Danish Activation Policy: The Role of the Normative Foundation, the Institutional Set-up and Other Drivers

Article by Flemming Larsen & Mikkel Mailand

In Denmark, active labour market policy schemes were introduced in the 1970s, but played only a limited role during this and the following decade. Large-scale activation policy as we know it today was not developed until the 1990s. Activation policy encompasses social disciplining, in the form of workfare-inspired incentives such activation obligation, tougher availability assessment and shorter benefit periods, and social integration, in which the main goal is activation in the form of individually tailored activation and skills upgrading. Since the late 1990s, however, the balance between the two has shifted from a strong focus on social integration to greater emphasis on social disciplining.

In explaining how Danish activation policy was created and has developed, this article has focused primarily on the normative foundation and justifications and the institutional set-up.

Activation policy has been justified in at least four ways: 1) There is widespread political focus on structural problems in the labour market. 2) From the 1980s onward the problems of financing the welfare state have come to be a strong focal point. 3) A lot of attention is being paid to the interaction between social problems and labour market attachment. 4) A 'communitarian' moral contract between citizens and society has also helped to justify the policy.

However, the institutional set-up - especially the extensive role of the labour market actors - may have been the single most important driver. Their comparatively strong role at national and, especially, regional level has its roots in the voluntary industrial relations system, established more than a hundred years ago. Understanding this role of the labour market actors is crucial for any understanding of the peculiar Danish way of balancing economic and social considerations. The institutional set-up has thus to some extent determined the contents of the policy. Numerous measures have obtained institutional stability, among other things because the actors over time have come to count on the opposite parties' 'rationality' in terms of behaviour and experience formation. Furthermore, a historical understanding has emerged that labour market policy comprises both economic and welfare policy goals, and that there need not be a conflict between them. One of the reasons for this may be the traditions of consensus-creating institutions in the labour market.

Substantial changes are under way in the Danish institutional set-up. These changes have so far led to a (limited) reduction in the role of the labour market actors, and to a more market-based steering, including outsourcing to new private agents and payment on the basis of the no cure, less pay principle. These changes cannot be explained solely with reference to the four normative justifications mentioned before. Furthermore, the European Employment Strategy cannot be said to have exerted any influence on the changes (just as the influence of the Strategy in Denmark is weak in general). It is difficult to tell whether the changes spring from a political awareness of the importance of changing the institutional set-up in order to change the policy fundamentally: that is, as the result of a deliberate strategy rather than by copying elements from other countries (primarily the Netherlands), which then have more indirect (and perhaps politically unrecognised) consequences for the special institutional set-up of the Danish labour market.

Article in Amparo Serrano Pascual and Lars Magnusson (eds.): Reshaping Welfare States and Activation Regimes in Europe, February 2007.