Labour market and employment

The structure of the labour market is crucial to the durability of the welfare state. The labour market plays a key role in enabling individuals to provide for themselves and their families, and thus to be independent of social welfare. Moreover, the labour market is essential in securing a taxation basis with the capacity to finance the expenditure of the welfare state on transfer incomes and services.


The framework supporting the labour market encompasses a great deal of legislation and a large number of institutions. These include institutions centred on pay negotiation and employment conditions, as well as legislation on benefits, activation and the like. In broad terms, the Danish labour market is often referred to as a variation on the “flexicurity model”. This is a model distinguished by great flexibility for employers with regard to appointment and dismissal, balanced by the presence of a “safety net” for employees in the form of transfer incomes in the event of unemployment.



Over and above the general labour market framework, including the various elements of the flexicurity model, the composition of the supply of – and demand for – labour also plays a crucial role in defining how well the labour market succeeds in ensuring low unemployment combined with the appropriate match between workers and companies. One key area of change in the composition of the supply of labour in recent decades has been the fact that an increasing proportion of the workforce comprises people who have migrated to Denmark. Another significant change is that the composition of education has altered, trending towards a larger share of employees having completed a course of tertiary education, with fewer skilled/unskilled workers. A third change is the rising proportion of elderly people on the labour market.


We at the ROCKWOOL Foundation broadly devote our attention to the significance of the labour market institutions and legislation in relation to securing employment. We also focus heavily on the challenges that may exist as regards providing employment for special groups on the labour market. The reason for this is that the importance of gaining a foothold on the labour market is not simply a question of public finances – it is also of great significance to the lives of individuals and the opportunities open to them to achieve their potential.