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Back to Work: Denmark

Improving the Re-employment Prospects of Displaced Workers

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Job displacement (involuntary job loss due to firm closure or downsizing) affects many workers over the course of their working lives. Displaced workers may face long periods of unemployment and, even when they find new jobs, tend to be paid less than in the jobs they held prior to displacement. Helping displaced workers get back into good jobs quickly should be a key goal of labour market policy. This report is the sixth in a series of reports looking at how this challenge is being tackled in a number of OECD countries. It shows that Denmark has effective policies in place to quickly assist people who are losing their jobs, in terms of both providing good re-employment support and securing adequate income in periods of unemployment. Despite a positive institutional framework, a sound collaboration between social partners and a favourable policy set-up, there is room to improve policies targeted to displaced workers as not every worker in Denmark can benefit from the same amount of support. In particular, workers affected by collective dismissals in larger firms receive faster and better support than those in small firms or involved in small or individual dismissals. Blue-collar workers are also treated less favourably than white-collar workers. More generally, low-skilled and older displaced workers struggle most to re-enter the labour market.

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Executive summary

The largest part of the high labour turnover in Denmark is the result of workers choosing or agreeing to change their job, often with positive effect. Workers who involuntarily lose their jobs as firms close or downsize in response to market fluctuations, however, often face substantial personal costs, both economic and non-economic. Around 2-3% of Danish workers with at least one year of tenure are displaced every year on average as a consequence of mass dismissal or firm closure, a share that doubled in the global financial crisis. In normal times, about three in four of these workers find a new job within one year, however this share dropped to only one in two workers after 2008 and has only slowly recovered since. Even for those displaced workers who do find jobs, many have to accept significant wage cuts. Older displaced workers face the poorest re-employment prospects, and bear the largest and most persistent wage losses.

English

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