Since the 1970s action to combat youth unemployment has been a central element of Danish labour market policy. A number of the instruments which were originally used in the efforts to combat unemployment continue to play an important role. Vocational guidance, education, job training with wage subsidies and enterprise allowances are some of the instruments which have always been used in the connection.
In the early 1990s the existing system of measures was widely criticised, partly because it was a highly regulated and inflexible system and partly because it was difficult to prove that the results achieved justified the resources spent. In spite of increasing resources, unemployment continued to grow. This was the background to the labour market reform was adopted by the Folketing (the Danish Parliament) in June 1993 which came into operation on 1 January 1994. The central elements of the reform were: the Act on an active labour market policy, the Act on leave schemes and the Act on activation at local level.
There are, in particular, two features which characterise the present initiatives and distinguish them from the measures deployed in the 1970s and the 1980s. The first is the principle that rights must be accompanied by duties. The second is the way in which the measures are organised. It has now, to a much higher degree, become the responsibility of regional and local authorities to decide which measures should be taken at the regional and local level. The leave schemes open up new possibilities for a better reconciliation of working life and family life and have provided the basis for job rotation schemes which are today one of the best ways in which to get the unemployed back into ordinary employment.
Between 1993 and 1995 unemployment fell by more than one third, or by 100,000 persons, and long-term unemployment declined from about 165,000 to about 110,000. During the same period more than 50,000 new jobs were created in the private sector alone. In the light of this positive development, in December 1995 a number of adjustments to the measures to combat unemployment were introduced with a view to making them more specifically targeted on getting the unemployment - including the long-term unemployment - back into ordinary employment and ensuring that firms can recruit the staff they need.
The concrete measures are targeted on two different groups of unemployed persons. The first group comprises unemployed persons who are insured against unemployment and who qualify for unemployment benefits. Measures in relation to this group of unemployed persons are regulated by the Act on an active labour market policy, which falls under the competence of the Ministry of Labour. The second group comprises unemployed persons who are either not insured against unemployment or who do not satisfy the conditions for qualifying for unemployment benefits, but who are entitled to social assistance. The provisions relating to this group are laid down in the Act on activation at local level, which falls under the competence of the Ministry for Social Affairs.
3.0.1.1. The Act on an active labour market policy
The aim of the Act on an active labour market policy is to contribute to ensuring a well-functioning labour market through an active labour market policy responding to the need of job seekers and persons who want to undergo education/training (both unemployed persons and employed persons who want to find a new job) as well as private and public employers.
3.0.1.2. Measures in relation to unemployed persons qualifying for unemployment benefits
Measures in relation to unemployed persons qualifying for unemployment benefits are a central element of active labour market policy. There are different measures for different target groups.
3.0.1.3. Labour market policy instruments
The following instruments can be used, either separately or in a combination:
- Placement activities in connection with ordinary (non-subsidised) work. The overall aim of the measures in relation to the unemployed is to bring them back into the ordinary labour market in a non-subsidised job.
- Information and guidance. It is of decisive importance that the unemployed are informed about their training and employment opportunities on the labour market.
- The drawing up of a personal action plan which forms the basis for measures in relation to the individual unemployed person.
- Job training, which may be offered with both public and private employers. Pay and other working conditions must be those laid down by collective agreement or those normally applying to the type of work concerned. However, the wage in connection with job training in the private sector may not amount to more than DKK 84,45 per hour (April 1996). A wage subsidy of about 45 DKK per hour is paid to employers who recruit unemployed persons in job training. If subsidy periods total more than 6 months, a private employer is obliged to subsequently employ the unemployed person without a subsidy or offer him/her training.
- Individual job training for unemployed persons who cannot be placed in job training at ordinary work places. The wage (called a project allowance) may be lower than in job training and is subject to agreement with the organisations who have the right to negotiate in the occupational field concerned. The subsidy to the employer may - unlike in ordinary job training - exceed 45 DKK per hour and the subsidy period may be longer than one year. Thus in employment in individual job training it is possible to take greater account of individual characteristics as regards the qualifications of the individual unemployed person.
- So-called "pool jobs" are jobs in the public sector of up to three years' duration for persons who have been unemployed for a total period of two years within the preceding three years. The hourly pay is the same as with public job training. The main aim of the pool job scheme is to create more permanent jobs in priority social fields in which demand remains unmet or in which there is a need for a higher level of services. The jobs can be set up by public employers in the fields of environmental protection, nature conservation, culture, public transport, housing, education, the labour market and the health and care sector.
- Education/training, either in the ordinary education/training system or as an element of special tailor-made programmes. During participation in such education the unemployed person may receive a training allowance which - for unemployed persons above the age of 25 years - corresponds to the amount of unemployment of benefit that the person concerned would otherwise have been entitled to (and for unemployed persons under the age of 25 years to 50% of the maximum rate of unemployment benefit). No training allowance is paid if the young persons qualifies for State Educational Support (SU) or the education/training programme is covered by this support system.
- Enterprise allowance to unemployed persons qualifying for unemployment benefits who wish to set up and run their own business. The enterprise allowance corresponds to 50% of the maximum rate of unemployment benefit and is payable for up to 2 ½ years.
It is a condition that the employment of unemployed persons in ordinary or individual job training or in pool jobs results in a net increase in the number of staff employed in the enterprise and that recruitment does not lead to unfair competition in relation to private enterprises.
3.0.1.4. Measures in support of persons under the age of 25 years who qualify for unemployment benefits
Persons under the age of 25 years who have not completed a formal education or training programme have a right and duty to at least 18 months' education/training after a total period of six months' unemployment.
3.0.1.5. Initiatives in relation to other persons receiving unemployment benefits
Other persons receiving unemployment benefits, including young persons who have completed special programmes for young persons or who have undergone formal education or training, have a right to a five-year unemployment benefit period, which is divided into a support period of two years and an activation period of three years.* During the first two years - the support period - the unemployed person has a higher degree of responsibility for his/her own situation. The aim is to bring the unemployed person back into work as quickly as possible. If the unemployed person does not get a job during this two-year support period, he/she enters the activation period lasting three years. Generally, unemployed persons in this group have greater difficulties in getting back into ordinary employment and therefore they have a right to and a duty to accept offers during the entire period. If the unemployed person has not obtained a job after this total period of five years, it is the task of the local authorities to ensure that the person concerned is offered activation measures under the Act on activation at local level.
3.0.1.6. The leave schemes
The leave schemes - offering a leave benefit - were introduced to the Danish labour market in 1992 and have since developed into a central element of Danish labour market policy. There are several reasons for this:
- Parental leave is an important step towards creating a better interaction between working life and family life.
- Training leave is an important instrument to ensure the continuous up-grading of the qualifications and skills of the labour force.
- The job rotation schemes made possible by the leave schemes have turned out to be one of the best ways to reintegrate the unemployed into the labour market.
Since the leave schemes were introduced in 1992 they have been adjusted several times, most recently in December 1995. The central thrust of these changes was that unemployed persons and employees now have the same right to training leave. Both groups now have the option of taking one year's training leave within a five-year period. Another change is that periods of training leave taken by unemployed persons are now included in the total unemployment benefit period. Furthermore, unemployed persons and employees now have the same rights to parental leave, as both groups have the right to 26 weeks' leave for children under the age of one year and 134 weeks' leave for children in the age group one to eight years.
By the end of 1995 a total number of about 70,000 persons were on leave: about 34,000 were on training leave, about 33,000 persons on parental leave and about 3,000 on sabbatical leave.
3.0.1.6.1. Training leave
Training leave may be given for periods of from one week to one year for approved training courses. However, as a rule leave may not be given in connection with participation in long-duration medium-level and higher education programmes.
The target group consists of unemployed persons, persons in employment and self-employed persons above the age of 25 years.
Conditions: It is a condition for obtaining leave that the person concerned is a member of an unemployment insurance fund and qualifies for unemployment benefit. Persons in employment and self-employed persons must also have worked for three years within the last five years. As regards employees, leave is subject to an agreement with the employer. Unemployed persons on training leave have a duty to accept a job offered to them.
Leave benefit: In connection with training leave a leave benefit is paid which amounts to (up to) 100% of the maximum rate of unemployment benefit (DKK 2,615 per week as per 1 January 1996).
3.0.1.6.2. Parental leave
Parental leave may be granted for consecutive periods of 13 to 52 weeks.
The target group is persons in employment, self-employed persons and unemployed persons with children in the age group 0-8 years. Both parents may (together or separately) obtain leave for up to 52 weeks for each of their children between 0-8 years.
Conditions: For employees and self-employed persons it is a condition that the person concerned qualifies for cash benefits in the event of sickness and maternity. For unemployed persons it is a condition that they qualify for unemployment benefits or are receiving social assistance. Employees and unemployed persons have a right to leave for 13 weeks (26 weeks if the child is under one year old). The remaining period is subject to agreement with the employer or the public employment service.
Leave benefit: During the period of parental leave a leave benefit is paid which corresponds to (up to) 70% of the maximum rate of unemployment benefit. As from 1 April 1997 this benefit level will be reduced to 60%.
3.0.1.6.3. Sabbatical leave
Sabbatical leave (for any purpose) may be granted for periods of 13 to 52 weeks.
The target group is employed persons above 25 years of age.
Conditions: The leave must be agreed with the employer. The person concerned must be a member of an unemployment insurance fund and qualify for unemployment benefits and have been employed for three years within the last five years. Finally, it is a condition that the vacancy is filled by an unemployed person who has been unemployed for at least one year.
Leave benefit: During sabbatical leave a leave benefit is paid which amounts to (up to) 70% of the maximum rate of unemployment benefit. As from 1 April 1997 the benefit level will be reduced to 60%.
The sabbatical leave scheme will expire at the and of March 1999.
3.0.1.6.4. Supplement to leave benefits
All the leave benefits may be supplemented by the employer. The benefit in connection with parental leave may also be supplemented by a local authority grant of up to DKK 35,000. The leave benefit is paid to the employer if the employee receives his/her normal wage or salary during the period of leave.
3.0.1.6.5. Administration
The leave schemes are administered by the public employment service which also offers its assistance in connection with the establishment of job rotation schemes. As mentioned earlier, the Act on leave schemes should also be seen in the context of the Act on active labour market policy. The public employment service is to ensure that the leave schemes has the best possible employment effects by establishing job rotation schemes. This can be done by offering guidance to employed persons about the possibilities for obtaining leave for advanced and continued training and by counselling and, in some cases, co-financing of the training of the replacement workers.
3.0.1.6.6. Financing
About DKK 6.8 billion have been earmarked to finance the direct cost of the schemes in 1996. Seen as a whole, the schemes will be cost-neutral in relation to the public budgets, as the costs of the leave schemes are off-set by, among other things, reduced expenditure on unemployment benefits.
3.0.1.7. The voluntary early retirement pay scheme
The voluntary early retirement pay scheme (VERPS) took effect on 1 January 1973 as a labour market policy measure.
The scheme covers people who have reached the age of sixty and are members of an unemployment insurance fund, provided that:
- they have been members of an unemployment insurance fund for at least twenty years in the last 25 years; however, people who have reached the age of 40 before 31 March 1992 qualify if they have been members since that date and have been members for 10 years within the last 15 years;
- they satisfy the conditions for entitlement to unemployment benefits (daily cash benefits) in case of unemployment; and
- they are resident in Denmark.
Members who are receiving benefits under the social pension acts will not be entitled to the VERP allowance.
This scheme means that it is possible for both wage and salary earners as well as self employed persons to obtain VERP when they reach the age of sixty, as membership of an unemployment insurance fund is open to any employed person.
When joining the scheme the member will receive VERP equalling the amount which the member would have been entitled to if he had been unemployed. The daily cash benefit totals 90% of the previous earnings of the insured, but not more than approximately DKK 136,730 per annum (1997 rate). The maximum rate is adjusted every year on 1 July.
This amount of VERP will be paid for as long as the person concerned would have been entitled to receive daily cash benefits. For full-time insured members over 60 years of age the pay rate can amount to a maximum of approximately DKK 136,730 per annum for a maximum of 2½ years. For the rest of the VERP period the rate may amount to not more than 80% of this (approx. DKK 112,060 per annum). For the same periods the VERP for part-time insured members may constitute a maximum of 2/3 of this amount.
According to the provisions of the Act, any person who receives VERP is allowed to be in employment for a total of not more than 200 hours a year. If the total of 200 hours is exceeded, the member must withdraw from the VERP scheme. The income received for the 200 hours of work is not deducted from the VERP.
Persons who have joined the VERP scheme are not allowed to engage in activities as self-employed persons.
Certain kinds of pensions are deducted from the VERP. However, other kinds of pensions are not usually deducted.
The VERP may not be exported; however, the right to receive the VERP is maintained during stays abroad totalling not more than three months annually.
A member who leaves the voluntary early retirement pay scheme in order to return to the labour market may rejoin the scheme once. If a person moves the voluntary early retirement pay scheme to join the part-time early retirement pay scheme, he may later rejoin the voluntary early retirement pay scheme. If a person leaves the voluntary early retirement pay scheme for other reasons it will not be possible to rejoin it.
3.0.1.8. The part-time early retirement pay scheme
Gradual withdrawal from the labour market is an issue which has been discussed for years. In the spring of 1994 all parties of the Folketing (the Danish Parliament) concluded an agreement on introduction of part-time voluntary early retirement for elderly employees who partly retire from the labour market and who work reduced hours.
The part-time early retirement scheme took effect on 1 January 199 5.
In order to qualify for part-time early retirement pay, the person must be between 60 and 66 years of age and must satisfy the conditions for joining the ordinary early retirement pay scheme. This means that he or she must be entitled to unemployment benefits and must have been a member of an unemployment insurance fund for 20 years within the last 25 years. However, persons who reached the age of 40 years before 31 March 1992 qualify if they have been members since that date and for at least 10 years within the last 15 years.
The employees concerned must substantiate that the working time has been reduced by at least 1/4, however, not to less than 12 hours per week on average.
Self-employed persons must substantiate that their working time as self-employed has been reduced to 18½ hour per week.
Unemployed persons and persons who are on early retirement pay and obtain part-time work may join the part-time early retirement pay scheme.
Part-time early retirement pay is paid at a fixed rate of about 58 DKK for each hour by which the working time is reduced.
It is the unemployment insurance funds which administer the scheme and pay out part-time early retirement pay (like the ordinary early retirement pay scheme).
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