crisis that they support solutions where we all look after each other more. This creates a lot of hope.” 

He believes one positive outcome of the crisis will be increased understanding for the fact that mass unemployment can only be prevented when we cooperate to create a more socially fair and greener society which is more environmentally friendly and focuses on upskilling unemployed people.

An old and tested recipe

His latest book looks at Denmark in the 1970s and 1980s, which was characterised by economic crisis and high unemployment. The efficient solution back then was a very active labour market policy with massive public investment in further education of unemployed people throughout the 1990s. This was heavily inspired by Swedish 1950s labour policies, the Swedish term “security by wings” and the Swedish Rehn-Meidner model.

The Swedish model is built on both push and pull when it comes to the labour market, so as to achieve movement between employment and unemployment. This is a principle that can still be used. Both supply and demand must be included in policies, explains Henning Jørgensen.  

In the 1990s and up until 2005, Denmark led a very active labour market policy, which ended with full employment in 2007. This recipe can and should be repeated now, he argues.

“We need to go big on public investments in further education of unemployed people in order to secure a future for businesses and for the many workers who are losing their jobs because of the corona crisis.”

Henning Jørgensen is a proponent of far more active use of education policies, employment policies, financial policies and labour market policies as steering tools, just like what was done in the 1990s and until 2005, but in a new combination suited for modern conditions. At the same time there will be a need to reassess what the goal of that policy is, he says.

“In the first decade of the 2000s, Denmark’s labour market policy lost its focus on education. It was all about getting unemployed people into work. But if the workers are to thrive for 50 years in the labour market, it is crucial to continuously train them – and this is as important as ever right now and on the other side of the corona crisis. Businesses will also be secured the most important competitive advantage: qualified and motivated labour.”

New megatrends

Former solutions cannot be completely copied, however. The labour market has changed, Henning Jørgensen explains. In his book he points to several modern megatrends which will influence the labour market and the skills workers will be needing: 

• New technology, e.g. digital solutions
• More so-called platform workers who do not enjoy the same rights as hired staff
• More migrant workers
• Climate change which means new skills are needed to secure a place in the labour market

Henning Jørgensen is in no doubt that the Nordic region’s strong position when it comes to digitalisation is a strength – which also helps in the handling of the corona crisis. But without continuous skills development when it comes to using digital solutions, this position of strength can soon be lost, he warns.