The Big Question: Could Denmark’s labour market model unlock European competitiveness?

In the International Institute for Management Development’s (IMD) 2024 World Competitiveness Ranking, Denmark came out third. 

Singapore and Switzerland took the top two spots, dethroning Denmark from the prized position in 2022 and 2023. 

Despite this, it’s still pretty good going for a country in Europe where one of the key topics of conversation is the bloc’s dwindling competitiveness. 

So what’s their secret?

In this episode of The Big Question, Deputy Director General of the Confederation of Danish Business, Thomas Bustrup, sits down with Hannah Brown to discuss the benefits of Denmark’s unique labour market. 

What is ‘The Danish Model’?

Denmark has developed a very flexible labour market model which Thomas says has been built on “trust” over the past 100 years. 

Often described as ‘flexicurity’, the system makes it both easy to hire and easy to fire people. This allows businesses the agility to pursue additional opportunities as and when it suits them without the need to keep excess staff in employment in between.

While many countries are against the easy dismissal of staff, this hasn’t had a negative effect on Danish employment rates. In October 2024, the unemployment rate in Denmark was 2.9%, significantly lower than the EU average which was 5.9% in August 2024, according to Eurostat. 

The security part of the ‘flexicurity’ comes in the form of the country’s unemployment welfare system. 

In Denmark, it’s commonplace to join a voluntary unemployment insurance scheme. Members of these schemes can claim unemployment benefit for up to two years, providing they meet the eligibility criteria. The benefit usually equates to an average of 57% of previous earnings. 

And whilst that might not seem enough, Thomas is confident it’s not usually a long term solution anyway. 

“The flexibility means that you often find a new job very quickly,” Thomas explained. 

In fact, according to Danish National statistics, in May 2024 less than 0.36% of the labour force had been unemployed for 52 weeks. 

Active Labour Market Programmes (ALMP) are also in place to keep employability up. Around 2% of the Danish labour force participates in vocational training every year. 

Why is Denmark so competitive?

Denmark is a leader in clean energy. 

“A lot of Danish companies have an excellence in that, and not just within the last years, but within probably 30 or 40 years,” Thomas explained. 

“Danish companies have done a lot in the green transition and thereby also being popular around the world and not only in Europe, but also in the US and Asia.”

A reliable supply of clean energy keeps energy prices stable and less vulnerable to global volatility.

What threatens to challenge its success now, like the rest of us, is European regulation.

“It's difficult to continue being a winning country in a continent which is challenged a lot,” Thomas said.

“The speed and simplicity is a huge challenge also for Danish companies. 

“It takes too long and is too complicated which means that Danish companies will look for doing their investments outside of Europe and I think that is very challenging.”

The Big Questionis a series from Euronews Business where we sit down with industry leaders and experts to discuss some of the most important topics on today’s agenda.

Watch the video above for the full conversation on Denmark’s competitiveness.

Video editor • Nicolas Coquet