Fighting Unemployment: The Limits of Free Market Orthodoxy

By David R. Howell | Go to book overview

9
Labor Market Policy, Flexibility,
and Employment Performance:
Denmark and Sweden in the 1990s

PETER PLOUGMANN


9.1 INTRODUCTION

PETER PLOUGMANN

The comparative employment performance of Denmark and Sweden in the 1990s has been widely viewed as telling a tale of contrast between success and failure within the Scandinavian welfare state model. Denmark's success at “curbing structural unemployment and improving overall labor market conditions” has been attributed by the Organization for Economic Cooperation and Development (OECD) to the fact that it is “amongst the most determined in implementing the Jobs Strategy” (OECD 1999: 54). Similarly, the International Monetary Fund (IMF) celebrates Denmark's procompetitive “reform efforts in the early 1990's” (IMF 1999: 113). On the other hand, Sweden has exemplified the collapse of the Scandinavian welfare state model, particularly for proponents of procompetitive, neoliberal economic policy.1 In a prominent survey of the state of the Swedish model in the mid-1990s, Assar Lindbeck (1997: 1315), concluded by asking whether, with 65% of the electorate receiving nearly all their income from the public sector (as employees or through redistribution), Sweden had hit “a point of no return.”

A closer look, however, reveals a more complex picture. Sweden has actually done better than its popular reputation suggests, and the employment performance of Denmark might be viewed as overrated, particularly if employment growth, rather than unemployment, is the main criterion. But the most telling fact is that both have dramatically improved their employment performance while maintaining a strong commitment to a universalistic welfare state with high levels of social protection. Indeed,

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