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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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Foreword

OECD labour markets are dynamic. Each year, around 20% of jobs in a typical OECD country are created or destroyed, and around one-third of all workers are hired or separate from their employer. These large job and worker flows are driven by a continuous process of labour reallocation, both across industries and between declining and growing firms within the same industry. This process is an important source of productivity gains, since more productive firms expand at the expense of less productive firms and earnings rise on average for workers who change jobs, particularly those who voluntarily quit one job to move to another. However, high job turnover also means insecurity for workers, especially those displaced from their jobs because of market re-structuring. A common challenge facing OECD governments is thus to nurture labour market dynamism, while keeping the adjustment costs that are borne by displaced workers as low as possible.

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