Job lock vs. flexicurity. What would you prefer?

I rarely go into politics or public policy on this blog, but I’m going to make an exeption today.

I’ve been following the US debate on health care pretty closely and the biggest issue currently in play is whether or not the US government should offer health care in addition to the private insurance companies.

In the current US system, where there is no so-called public option, many people have health insurance through their workplace and this system has one serious often overlooked drawback, namely job lock:

Millions of Americans are in what’s called “job lock.” They can’t leave their jobs because they feel they can’t get the same health insurance benefits on their own or at the next job.

A new poll by NPR News, the Kaiser Family Foundation, and Harvard’s Kennedy School of Government shows that one out of four Americans has experienced job lock, in the last couple of years, or someone in their immediate family has. That’s despite legislation enacted six years ago to deal with the problem

In other words, you may hate your job but if you quit you and your family no longer have health insurance. This article looks at job lock in detail.

In Denmark on the other hand, we have pretty much the exact opposite: Health care is public and paid for through our taxes. In addition, Denmark has a unique labor market approach called flexicurity.

Flexicurity means that on one hand it’s easy for companies to fire employees but on the other hand, you get very generous unemployment benefits, ie. 90% of your salary.

The drawback to this system is obvious: Very high taxes.

The advantages are many, though. First of all, the Danish economy has been doing very well. Even now, during the financial crisis, we’re doing better than most of Europe and unemployment is still below 5%.

From a standpoint of happiness at work, there is no doubt that the Danish system is best. When it’s easy and safe to quit a job there is much less risk in leaving a job you hate. Even if you choose not to quit, just knowing that you could makes things more bearable. Hating you job AND knowing that you can’t quit makes everything worse.

Even the fact that it’s easy to fire people increases happiness at work. Seriously! It means that companies can fire employees who don’t perform well or who don’t fit in.

In countries with very strong labour protection laws, it can be almost impossible to fire anyone – meaning that underperforming employees stay in their jobs and everyone else has to pick up the slack. Also, remember that unhappiness at work is highly contagious, so one unhappy employee can easily drag down the whole department.

So in my opinion (and I am NOT an economist, so take this with a grain of salt) the flexicurity model makes Danes happier at work – and as I’ve previously mentioned happy workplaces are more productive, innovative and profitable.

The American model on the other hand, makes people less happy at work and thus decreases productivity.

Your take

What do you think? Have you ever experienced job lock? What advantages or drawbacks can you see to the US or the Danish model?

Comments

9 responses to “Job lock vs. flexicurity. What would you prefer?”

July 13, 2009

Prescott Perez-Fox

Alex, you’ve pretty much hit it on the head. The US system locks people in to terrible jobs, prevents them from moving to new cities, starting small businesses, chasing their dreams, and being happy at work.

Perhaps the problem wouldn’t be so dramatic if health care costs didn’t rise some 400% in the last ten years
July 13, 2009

Frode H

Here in Norway it’s pretty much like in Denmark, but it is harder to fire someone.

I have a son with a severe diagnose that demand medicine and special attention. The cost of it, for me is less than one time to the pub per month (and I do not drink a lot…). We would not be able to make it in USA unless we had good jobs with great benefits. And if I on top of a demanding domestic situation should hate my job, and be stuck, well, I would probably end up a loony toon in no time at all. I do not know the numbers, but dreading to go to work generate a lot of sick days, and people at my job, that are often sick are often unhappy at work.

Alex, you must have a huge market in creating happy workplaces in USA :)
July 14, 2009

Alexander

Prescott: Glad to hear you agree – I had no idea health insurance cost had risen so steeply of late.

Frode: It’s good to be Scandinavian, ain’t it?
July 14, 2009

Parker

Great article, but it leaves out one thing. US companies increasingly are shifting their health care coverage to so-called HSA’s (health savings accounts). In a nutshell this is nothing more than catastrophic health coverage, everything else coming out of the employee’s pocket 100% until a specific ceiling is passed ($5K – $10K). Some employers do offer contributing funds (mine), others do not (my bride’s). So if your budget is tight to begin with, and have reasonable health, that limit never gets reached and you’re screwed. Basically, it’s getting much tougher to find new employment with real health benefits anymore.
If I could convince my bride to relocate, I’d have her brush up on her Danish. :)
July 15, 2009

peter

alexander: the 90% unemployment benefit is only for (some) people with (private) insurance – and thus has little (nothing) to do with taxes.

if you don’t have insurance (usually called “a-kasse”) you are only eligible to receive “kontanthj
July 15, 2009

Steve

I am in that situation. I am 50 and have severe Rheumatoid arthritis. The medicine I take costs $1500 a month. With the company’s insurance plan, I pay only $15 a month. I cannot leave this job for the risk of not having the insurance.
August 11, 2009

Janice

So interesting to hear opinions from people in other countries. Also, employer-based health insurance excludes a lot of people who work part-time, are contractors or self-employed, and who work for small businesses that aren’t required (and often can’t afford) to provide health insurance for their employees. Many of these people do not currently qualify for Medicaid, and buying private insurance is not only expensive (it is upwards of $12,000 a year for both my parents, who are self-employed and went without for years when I was growing up b/c we could not afford it) but can also be very difficult just to obtain if you have certain health conditions, even if you can afford to pay the higher premiums.

I’m not yet sure how I feel about the single-payer system, not knowing enough about how they work, but I am strongly in favour of a public option to at least provide an affordable option to those currently without access to health insurance and regular preventative care, not to mention competition for some private insurers. If private insurers truly offer such great service and are the best way of providing Americans with health care, why are they so afraid to prove it?
August 20, 2009

Lucia

The system encouraging people to change the job if they are not happy with the old one sounds amazing. But I would love to know if it really works for different job categories.
For those who are currently unhappy with a job and are looking for a new one there are some offers:http://www.denmark.net/jobs
March 15, 2010

catharina sellin

The high benefits and training provision that this system requires also require a higher burden of taxation upon the higher earning members of the society. Denmark currently has the highest total taxation of any country in the world, but the Danes have been consistently ranked as the happiest nation on Earth. Besides, Denmark