Danish "Flexicurity"

These days, Americans worry about free trade, outsourcing, and layoffs.

However, as demonstrated by most of Europe, protectionism has led to high joblessness and slow economic growth.

I read in Forbes magazine that the Danish system is getting a lot of attention as a middle ground between "cruel capitalism" and "Eurostagnation".

With flexcurity, they combine light regulation (employers can layoff at will) with generous unemployment benefits, and a well-developed education system for people who are laid off or outsourced.

An example they gave is the town of Billund, where Lego employed 4,000 out of a population of 10,000. Lego decided to lay off half its workforce there (2,000). Instead of devestating the town, the former Lego workers had a soft landing and bounced back: the unemployment rate in Billund went below 2%.

The laid off workers collected 90% of their income for 6 months. Before they were even officially let go, they were shuttled to classrooms for a 6 week retraining program. In the program, the employees were taught how to transition from manufacturing to the service industry. The service training was so good that Lego had to discourage the airport and a nearby water park from poaching the trainees until they were officially laid off.

Statistics show that Denmark is doing well. Their employee turnover level is on par with the Unites States, and their 3% real GDP growth rate is the best in Western Europe.

The main drawback is that the benefits are paid for by a high income tax, with an upper rate of 60%. This chases the smartest and most highly skilled Danes to lower taxed places like the U.S. or U.K.