Work and the Welfare State: Street-Level Organizations and Workfare Politics

Chapter 7 Active Labor Market Reform in Denmark: The Role of Governance in Policy Change

7 Active Labor-Market Reform in Denmark The Role of Governance in Policy Change Flemming Larsen D enmark is widely regarded as a ‘‘model’’ example of the Nordic welfare state. Its highly developed integration of labor-market and social welfare arrangements allows for both social protection and labor-market flexibility. Denmark is arguably distinctive in the ways in which its labor-market policies are linked to a broader set of welfare state arrangements, generally referred to as the ‘‘flexicurity state.’’ Although it’s difficult to describe the flexicurity concept in brief, generally, it refers to arrangements through which the state underwrites some of the risks associated with labor-market mobility and job instability while continually refreshing the human capital of its workforce. Denmark has received considerable international attention for its remarkable record of social and economic performance, often ascribed to the Danish flexicurity model (Bredgaard and Larsen 2010; Madsen 2008a; Bredgaard, Larsen, and Madsen 2006). Active labor-market policy—or work activation—has been part of these flexicurity arrangements for nearly two decades. However, in the early 2000s, Denmark began modifying its activation program, shifting the emphasis from human-capital development toward a workfare or work-first model. This departure from the traditional Danish approach to unemployment constitutes a signi ficant change in flexicurity arrangements, reallocating more of the costs of labor flexibility and job insecurity from government to individuals. Yet this shift has not been easily or fully achieved, in part because it runs contrary to wellestablished principles of social cohesion that are deeply rooted in Danish society and, arguably, the hallmark of modern Danish politics. 103 104 flemming larsen This chapter examines the Danish government’s efforts to revise its active labor-market policies. It recognizes two fronts in the political project to advance a work-first approach to activation: changes made through formal policy reforms and changes advanced, less visibly, through governance reforms. Although governance reform is often presented as apolitical and neutral, it is politically consequential when it changes who has political control of implementation processes and how policy is implemented at the street level. My approach builds on a main theme of this volume, focusing on the strategic importance of governance reforms to the activation policy project (see chaps. 1 and 2). While some aspects of the Danish experience are unique to this country, its path to reform also has similarities to those of other European countries. This analysis will consider common trends as well as distinctive features of the Danish reform experience. This chapter begins by reviewing the development of active labor-market policies in Denmark, placing them in the context of European developments more generally. It next moves from the first wave of policy reform to the second wave of governance reform, examining governance as a strategy for indirectly redefining Denmark’s activation program to emphasize work first and social discipline. In analyzing the Danish case, I look first at the narrative offered by government officials to justify governance reforms. Second, I explore key governance changes and how they have altered the organizational structure of influence and incentives. Third, I draw on my empirical research in Danish municipalities to examine ways in which governance reforms have reached down to the municipal level and into street-level practice. I conclude by offering an assessment of these developments and reflections on the still-unfolding politics of Danish activation reform. The Shift toward Active Labor-Market Policy in Europe Active labor-market and workfare policies were widely advocated by the OECD and European Union in the 1990s (OECD 1994; European Commission 1993). During the 1990s and early 2000s, formal policy reforms swept across the OECD countries, advancing a transformation from a ‘‘passive’’ to an ‘‘active’’ approach to labor-market and social policies.1 Typically, income support through social assistance reflected a passive approach; job preparation and placement reflected an active approach. Activation reforms generally built on the perception that the ‘‘problem’’ to be addressed was a deficit within the unemployed : lack of either motivation or incentive to work. However, the specific elements have varied across OECD countries, in part reflecting important differences in national political, institutional, and cultural contexts (Barbier 2004). For many European countries, traditional policies had active labor-market reform in denmark 105 aimed at enhancing work competencies and skills and providing income support. However, this approach has been replaced by policies targeting work enforcement and emphasizing...