3 - Political Economy of the Inclusive Labour Market Revisited: Welfare through Work in Denmark

Summary

Introduction

This chapter draws attention to the wider political economy of the labour market, and in particular provides a framework for a deeper, nuanced understanding of social processes and institutional relations in and through which employer engagement is framed. Our perspective takes on board an analytical framework that views a welfare regime as embodying historically formed class (struggle) relations, in which policies are contingent upon the balance of social forces and specific forms of political struggle. Struggles tend to be centred around both the redistribution of income and access to power resources and representation structures. In relation to representation we refer to both elected local and national government, and systems of political exchange such as social dialogue and corporatist networks (Jessop, 2016).

Esping-Andersen’s (1990) concept of welfare regimes as systems of power and negotiation between key interests and actors helps us understand the social and political dynamics of labour regulation. He argued that the redistributive and potentially inclusive dimension of a welfare regime is contingent on labour movement power and influence. The historic development of industrial capitalism in the Scandinavian countries, including Denmark, involved the formation of a highly developed trade union movement and systems of collective bargaining. In earlier work (Etherington and Jones, 2004a) we argued that ‘welfare through work’ in Denmark is shaped largely by the industrial relations framework and the key role that trade unions (TUs), labour movement organizations and the public sector play in labour market policy.

This chapter suggests that four key elements of the Danish system are crucial in shaping employment and skills. The first is that high union density and membership make TUs important actors. In Denmark, the TUs manage unemployment insurance (UI) benefits (the Ghent system), which are important in connecting trade unions to unemployment policies. All these elements combined are crucial to employer engagement in labour market policy. Second, and linked to this, is the TUs’ active involvement in social dialogue and bargaining around employment policy and relatedly, third, a developed system of collective agreements where unions negotiate changes and improvements to welfare and skills policies (Valizade et al, 2022).