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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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Income support as a safety net for displaced workers in Denmark

Displaced workers cope with the consequences of a job loss very differently depending on the type and generosity of the income support they receive. A well-designed benefit system can minimise the adverse consequences resulting from displacement, without necessarily decreasing the incentive for displaced workers to move quickly back into the workforce. This chapter discusses how well displaced workers are covered by the Danish benefit system, and whether the level of income support is adequate to mitigate their wage losses. Recent reforms have helped maintain the sustainability of the benefit system but further measures are required to adapt it to changing economic conditions and improve the inclusiveness of the system.

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