5 ways Denmark is preparing for the future of work

How do you prepare a traditional welfare state, with its institutionalized and tax-funded benefits, for the future of work? How do you maintain a healthy labour market, a level playing field, collective agreements and strong social dialogue, without killing the potential of new technology and innovation? Denmark has taken important steps to accommodate its changing labour landscape.

One of the game-changing consequences of the internet has been the birth of e-commerce. Consumers and companies have embraced buying and selling products online for mutual benefit, and traditional business models have been disrupted by new ones. For companies in retail with the ability to adapt, e-commerce has been a vehicle for growth. For law-makers, e-commerce has challenged legislation concerning taxation and consumer rights.

The transition from traditional retail has, to a large extent, been successful. Today, a new challenge has arrived. Digital platforms are facilitating physical labour, creating a fast, flexible connection between supply and demand for work. Once again, legislators are faced with opportunities and challenges.

With a growing number of platform workers, a key issue is ensuring their labour market rights – both statutory rights concerning work safety, health and holiday allowances, and rights settled in collective agreements, such as wages and working conditions.

In Denmark, where wages are settled by social partners, the government plays a crucial role by ensuring a level playing field for competition between traditional workers and platform workers. Yet legislators depend on social partners to engage in dialogue and enter into agreements.

Another critical issue is ensuring that current legislation does not stand in the way of potential benefits. Platform work provides flexible alternatives to traditional employment for people who have limited abilities, or who want to plan their own working hours, or who need a stepping stone to more permanent employment.

In these cases, platform work can provide a gateway from unemployment and a fast track to the labour market. Yet legislation concerning social benefits and unemployment benefits must acknowledge platform work as work, and income from platform work as having the same value as income from traditional employment.

To handle the impact of technological change on the labour market, the Danish government established the Disruption Council in 2017. The council is headed by the Prime Minister, and comprises eight ministers and 30 members, including CEOs, social partners, researchers and others.

Discussion has centred around how public policy can embrace new forms of work while maintaining a well-functioning labour market. It has resulted in the following five steps to support innovation and the competitiveness of new technologies.

1. Adjusting the unemployment benefits system

Regulation concerning unemployment benefits for self-employed and atypical employees, such as platform workers, will be harmonized with rules for ordinary employees. This gives everyone, regardless of their form of employment, a better safety net and greater security if they lose their income. All types of employment count, meaning that a person who is both self-employed and an employee will be able to use both types of employment to earn unemployment benefits.

The new system will to a larger extent be based on objective, register-based and digital solutions that provide greater transparency for everyone. In addition, there will be more similarities between the unemployment benefits system and the tax system. Under the new agreement, all taxable income can be used to earn unemployment benefits.

2. Platform work is recognized as work with regard to social benefits

Not only will income from platform work be considered as equal to income from traditional work in relation to unemployment benefits, platform work will be made equal to traditional work when it comes to maintaining rights to social benefits.

Until now, a substantial barrier for unemployed people to engage in the platform economy has been uncertainty about the current legislation – specifically on how income from platforms will affect their right to unemployment benefits, offsetting and vesting rules. To strengthen transparency, the Ministry of Employment has made clear to unemployment insurance funds and municipal job centres that platform work is to be acknowledged as work. This removes the red tape blocking unemployed recipients of social benefits from using platform work as a stepping stone to enter the labour market.

3. The first collective agreement with a platform company

In April 2018, the platform Hilfr entered a historic, collective agreement with the union 3F. This was the first agreement between a union and a platform company in Denmark. It ensures the platform’s users have employee rights, including a pension and a holiday allowance. The contract acts as a bridge between the strong tradition of collective agreements in Denmark and the new digital platforms, providing platform workers with the potential to unionize.

4. Boosting the future potential of the sharing and platform economies

A short while ago, the government entered into a political agreement to strengthen the growth potential of the platform economy. It requires checking whether regulation concerning platform companies needs clarifying or adjusting, and launching a dedicated web platform to provide the platform industry with one point for answers concerning public regulation. The agreement also includes the establishment of a council with social partners and industry to advise the Minister for Business on developments regarding the sharing and platform economies.

Furthermore, it eases and clarifies tax terms for renting out cottages, full-year homes, cars and boats through a platform or rental agency. The tax authorities have also entered into cooperation with Airbnb, to ensure a clear framework for short-term rentals and automatic reporting of rental income to the Danish tax authorities.

5. Upskilling the workforce to meet changing conditions

This is crucial in preparing for the future of work in a broader context. The Danish government has entered into a tripartite agreement with social partners on vocational training and education. It is investing in future competencies with more flexible solutions, in easier access to education and training, and in strong lifelong learning possibilities. The agreement contains several initiatives targeting companies, workers’ incentives and opportunities to begin training and upskilling. One of these is a “transition fund” which offers free training to both skilled and low-skilled people.

Similar to how we have grown accustomed to e-commerce over the years, adapting to new conditions does not happen overnight. However, these initiatives are important steps towards creating an innovative ecosystem that drives healthy competition within the framework of the Danish Flexicurity model, ensuring a sound labour market with a proper social safety net.