Labor Market Policy, Flexibility, and Employment Performance: Denmark and Sweden in the 1990s

Peter Plougmann and Per Kongshøj Madsen

in Fighting Unemployment

Published in print February 2005 | ISBN: 9780195165845
Published online July 2005 | e-ISBN: 9780199835515 | DOI:
 Labor Market Policy, Flexibility, and Employment Performance: Denmark and Sweden in the 1990s

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Chapter 9 considers Denmark and Sweden, two countries that exemplify the universalistic welfare state. Denmark’s unemployment rate was similar to that of the United States in the 1980s, rose above it in the 1990s, but by 2002 was again well below it. Sweden’s unemployment rate was far below the U.S. rate until the early 1990s, and although unemployment shot up to almost 10% in the middle of the decade, by 2002 Sweden was again outperforming the United States. This impressive employment performance has been achieved without changing the fundamentals of the Scandinavian Model: high tax rates, a comprehensive social security system, and among the lowest levels of wage and income inequality in the developed world. The authors argue that much of the explanation can be found in a strong commitment of both countries to active labor market policies, such as job placement and work-related education and training programs. Danish and Swedish government interventions have acted to facilitate both labor market flexibility and the transition to the “new economy” of services and high technology. These state policies have helped promote a flexible and innovative “high-road” economy without abandoning the universalistic welfare state.

Keywords: flexibility; welfare state; labor market; regulation; deregulation; unemployment; employment; labor market institutions; active labor market policies; Denmark; Sweden

Chapter.  9864 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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