Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Towards Common Principles of Flexicurity: More and better jobs through flexibility and security {SEC(2007) 861} {SEC(2007) 862}
Date: 2007-06-27
Institutions: European Commission
Subjects: EU employment policy, EU financing, job mobility, labour flexibility, labour relations, organisation of work, social security, work contract

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.6.2007 
COM(2007) 359 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Towards Common Principles of Flexicurity: 

More and better jobs through flexibility and security 

{SEC(2007) 861} 
{SEC(2007) 862} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

The challenges and opportunities of globalisation and change.................................... 3 

An integrated flexicurity approach............................................................................... 4 

Flexicurity policies: the experience of Member States ................................................ 7 

Flexicurity and the social dialogue .............................................................................. 8 

Developing common principles of flexicurity ............................................................. 8 

Flexicurity pathways .................................................................................................. 10 

The financial dimension of flexicurity....................................................................... 10 

Next steps: Flexicurity and the Lisbon Strategy for Growth and Jobs ...................... 12 

ANNEX I FLEXICURITY PATHWAYS ............................................................................... 13 

ANNEX II EXAMPLES OF FLEXICURITY......................................................................... 19 

ANNEX III BACKGROUND INDICATORS RELEVANT FOR FLEXICURITY .............. 21 

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1. 

THE CHALLENGES AND OPPORTUNITIES OF GLOBALISATION AND CHANGE 

The  way  European  citizens  live  and  work  is  rapidly  changing1.  Four  main  reasons 
the 
can  be  highlighted:  European  and 
development of new technologies, particularly in the information and communication 
areas;  the  demographic  ageing  of  European  societies,  together  with  still  relatively 
low average employment rates and high long-term unemployment, which put at risk 
the  sustainability  of  social  protection  systems;  and  the  development  of  segmented 
labour  markets  in  many  countries2  where  both  relatively  protected  and  unprotected 
workers coexist ("insiders" and "outsiders").  

international  economic 

integration; 

Overall,  globalisation  is  beneficial  for  growth  and  employment,  but  the  change  it 
brings requires rapid responses from enterprises and workers. Employment has been 
increasing  in  the  EU  and  unemployment  is  declining  steadily.  There  are  positive 
developments to build upon, even if there are still 17 million unemployed in the EU 
(2007) and European economies still need restructuring. Adaptation requires a more 
flexible labour market combined with levels of security that address simultaneously 
the  new  needs  of  employers  and  employees.  Europe  must  create  more  and  better 
jobs,  to  manage  change  and  new  social  risks.  It  must  reduce  segmented  labour 
markets and precarious jobs, and promote sustained integration and accumulation of 
skills.  Women,  the  young  and  migrants  are  already  over-represented  among  labour 
market outsiders, and older workers face a number of difficulties keeping or finding 
a job3. Even those on open-ended contracts can feel threatened because, if they are 
made redundant, they face the same difficulties moving on to good quality jobs. 

In  order  to  achieve  the  Lisbon  objectives  of  more  and  better  jobs,  new  forms  of 
flexibility  and  security  are  needed,  for  individuals  and  companies  as  well  as  for 
Member  States  and  the  Union.  Individuals  increasingly  need  employment  security 
rather than job security, as fewer have the same job for life. Companies, especially 
SMEs, need to be able to adapt their workforce to changes in economic conditions. 
They  should  be  able  to  recruit  staff  with  a  better  skills  match,  who  will  be  more 
productive  and  adaptable  leading  to  greater  innovation  and  competitiveness. 
However, Europe is not adjusting as well as it could to the shocks that are imposed 
on its economy. This may aggravate concerns related to outsourcing and relocation4, 
and  increase  income  inequalities  and  gaps  between  skilled  and  unskilled  workers5. 
The  EU  and  its  Member  States  need  to  progress  further  towards  a  dynamic, 
successful  knowledge  economy,  spreading  the  benefits  of  prosperity  more  evenly 
across  society.  There  must  be  more  winners  from  the  process  of  change  and  more 
upwards mobility. More "have-nots" must be transformed into "haves". 

European  citizens  accept  the  need  for  adaptation  and  change.  76%  of  Europeans 
agree  that  lifetime  jobs  with  the  same  employer  are  a  thing  of  the  past.  76%  also 
consider that being able to change easily from one job to another is a useful asset to 

1 
2 
3 
4 
5 

BEPA (2007):Europe's Social Reality. 
European Commission, Employment in Europe 2004, Chapter 4. 
OECD (2006): Live longer, work longer. See also OECD (2007) Employment Outlook. 
BEPA (2006):EU competitiveness and industrial location. 
J. Hudson: Inequality and the Knowledge economy: Running or standstill? 

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find  a  job  nowadays.  72%  of  people  said  work  contracts  should  become  more 
flexible to encourage job creation. Finally, 88% of citizens said that regular training 
improves one's job opportunities6. 

The EU's overall policy response to the challenges and opportunities of globalisation 
is  the  renewed  Lisbon  Strategy  for  Growth  and  Jobs.  The  European  Council  called 
on  the  Member  States  "to  develop  more  systematically  in  the  National  Reform 
Programmes comprehensive policy strategies to improve the adaptability of workers 
and enterprises". The Commission, jointly with Member States and Social Partners, 
was asked to "explore the development of a set of common principles on flexicurity", 
as  a  useful  reference  in  achieving  more  open  and  responsive  labour  markets  and 
more productive workplaces7. 

2. 

AN INTEGRATED FLEXICURITY APPROACH 

The  rationale  for  an  integrated  flexicurity  approach  is  the  need  to  achieve  the 
objectives of the renewed Lisbon Strategy8, in particular more and better jobs, and at 
the same time to modernise the European social models. This requires policies that 
address  simultaneously  the  flexibility  of  labour  markets,  work  organisation  and 
labour relations, and security - employment security and social security.  

Flexicurity aims at ensuring that EU citizens can enjoy a high level of employment 
security, i.e. the possibility to easily find a job at every stage of active life and have a 
good prospect for career development in a quickly changing economic environment. 
It also aims at helping employees and employers alike to fully reap the opportunities 
presented  by  globalisation.  It  therefore  creates  a  situation  in  which  security  and 
flexibility can reinforce each other. 

Member States should  do more to make their labour markets employment-friendly: 
policy  measures  are  often  designed  and  implemented  in  a  piecemeal  way  that  does 
not address the broader problems in the labour market. Too frequently, policies aim 
to increase either flexibility for enterprises or security for workers; as a result, they 
neutralise or contradict each other. The economic upswing, with economic growth at 
a  6  year  high  and  7  million  new  jobs  being  created  between  2005  and  2008,  is  an 
opportunity for the Union and the Member States: now is the time to redouble efforts 
and undertake the reforms needed to fulfil the Union's commitments to growth and 
jobs, and to economic and social cohesion.  

What is flexicurity? 

Flexicurity  can  be  defined  as  an  integrated  strategy  to  enhance,  at  the  same  time, 
flexibility and security in the labour market.  

Flexibility,  on  the  one  hand,  is  about  successful  moves  ("transitions")  during  one’s 
life course: from school to work, from one job to another, between unemployment or 
inactivity and work, and from work to retirement. It is not limited to more freedom 

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8 

European Employment and Social Policy, Special Eurobarometer 261, October 2006. 
Presidency conclusions, European Council 23/24 March 2006 and 8 March 2007. 
Annual Progress Reports of January and December 2006: Guideline 21. 

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for companies to recruit or dismiss, and it does not imply that open-ended contracts 
are obsolete. It is about progress of workers into better jobs, "upward mobility" and 
optimal development of talent. Flexibility is also about flexible work organisations, 
capable  of  quickly  and  effectively  mastering  new  productive  needs  and  skills,  and 
about facilitating the combination of work and private  responsibilities. Security, on 
the  other  hand,  is  more  than  just  the  security  to  maintain  one's  job:  it  is  about 
equipping people with the skills that enable them to progress in their working lives, 
and  helping  them  find  new  employment.  It  is  also  about  adequate  unemployment 
benefits to facilitate transitions. Finally, it encompasses training opportunities for all 
workers, especially the low skilled and older workers.  

Thus,  enterprises  and  workers  can  both  benefit  from  flexibility  and  from  security, 
e.g.  from  better  work  organisation9,  from  the  upward  mobility  resulting  from 
increased skills, from investment in training that pay off for enterprises while helping 
workers adapt to and accept change. 

The components of flexicurity 

The  Commission  and  the  Member  States,  drawing  on  experience  and  analytical 
evidence,  have  reached  a  consensus  that  flexicurity  policies  can  be  designed  and 
implemented across four policy components: 

– 

– 

– 

Flexible  and  reliable  contractual  arrangements  (from  the  perspective  of  the 
employer  and  the  employee,  of  ''insiders''  and  ''outsiders'')  through  modern 
labour laws, collective agreements and work organisation; 

Comprehensive  lifelong  learning  (LLL)  strategies  to  ensure  the  continual 
adaptability and employability of workers, particularly the most vulnerable; 

Effective  active  labour  market  policies  (ALMP)  that  help  people  cope  with 
rapid change, reduce unemployment spells and ease transitions to new jobs; 

–  Modern  social  security  systems  that  provide  adequate  income  support, 
encourage  employment  and  facilitate  labour  market  mobility.  This  includes 
broad  coverage  of  social  protection  provisions  (unemployment  benefits, 
pensions  and  healthcare)  that  help  people  combine  work  with  private  and 
family responsibilities such as childcare. 

How flexicurity works 

Economic  analysis10  confirms  that  these  four  components  can  be  mutually 
supportive,  and  improve  employment  (total  as  well  as  for  women,  youth  and  older 
workers), at-risk-of-poverty rates, and human capital. 

Whereas  some  workers  experience  high  flexibility  and  low  security,  others  are  in 
contractual  arrangements  which  discourage  or  delay  transfers.  This  is  particularly 
the  case  with  strict  employment  protection  legislation  (EPL)  against  economic 

9 
10 

OECD (2006): Live longer, work longer. 
European Commission, Employment in Europe 2006, Chapter 2. 

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dismissal.  According  to  analytical  evidence11,  strict  EPL12  reduces  the  numbers  of 
dismissals  but  decreases  the  entry  rate  from  unemployment  into  work.  When 
deciding whether to recruit new staff, firms will take into account the likelihood that 
high  dismissal  costs  will  be  incurred  in  the  future.  This  is  especially  relevant  for 
small enterprises. Analysis13 also suggests that although the impact of strict EPL on 
total unemployment is limited, it can have a negative impact on those groups that are 
most likely to face problems of entry into the labour market, such as young people, 
women,  older  workers  and  the  long-term  unemployed.  Women,  for  example,  are 
more likely than men to move between working and not working, in particular when 
seeking to balance work and family life, and therefore are more affected by reduced 
recruitment caused by strict EPL. Strict EPL often encourages recourse to a range of 
temporary contracts with low protection - often held by women and young people – 
with limited progress into open-ended jobs14. The result is segmentation of the labour 
market which flexicurity seeks to address. EPL, of course, has also positive effects; 
in particular, it encourages enterprises to invest in training and promotes loyalty and 
higher productivity of employees.  

Comprehensive lifelong learning strategies and better investment in human resources 
are  necessary  to  respond  to  rapid  change  and  innovation.  This  is  an  increasingly 
crucial factor both for the competitiveness of firms and the long-term employability 
of  workers.  High  quality  initial  education,  broad  key  competences  and  continuous 
investments  in  skills  improve  enterprises'  opportunities  to  cope  with  economic 
change and workers' chances of staying employed or finding new employment. High 
participation in lifelong learning is positively associated with high employment and 
low  (long-term)  unemployment15.  However,  too  often  these  investments  are  only 
benefiting the highly skilled16: those with the greatest need for learning, such as low-
skilled workers, workers on temporary contracts, self-employed, and older workers, 
suffer most from underinvestment in training. Enterprises may be discouraged from 
investment in skills because trained staff may be recruited by other employers. Cost 
sharing, for example through funds at branch level, may partly address this problem. 
Inclusive lifelong learning strategies require the active involvement of governments, 
social partners, enterprises and individual workers.  

Modern social security systems offering adequate unemployment benefits, as well as 
active  labour  market  policies,  are  essential  components  providing  income  security 
and support during job changes. Good unemployment benefit systems are necessary 
to  offset  negative  income  consequences  during  job  transfers,  but  they  may  have  a 
negative  effect  on  the  intensity  of  job  search  activities  and  may  reduce  financial 
incentives to accept work. This can be largely offset by setting up efficient job search 
support  and  work  incentives17,  ensuring  a  balance  between  rights  and  obligations. 
Evidence  suggests  that  direct  job  search  assistance,  such  as  job  search  courses  and 

11 
12 
13 

14 
15 
16 
17 

OECD (2007) Employment Outlook, pages 69-72. 
The OECD assesses overall strictness of EPL. See for example OECD (2004): Employment Outlook. 
E.g. Algan and Cahuc (2004), Job Protection: the Macho Hypothesis, IZA DP no. 1192 and Nickell and 
Layard,  (1999),  Labour  Market  Institutions  and  Economic  Performance,  in:  Ashenfelter  and  Card 
(Eds.), Handbook of Labour Economics.  
European Commission, Employment in Europe, 2004. 
Employment in Europe 2006: p. 108. 
OECD (2005): Promoting Adult Learning. 
OECD (2005): From unemployment to work. 

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job  clubs,  rank  highly  among  the  most  effective  measures  to  help  the  unemployed 
find  a  job18.  Spending  on  active  labour  market  policies  is  associated  with  lower 
aggregate  unemployment19.  The  effectiveness  of  active  labour  market  policies  is 
positively related to less strict EPL20. 

A  successful  flexicurity  strategy  has  to  balance  carefully  the  income  insurance 
function  of  the  unemployment  benefit  system  with  an  appropriate  “activation” 
strategy  designed  to  facilitate  transitions  into  employment  and  boost  career 
development.  Empirical  evidence  suggests  that  workers  feel  better  protected  by 
adequate  unemployment  benefits  than  by  strict  protection  against  dismissal.  Active 
labour market policies, too, have a positive effect on the feeling of security among 
workers21.  When  asked  about  their  chances  of  finding  new  employment  if  made 
redundant,  respondents  react  very  differently  across  Europe.  For  example,  French 
workers, with high EPL, rate their chances as very low while Danish workers, with 
moderate  EPL,  rate  them  as  very  high22.  This  illustrates  that  good  unemployment 
benefits, effective active labour market policies and dynamic labour markets increase 
people's feeling of security.  

3. 

FLEXICURITY POLICIES: THE EXPERIENCE OF MEMBER STATES 

In  recent  years,  the  flexicurity  debate  has  been  inspired  by  favourable  employment 
and  socio-economic  performances  in  certain  Member  States,  as  underlined  by  the 
OECD's  restated  Jobs  Strategy23.  The  OECD  characterises  flexicurity  broadly  as 
follows:  moderate  EPL;  high  participation  in  lifelong  learning;  high  spending  on 
labour  market  policies  (both  passive  and  active);  generous  unemployment  benefit 
systems balancing rights and duties; broad coverage of social security systems; and 
high trade union coverage. The socio-economic outcomes are characterised by high 
employment rates, low unemployment rates, and low relative poverty rates compared 
to  the  EU  average.  Work  done  in  the  OECD24,  ILO25  and  the  European 
Commission26 indicates that flexicurity policies have contributed to those favourable 
outcomes. 

In line with the Strategy for Growth and Jobs, flexicurity should be seen in a wider 
context.  Sound  and  financially  sustainable  macro-economic  and  effective  micro-
economic  policies,  as  well  as  open  and  competitive  product,  services  and  capital 
markets  create  an  environment  where  firms  can  seize  emerging  opportunities,  fund 
new commercial ideas and create jobs. Similarly, flexicurity must be complemented 

18 
19 
20 
21 

22 
23 
24 
25 

26 

Jochen Kluve, The Effectiveness of Active Labour Market Policy, IZA Discussion Paper, March 2007. 
OECD (2006): OECD Jobs Strategy: Lessons from a decade's experience. 
Jochen Kluve (See above). 
OECD (2004, see above) and Postel-Vinay and Saint-Martin (2004) 'Comment les salariés perçoivent-
ils la protection de l'emploi?'. 
European Employment and Social Policy, Special Eurobarometer 261, p. 27. 
OECD (2006), Boosting Jobs and Incomes, Policy Lessons from Reassessing the OECD Jobs Strategy.  
Ibidem 
ILO,  Seventh  European  Regional  Meeting,  14-18  February  2005:  official  conclusions  no.  18;  ILO, 
Changing Patterns of Work, Report of the Director-General, June 2006: page 33-35. Also: S. Cazes and 
A. Nesporova, Flexicurity: A relevant approach in Central and Eastern Europe, ILO 2007. 
OECD (2006), Boosting Jobs and Incomes, Policy Lessons from Reassessing the OECD Jobs Strategy. 
European Commission, DG EMPL, Employment in Europe 2006. 

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by  social  policies  aimed  at  the  underprivileged  and  those  furthest  away  from  the 
labour market.  

Annex  II  highlights  some  examples  of  countries  operating  effective  flexicurity 
policies or addressing their challenges in a comprehensive, flexicurity-oriented way.  

In order to monitor the effectiveness of flexicurity policies, Member States and the 
Commission  are  discussing  the  definition  and  use  of  indicators  relevant  for 
flexicurity; the result so far of this work in progress is in Annex III. 

4. 

FLEXICURITY AND SOCIAL DIALOGUE 

Active  involvement  of  social  partners  is  key  to  ensure  that  flexicurity  delivers 
benefits  for  all.  It  is  also  essential  that  all  stakeholders  involved  are  prepared  to 
accept  and  take  responsibility  for  change.  Integrated  flexicurity  policies  are  often 
found  in  countries  where  the  dialogue  –  and  above  all  the  trust  -  between  social 
partners, and between social partners and public authorities, has played an important 
role. Social partners are best placed to address the needs of employers and workers 
and detect synergies between them, for example in work organisation or in the design 
and  implementation  of  lifelong  learning  strategies.  Social  partners'  support  for  the 
core objectives of the Lisbon Strategy is an important asset; translating this support 
into concrete policy initiatives is a responsibility of governments and social partners 
alike.  A  comprehensive  flexicurity  approach  –  as  opposed  to  separate  policy 
measures  –  is  arguably  the  best  way  to  ensure  that  social  partners  engage  in  a 
comprehensive debate on adaptability. 

Experience shows that a partnership approach is best suited to develop a flexicurity 
policy. Obviously, it is up to the relevant stakeholders, as autonomous organisations, 
to decide for themselves how to participate in social dialogue on flexicurity policies.  

At  Member  State  level,  flexicurity  would  provide  the  framework  for  a  process  to 
establish  national  objectives  for  adaptation  and  change  in  the  area  of  employment, 
productivity,  flexibility  and  security.  This  process  would  need  increased  awareness 
of the  specific  needs for change and policy improvements.  It  would be  initiated  by 
public  authorities,  but  seeking  the  commitment  of  the  social  partners,  and  of  other 
stakeholders as appropriate. A national dialogue could be set up with representatives 
of employers, workers, government and other parties, with the task of formulating a 
series of policy approaches or negotiating a package of measures. This could lead to 
the  adoption  of  a  national  integrated  flexicurity  strategy.  The  Commission 
encourages Member States to work with social partners with a view to including their 
approaches to flexicurity in the National Reform Programmes.  

5. 

DEVELOPING COMMON PRINCIPLES OF FLEXICURITY 

While  flexicurity  policies  and  measures  must  reflect  the  very  different  national 
situations,  all  EU  Member  States  face  the  same  challenge  of  modernisation  and 
adaptation  to  globalisation  and  change.  Therefore,  to  facilitate  national  debates 
within the common objectives of the Growth and Jobs Strategy, it seems appropriate 
to reach a consensus at EU level on a series of "common principles of flexicurity".  

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These  common  principles  could  be  a  useful  reference  in  achieving  more  open  and 
responsive  labour  markets  and  more  productive  workplaces.  They  should  help 
Member  States  in  the  establishment  and  implementation  of  flexicurity  strategies 
which fully take into account their own respective specific challenges, opportunities 
and circumstances, with the active involvement of social partners.  

The common principles could be:  

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

Flexicurity involves flexible and reliable contractual arrangements (from the 
perspective  of  the  employer  and  the  employee,  of  insiders  and  outsiders); 
comprehensive  lifelong  learning  strategies;  effective  active  labour  market 
policies; and modern social security systems. Its objective is to reinforce the 
implementation of the Growth and Jobs Strategy, create more and better jobs, 
and  strengthen  the  European  social  models,  by  providing  new  forms  of 
flexibility  and  security  to  increase  adaptability,  employment  and  social 
cohesion. 

Flexicurity  implies  a  balance  between  rights  and  responsibilities  for 
employers, workers, job seekers and public authorities. 

Flexicurity  should  be  adapted  to  the  specific  circumstances,  labour  markets 
and  industrial  relations  of  the  Member  States.  Flexicurity  is  not  about  one 
single labour market model or a single policy strategy. 

Flexicurity  should  reduce  the  divide  between  insiders  and  outsiders  on  the 
labour market. Current insiders need support to be prepared for and protected 
during job to job transitions. Current outsiders - including those out of work, 
where women, the young and migrants are over-represented - need easy entry 
points to work and stepping-stones to enable progress into stable contractual 
arrangements. 

Internal  (within  the  enterprise)  as  well  as  external  (from  one  enterprise  to 
another)  flexicurity  should  be  promoted.  Sufficient  flexibility  in  recruitment 
and  dismissal  must  be  accompanied  by  secure  transitions  from  job  to  job. 
Upward mobility needs to be facilitated, as well as between unemployment or 
inactivity  and  work.  High-quality  workplaces  with  capable  leadership,  good 
organisation  of  work,  and  continuous  upgrading  of  skills  are  part  of  the 
objectives  of  flexicurity.  Social  protection  needs  to  support,  not  inhibit, 
mobility. 

Flexicurity  should  support  gender  equality  by  promoting  equal  access  to 
quality  employment  for  women  and  men,  and  by  offering  possibilities  to 
reconcile  work  and  family  life  as  well  as  providing  equal  opportunities  to 
migrants, young, disabled and older workers. 

Flexicurity requires a climate of trust and dialogue between public authorities 
and social partners, where all are prepared to take responsibility for change, 
and produce balanced policy packages.  

Flexicurity policies have budgetary costs and should be pursued also with a 
view  to  contribute  to  sound  and  financially  sustainable  budgetary  policies. 

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They  should  also  aim  at  a  fair  distribution  of  costs  and  benefits,  especially 
between businesses, individuals and public budgets, with particular attention 
to  the  specific  situation  of  SMEs.  At  the  same  time,  effective  flexicurity 
policies can contribute to such an overall objective.  

6. 

FLEXICURITY PATHWAYS 

The  implementation  of  the  common  principles  of  flexicurity  in  the  Member  States 
requires  the  establishment  of  carefully  planned  and  negotiated  combinations  and 
sequences of policies and measures. Since Member States vary considerably in their 
socio-economic, cultural and institutional background, the specific combinations and 
sequences will also vary.  

While  flexicurity  is  not  about  one  single  labour  market  model  or  a  single  policy 
strategy,  best  practices  from  throughout  the  Union  provide  ample  opportunities  for 
Member  States  to  learn  from  each  other  by  analysing  what  works  best  in  their 
national situations. 

A  number  of  broad,  "typical"  combinations  and  sequencings  of  the  policy 
components of flexicurity can be identified, to help tackle the typical challenges that 
countries  face  on  the  way  to  flexicurity;  these  are  called  flexicurity  pathways.  The 
four typical pathways - and the challenges they seek to address -described in Annex I 
do  not  –  and  indeed  cannot  -  reflect  the  concrete  situation  of  any  specific  country. 
However,  each  pathway  –  or  even  a  combination  of  them  -  addresses  specific 
challenges that are pertinent to several Member States.  

These pathways have been developed on the basis of the Member States' situations, 
and of the report of the Flexicurity Expert Group27.  

Member  States,  taking  account  of  their  own  particular  situation  and  institutional 
background,  should  study  –  in  consultation  with  social  partners  and  other 
stakeholders  –  their  specific  challenges  and  the  typical  pathways  that  can  help  to 
address  them,  in  order  to  design  their  own  comprehensive  pathway  towards  better 
combinations of flexibility and security. 

The  typical  pathways  should  also  serve  as  an  instrument  for  mutual  learning  and 
benchmarking in the framework of the renewed Lisbon Strategy.  

7. 

THE FINANCIAL DIMENSION OF FLEXICURITY  

Accelerating  economic  and  labour  market  changes  require  workers  to  make 
transitions  between  jobs  more  frequently  during  their  careers.  This  may  require 
having  recourse  to  unemployment  benefits  while  being  supported  by  active  job 
search and skills improvement.  

27 

Flexicurity Pathways, report by Prof. Ton Wilthagen, rapporteur of the Flexicurity Expert Group, May 
2007. 

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In  countries  where  a  system  of  unemployment  benefits  is  already  in  place  and 
benefits  are  generous,  the  application  of  the  right-and-duty  principle  should 
contribute to make the system cost effective. For countries where benefit systems are 
less developed, authorities may consider shifting public resources towards enhancing 
flexicurity  policies  and  distribute  any  additional  costs  between  different  sources, 
through either increased taxation or social contributions.  

However,  the  financial  costs  of  flexicurity  should  always  be  assessed  against  the 
budgetary  benefits  stemming  from  enhanced  labour  market  dynamism,  higher 
employment  and  productivity.  One study28 estimates that a 10% increase in ALMP 
spending  per  unemployed  person  reduces  by  0.4%  the  unemployment  rate.  Early 
intervention  cuts  the  long-term  costs  of  unemployment,  associated  ill  health  and 
social exclusion29. 

Improved lifelong learning will require a more efficient, and sometimes greater, use 
of  public  and  private  resources,  but  this  should  pay  off  in  terms  of  more  jobs  and 
higher labour productivity. It has been estimated that individuals who undertake on-
the-job  vocational  training  earn  on  average  5%  more  than  those  who  do  not30.  A 
significant  proportion  of  on-the-job  training  costs  is  currently  borne  by  employers 
and  will  continue  to  be  so.  In  addition,  public  policies  may  also  stimulate  lifelong 
learning  financed  by  individuals,  e.g.  through  tax  deductions.  In  most  countries 
workers  can  also  be  made  responsible  for  investments  in  lifelong  learning  and  the 
taking  up  of  current  training  offers.  Therefore,  workers  may  also  bear  some  of  the 
costs, for example by investing their time.  

Strengthening  active  labour  market  policies  may  require  new  resources  being 
concentrated  on  individualised  and  preventive  policies.  However,  these  policies  do 
not  become  more  effective  simply  by  raising  total  spending.  Their  effectiveness 
depends on their quality and their labour market relevance, on being tailor-made, and 
on  the  effective  combination  between  security  and  readiness  to  accept  change  and 
labour  markets  dynamism.  Effective  anti-discrimination  policies  also  complement 
active labour market policies.  

Flexicurity  policies  often  have  budgetary  costs  and  must  remain  fully  compatible 
with  sound  and  financially  sustainable  budgetary  policies.  In  some  countries 
flexicurity-related expenditure in itself is high enough but its effectiveness needs to 
be  increased,  notably  by  improving  the  structure  of  lifelong  learning  and  active 
labour market policies. In other countries, there is clearly a need for extra resources 
and thus increased public and private expenditure, at least in the short run; however, 
this  extra  funding  does  not  necessarily  come  from  higher  total  public  spending  but 
also  from  a  fair  distribution  of  costs  between  businesses,  individuals  and  public 
budgets, and from a shift of public spending across policy priorities. 

28 

29 

30 

Bassani  and  Duval,  "Employment  Patterns  in  OECD  Countries:  Reassessing  the  Role  of  Policies  and 
Institutions", OECD WP n° 35, 2006. 
Iskra  Beleva,  Long-Term  Unemployment  as  Social  Exclusion,  Human  Development  Report,  UNDP 
1997. 
De la Fuente and Ciccone, "Human capital in a global and knowledge-based economy", May 2002. 

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Financing flexicurity policies: the Community contribution  

The Community Guidelines for Cohesion and those for Rural Development highlight 
the  contribution  of  Cohesion  Policy  and  Rural  Development  to  the  strategic 
objectives of the Union, and in particular to the Lisbon Strategy. More specifically, 
all  the  measures  that  fall  within  the  Employment  Guidelines  (including  therefore 
flexicurity policies) are eligible for the European Social Fund (ESF) support, which 
will make available to Member States approximately € 70 billion in the 2007-2013 
programming period, and in many cases the European Regional Development Fund 
can  also  provide  financial  support.  Among  the  actions  that  could  be  funded  are 
training at company level and active labour market measures, including job-finding 
assistance  for  the  unemployed,  lifelong  learning  and  the  promotion  of  self-
employment  and  entrepreneurship.  The  European  Globalisation  Adjustment  Fund 
can also provide a significant Community contribution. 

8. 

NEXT STEPS: FLEXICURITY AND THE LISBON STRATEGY FOR GROWTH AND JOBS 

The purpose of this Communication is to facilitate a comprehensive debate between 
EU  institutions,  Member  States,  social  partners  and  other  stakeholders,  so  that  the 
European  Council  may  adopt,  by  the  end  of  2007,  a  set  of  common  principles  of 
flexicurity.  These  common  principles  should  then  inspire  and  contribute  to  the 
implementation of the Integrated Guidelines for Growth and Jobs, and in particular 
the Employment Guidelines.  

The  next  Joint  Employment  Report  of  2007/2008  should  focus  its  analysis  on  the 
extent  to  which  Member  States  are  developing  comprehensive  policy  strategies 
covering  the  four  components  of  flexicurity.  In  its  analysis  of  this  year's  Lisbon 
National Reform Programmes, the Commission will provide initial comments on the 
way  Member  States  might  benefit  from  common  principles  and  pathways  of 
flexicurity to design their own specific policies.  

Throughout  the  next  cycle  of  the  Integrated  Guidelines,  Member  States  will  be 
invited  to  use  their  National  Reform  Programmes  to  report  explicitly  on  their 
flexicurity  strategies.  The  Commission  will  monitor  these  strategies  in  the  Annual 
Progress Reports, and report on progress made in flexicurity strategies at the end of 
the  Lisbon  cycle.  The  Commission  will  propose  a  strengthened  and  more  focused 
mutual  learning  programme,  to  ensure  that  Member  States  benefit  from  flexicurity 
policies that work.  

Given  the  role  of  social  dialogue  in  the  establishment  and  implementation  of 
successful flexicurity strategies, the Commission invites the European social partners 
to engage in a dialogue at Community level, on the basis of the common principles 
of  flexicurity  approved  by  the  European  Council.  This  debate  would  complement, 
and  feed  into,  the  core  role  of  social  partners  in  their  respective  national  contexts. 
The 2008 Tripartite Social Summit could thus focus its discussion on flexicurity. 

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ANNEX I  
FLEXICURITY PATHWAYS  

Pathway 1: tackling contractual segmentation 

This typical pathway is of interest to countries where the key challenge is segmented labour 
markets,  with  insiders  and  outsiders.  This  pathway  would  aim  to  distribute  flexibility  and 
security  more  evenly  over  the  workforce.  It  would  provide  entry  ports  into  employment  for 
newcomers and it would promote their progress into better contractual arrangements.  

In these countries, open ended contracts have been seen as the main access route to protection 
by  labour  laws  and  collective  agreements.  Training  opportunities  and  social  security 
provisions also tend to depend on having an open ended contract. Due to attempts to increase 
labour market  flexibility,  a  high incidence  of fixed-term contracts, on-call contracts, agency 
work, etcetera, has developed. Often workers are on repeated fixed term contracts for a long 
time before obtaining an open ended contract. Rather than as stepping stones, these contracts 
risk working as traps. In these countries, security tends to rely on job protection rather than 
social benefits. As a consequence, unemployment benefits are rather low and social assistance 
systems  are  weakly  developed.  Benefit  administrations  and  public  employment  services,  in 
their present situation, are in need of institutional reinforcement to offer sound management 
and effective active labour market policies to the unemployed.  

Benefits for citizens and society would accrue if effective stepping stones are created enabling 
workers to enter and progress on the labour market and achieve upward mobility.  

Within contractual arrangements, this pathway would aim to improve the position of workers 
on  fixed  term  contracts,  agency  work,  on-call  work,  etc.  It  would  ensure  that  adequate 
protection  is  offered  to  these  workers,  for  example  equal  pay  and  a  minimum  number  of 
working  hours  for  on-call  workers.  Secondary  employment  conditions,  such  as  coverage  by 
occupational  pension  funds  and  access  to  training,  would  also  apply  to  these  workers. 
Legislation and collective agreements would limit consecutive use of non-standard contracts 
and promote timely progress into better contracts.  

A  complementary  approach  would  be  to  redesign  the  open  ended  contract.  In  this  option, 
workers  would  have  an  open  ended  contract  from  the  very  beginning  of  the  employment 
relationship with their employer and would no longer, as is now often the case, start with a 
series  of  fixed  term  or  agency  contracts.  The  open  ended  contract  would  be  redesigned  to 
include  a  progressive  build-up  of  job  protection.  It  would  start  with  a  basic  level  of  job 
protection, and protection would build up progressively with job tenure, until 'full' protection 
is  achieved.  This  'tenure  track  approach'  would  guarantee  automatic  progress  into  better 
contractual  conditions;  the  risk  of  getting  'stuck'  in  less  protected  contracts  would  thus  be 
reduced.  

Redesigning  rules  for  economic  dismissals  would  be  envisaged  for  open  ended  contracts, 
addressing  bureaucracy,  length  of  procedures,  improving  transparency  of  outcomes,  and 
making the process more reliable. 

On  lifelong  learning,  employers  and  public  authorities  should  work  together  to  improve 
training  facilities  for  temporary  workers.  At  present,  these  categories  often  do  not  receive 
training  opportunities  because  the  employer  is  not  sure  how  long  he  or  she  will  keep  the 
worker. Training funds and training institutes at branch or regional level would be installed to 

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ensure  that  everybody  can  benefit  from  training.  Incentives  for  workers  and  enterprises, 
including  financial  contributions  and  tax  credits,  would  be  strengthened  to  enhance 
participation.  

Active labour market policies would start with strengthening public employment services in 
terms of staff and skills. Cooperation with market partners, such as temporary work agencies, 
would  be  considered.  Active  labour  market  policies  would  be  designed  to  support  not  only 
(long-term)  unemployed  but  also  those  who  are  experiencing  frequent  intervals  of 
unemployment.  

Social  security  systems  would  ensure  the  possibility  for  temporary  workers  to  accumulate 
rights  and  would  improve  portability  of  entitlements  across  firm  or  branch  borders.  They 
towards  providing  higher  benefits  during  shorter  spells  of 
would  be  remodelled 
unemployment.  The  introduction  of  a  social  assistance  system  would  be  considered  to 
increase citizens' mobility and make them less dependent on informal family support.  

Trust  between  social  partners  would  be  further  strengthened  by  creating  opportunities  for 
them to make the benefits of change visible to their constituencies.  

As to sequencing and financing, priority would be given to addressing segmentation, which 
entails limited direct costs. Measures under lifelong learning and active labour market policies 
are  of  the  highest  importance  but  may  take  time  to  deliver.  They  also  require  public  and 
private  investments.  Improving  social  security,  especially  setting  up  social  assistance,  may 
require  additional  or  redeployed  public  expenditure  that  must  go  hand  in  hand  with 
monitoring  and  conditionality  of  benefits  in  order  to  ensure  that  such  spending  is  cost 
effective.  In  parallel,  redesigning  economic  dismissal  rules  would  be  feasible  with  putting 
these conditions in place. 

*** 

Pathway 2: developing flexicurity within the enterprise and offering transition security. 

This typical pathway is of interest to countries with relatively low job-flows. It would increase 
investments in employability to allow workers within enterprises to continuously update their 
capabilities  and  thus  be  better  prepared  for  future  changes  in  production  methods, 
organisation  of  work.  This  pathway  would  also  look  beyond  the  actual  job  and  the  actual 
employer, by putting in place systems that provide safe and successful job to job transitions in 
the case of company restructurings and redundancy.  

The  countries  which  are  addressed  by  this  pathway  are  dominated  by  larger  enterprises, 
offering  high  levels  of  job  protection.  Workers  are  strongly  attached  to  their  enterprise  and 
labour  market  dynamism  is  rather  low.  In  recent  years,  this  tradition  has  come  under  strain 
because company restructurings and outsourcing are becoming more frequent. Social security 
systems  in  these  countries  are  largely  well  developed and benefits are adequate. Combining 
good  benefits  with  strong  incentives  for  accepting  jobs  remains  a  challenge.  Spending  on 
active  labour  market  policies  has  often  increased  strongly,  but  programmes  are  not  always 
effective,  especially  when  it  comes  to  offering  roads  back  into  employment  for  long  term 
unemployed.  

Benefits  for  citizens  and  society  would  accrue  from  enhanced  mobility  of  workers  between 
enterprises.  Workers  will  be  more  inclined  to  take  risks  associated  with  job  transfers  if 

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benefits  are  adequate  during  transition  periods  and  if  prospects  for  new  and  better  jobs  are 
real.  

Contractual  arrangements  would  be  made  to  meet  the  following  requirements:  (a)  a 
preventative approach, with continuous investment in lifelong learning (see below), improved 
working time flexibility and arrangements to combine work and care responsibilities; (b) early 
intervention, meaning that the search for a new job is not delayed until the worker has been 
made redundant, but starts immediately when it becomes clear that this is likely, and (c) joint 
action  by  all  concerned.  Employers,  social  partners,  public  employment  services  and 
temporary work agencies would work together to organise transitions and prevent redundant 
workers becoming (long-term) unemployed. If these conditions are met, dismissal procedures 
can be made considerably lighter, less costly and less time consuming.  

Enterprises would be expected to forcefully step up their investments in lifelong learning and 
employability  of  their  workforce.  This  would  be  done  in  a  way  that  takes  into  account  the 
diversity of enterprises and their size. Skills development programmes would offer personal 
training and career programmes to each employee. Such programmes would be seen as part of 
the employment contract, constituting a mutual obligation to do everything possible to meet 
the agreed skills requirements. Employability would also be made an issue of negotiation at 
enterprise  or  branch  level.  Collective  agreements  would  set  skills  requirements  for  each 
relevant  profession,  provide  training  facilities  needed  to  achieve  these  skills,  and  set  time 
frames for workers to meet the requirements. In branches dominated by SMEs, cooperation at 
branch level would be helpful in creating effective human capital development policies.  

Active labour market policies, operated by public employment services, would contribute to 
successful  job-to-job  transitions  (see  above).  Apart  from  this,  public  employment  services 
would focus on the long-term unemployed. They would offer them programmes which would 
be made more responsive to the demands of the labour market and personalised coaching of 
jobseekers. 

Social  security  systems  would  focus  on  ensuring  conditionality  of  benefits  and  effective 
monitoring of job search efforts. Benefit levels, although generally adequate, may need to be 
raised during the first periods of unemployment, in order to improve the situation of workers 
in transition.  

Although institutional social dialogue is well-developed, trust between the social partners is 
in urgent need of reinforcement, especially at national level. Wherever possible, decentralised 
levels would be implicated in the negotiations.  

As  to  sequencing  and  financing,  priority  would  be  given  to  measures  and  investments  by 
enterprises  and  branches,  to  further  develop  internal  flexicurity  and  transition  security.  This 
would go hand in hand with refocusing dismissal procedures towards early intervention and 
transition. Improved active labour market policies would require better spending rather than 
more spending.  

*** 

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Pathway 3: tackling skills and opportunity gaps among the workforce 

This  typical  pathway  is  of  interest  to  countries  where  the  key  challenge  is  large  skills  and 
opportunity gaps among the population. It would promote opportunities of low-skilled people 
to enter into employment and develop their skills in order to obtain a sustainable position at 
the labour market. 

In these countries, employment rates tend to be high, but not all groups are equally onboard. 
Upward  mobility  needs  to  be  promoted.  Contractual  arrangements  tend  to  be  sufficiently 
flexible,  but  may  in  some  cases  need  to  provide  more  protection  to  weaker  groups  on  the 
labour  market.  Skills  gaps  and  opportunity  gaps  may  lead  to  segmentation  in  sectors  and 
workplaces as well as in outcomes on the labour market. There are risks that specific groups 
(women, single mothers, migrants, the disabled, youth and older workers) are being excluded 
from the labour market. This may result in high shares of people on permanent benefits and 
could increase poverty rates. Active labour market policies provide strong incentives towards 
job acceptance, but efforts may be needed to ensure progress in terms of job quality and skills 
levels.  

Benefits  for  citizens  and  society  would  accrue  from  offering  improved  chances  of  social 
mobility to the low skilled by preparing people to progress into different professions with new 
opportunities. 

Contractual  arrangements  would  allow  low-skilled  workers  to  enter  employment  at 
conditions  which  are  favourable  to  potential  employers,  but  would  also  allow  them  to 
progress into more stable contractual arrangements when their skills improve and the working 
relationship acquires a more permanent character.  

Lifelong  learning  policies  would  address  opportunity  gaps  among  the  workforce,  starting  at 
the initial education system. Early school leaving would be fought and general qualification 
levels  of  school  leavers  would  be  improved.  Illiteracy  and  innumeracy  problems  among  the 
adult population would be addressed. Workforce training would be targeted especially at the 
low skilled. Combinations of work and training and mobility between training systems would 
be  promoted.  Informal  learning  would  be  recognised  and  validated  and  low-threshold,  easy 
access language and computer training inside and outside the workplace would be organised. 
Taking into account their diversity and size, enterprises would develop comprehensive skills 
strategies,  allowing  all  their  staff  to  train  and  acquire  new  skills.  Public  authorities  may 
improve  incentives  to  enterprises  to  invest  in  their  workforce,  using  tax  incentives  or  other 
instruments.  But  they  would  also  increase  incentives  to  workers,  for  example  by  putting  in 
place a system of individual training accounts. Such accounts would allow workers to spend a 
certain amount of (working) time and money on their personal development, in cooperation 
with their employers.  

Active  labour  market  policies  would  distinguish  clearly  between  those  jobseekers  that  are 
sufficiently skilled, and those who need to strengthen their skills. For the first group, emphasis 
can be on individual job search support. For the second group, however, active labour market 
policies  would  focus  on  providing  adequate  training  to  support  upward  mobility  and 
sustainable, rather than quick, reintegration.  

Social  security  systems  would  offer  incentives  to  low-skilled  benefit  recipients  and  monitor 
the conditionality of such benefits in order to ensure that taking up work pays, if necessary by 
providing  supplementary  benefits  or  gradual  phasing  out  of  benefits.  Thus,  they  would 

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contribute to avoiding problems of the working poor. They would also contribute to reducing 
non-wage labour costs of low-skilled workers.  

Where  the  role  of  social  partnership  is  not  strongly  developed,  social  dialogue  could  be 
revitalised  by  bringing  new  issues  into  the  discussion,  such  as  R&D,  innovation,  and 
education and skills.  

As to sequencing and financing, improvements in initial education would be implemented as 
a  priority,  but  they  will  take  time  to  deliver.  Improved  workplace  training  would  require 
private  investments,  supported  by  public  incentives.  Effective  active  labour  market  policies 
and  policies  in  the  social  security  field  to  increase  the  attractiveness  of  recruiting  the  low-
skilled have to be enhanced.  

*** 

Pathway  4:  improving  opportunities  for  benefit  recipients  and  informally  employed 
workers. 

This typical pathway is of interest to countries which have experienced substantive economic 
restructuring  in  the  recent  past,  resulting  in  high  numbers  of  people  on  long-term  benefits 
with  difficult  perspectives  of  returning  to  the  labour  market.  It  would  aim  at  improving 
opportunities for benefit recipients and shifting from informal to formal employment through 
development of effective active labour market policies and lifelong learning systems combined 
with an adequate level of unemployment benefits.  

In  these  countries,  traditional,  often  industrial,  enterprises  were  forced  to  lay  off  large 
numbers  of  people.  Unemployed  workers  receive  benefits  that  are  often  designed  as  'labour 
market  exit  benefits'  rather  than  'transition  into  new  employment'.  Investments  in  active 
labour market policies are limited and chances of finding new employment are low. Benefit 
administrations  and  public  employment  services  need  institutional  reinforcement  to  provide 
effective  active  labour  market  policies.  New  economic  activity  is  developing,  mostly  in 
services. For benefit recipients, it is difficult to seize the employment opportunities associated 
with  this  new  economic  development.  New  jobs  often  have  low  levels  of  protection,  while 
some  measures  that  apply  to  old  jobs  may  be  too  restrictive.  Gender  gaps  persist.  Many 
people are taking recourse to the informal economy. Weak vocational training systems make 
difficult for low skilled workers and young people without work experience to adjust to the 
requirements of the labour market.  

Benefits  for  citizens  and  society  would  accrue  from  creating  new  opportunities  for  the 
unemployed and from bringing informal economic activity into the formal economy.  

Within  contractual  arrangements,  it  would  be  ensured  that  workers  employed  in  emerging 
sectors  of  the  economy,  many  of  whom  work  on  fixed  term  or  on  call  basis,  are  offered 
adequate levels of protection. Regularising informal work could be made more attractive by 
improving  informal  workers'  rights  and  providing  access  to  professional  training.  Higher 
regularised  employment  would  lead  to  increased  tax  revenues  and  social  contributions.. 
Transitions  to  formal  employment  would  also  require  further  reforms  of  labour  taxation, 
business  registration  requirements  as  well  as  strengthening  of  labour  inspectorates  and 
financial  institutions  combating  informal  work.  Workers  on  open  ended  contracts  would 
benefit  from  increased  investments  in  their  training  and  early  action  in  case  of  threatened 

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redundancy. If these conditions are in place, there is less need to apply strict rules with respect 
to economic dismissals.  

Lifelong learning, education and vocational training systems would be developed in close co-
operation  with  enterprises,  geared  towards  labour  market  needs.  Company  investments  in 
lifelong  learning  would  be  stimulated.  An  obligation  for  employers  to  invest  in  their 
employees  could  be  a  key  issue  in  collective  bargaining.  Developing  lifelong  learning  and 
vocational  training  systems  would  require  close  partnership  between  private  companies  and 
public  authorities.  Better  linking  the  allocation  of  resources  with  education  outcomes  is 
needed for these systems to be cost-effective. 

The administrative capacity of public employment services would be a priority. This requires 
improvement  in  terms  of  staff  numbers,  skills,  decision-making  process  and  work 
organization. Co-operation between benefits administrations and public employment services 
would  be  strengthened  in  order  to  provide  effective  active  labour  market  policies.  Active 
labour market policies would concentrate on long term unemployed and disabled workers and 
workers  threatened  with  dismissals.  They  would  provide  tailor-made  assistance,  including 
programmes more responsive to the needs of the labour market, to successful re-employment 
of job seekers. Public-private partnership of all stakeholders (public authorities at all levels, 
education  and  training  providers,  social  partners,  companies,  NGOs,  private  employment 
agencies) could contribute to effectiveness of active labour market policies, 

On social security system, unemployment benefits would be brought at an adequate level, to 
enable job search without workers taking up informal jobs. At the same time work incentives 
and  the  conditionality  of  benefits,  both,  for  workers  and  employers,  need  to  be  improved. 
They would encourage on one hand people on benefits who can work to look for jobs and on 
the  other  hand  employers  to  create  new  jobs.  Conditions  for  the  integration  of  the  disabled 
into labour markets would be facilitated. Portability of social security entitlements would be 
improved. 

The capacity of the social partners would be reinforced, e.g. by extending rights to negotiate 
key elements of working conditions including working time. Governments would promote the 
creation of comprehensive employer and employee organisations and their merging into larger 
bodies.  Both  bipartite  and  tripartite  social  dialogue  could  be  strengthened.  Social  dialogue 
could also be developed at branch and regional level.  

As to sequencing and financing, priority would be given to bringing informal work into the 
formal system. Institutional reinforcement of public employment services and improvements 
in social security would thus become more affordable. Investments in lifelong learning would 
require  joint  efforts  of  public  authorities  and  enterprises.  Redesigning  dismissal  procedures 
would be feasible in parallel with improving active labour market policies, lifelong learning 
and social security.  

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ANNEX II 
EXAMPLES OF FLEXICURITY 

The following examples illustrate how flexicurity policies can work. They highlight the merits 
of an integrated approach across at least some of the four components of flexicurity, whereby 
flexibility and security are mutually reinforcing. 

The Austrian severance pay system. Austria combines rather high labour market flexibility 
with  an  average  level  of  social  benefits,  accompanied  by  effective  active  labour  market 
policies  and  strong  reliance  on  social  partnership.  Austrian  labour  laws  provide  for  a 
relatively low de facto level of employment protection, although statistics display an average 
index.  This  discrepancy  is  linked  to  procedural  aspects,  which  are  supportive  to  relatively 
smooth dismissal procedures. There is relatively little need for employers to take recourse to 
fixed  term  contracts,  the  share  of  which  is  below  average  (9%  in  2006  against  14.4%  EU 
average).  The  unemployment  rate  is  among  the  lowest  in  Europe  (4.8%).  Long-term 
unemployment is at 1.3%. The employment rates meet the Lisbon target (70.2% in total and 
63.5%  for  women).  Participation  in  lifelong  learning  passed  the  EU  target  and  is  at  12.9% 
(2005) At 12%, the at-risk of poverty rate is low.  

In  this  context,  a  very  important  innovation  took  place  in  2003,  when  the  new  system  of 
severance  pay  came  into  force.  In  the  old  system,  severance  payment  to  redundant  workers 
depended  on  the  length  of  the  employment  relationship.  This  meant  that  workers,  when 
moving from one employer to another, would lose their accumulated rights. The new system 
obliges  the  employer  to  pay  a  fixed  monthly  sum  into  a  personalised  account  held  by  the 
worker.  Workers  may  draw  from  this  account  in  the  case  of  dismissal.  The  new  system 
eliminates the discouraging effects to mobility and prevents workers from losing their claims 
in cases of self-termination of the working relationship. Furthermore, the Labour Foundations 
(Arbeitsstiftungen)  are  a  particularly  successful  model  for  easing  the  consequences  of 
restructurings.  They  serve  as  transition  agencies  to  support  job-to-job  placement  in  case  of 
threatened mass dismissal, applying the principles of early intervention and joint action by all 
public and private parties concerned. 

The Danish Golden Triangle. The Danish labour market shows a successful combination of 
flexibility  and  security,  offering  flexible  labour  laws  and  relatively  low  job  protection, 
extensive efforts on lifelong learning and active labour market policies, and a generous social 
security system. This goes back to the so-called 'September agreement' of 1899, which traded 
the right to recruit and dismiss with the development of a public employment benefit system. 
In  the  1960s,  with  the establishment  of  the  Public  Employment  Service,  the  state  took  over 
much of the unemployment risk. In the late 1980s and early 1990s, the active labour market 
policies  were  added,  aiming  to  motivate  the unemployed to seek and  accept jobs  as  well as 
upgrade their qualifications. Skills development was  stimulated  by  a  system  of  job  rotation, 
allowing  workers  to  train  while  unemployed  persons  temporarily  replace  them.  Together, 
these  elements  form  the  so-called  Golden  Triangle  of  flexible  contractual  arrangements, 
generous  social  security  and  welfare  schemes  and  extensive  active  labour  market  policies. 
Denmark  is  characterised  by  very  high  employment  rates  (77.4%  in  2006),  very  low 
unemployment  (3.9%),  youth  unemployment  (7.7%)  and  long-term  unemployment  (0.8%), 
high job turnover (one fourth of employees having been with the same employer for less than 
one  year),  high  participation  in  lifelong  learning  (27.4%),  low  at-risk-of-poverty  rate  (12%) 
and a high general feeling of security among the population. 

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Temporary  work  in  the  Netherlands.  The  Dutch  'Wassenaar  Agreement'  (1982)  traded 
wage moderation for employment, and paved the way for the development of part time jobs in 
the  context  of  collective  agreements.  Part-time  jobs  are  mostly  open  ended  contracts  and 
should  not  be  confused  with  'precarious  employment'.  The  large  majority  of  part  time 
workers, who are mostly women, do so voluntarily. During the 1990s, relative inflexibility of 
the labour market was a rising concern, but public authorities could not reach agreement on 
labour law modernisations. Social Partners (in the Foundation of Labour) were finally invited 
to negotiate a package deal. Their deal concentrated on strengthening the position of workers 
on  temporary  contracts,  thus  reducing  precariousness  without  taking  away  the  flexibility 
aspect.  It  contained  three  main  ingredients:  (1)  limiting  the  consecutive  use  of  fixed-term 
contracts  to  three  (the  next  contract  being  open  ended);  (2)  eliminating  obstacles  for 
temporary  agencies;  (3),  recognition  of  fixed-term  and  temporary  agency  contracts  in  the 
labour  code  and  introducing  minimum  protection  and  payment.  Temporary  agency  workers 
would  be  covered  by  a  collective  agreement  providing  wage  guarantees,  training  and 
supplementary pension. The agreement was cast into legislation; the Flexibility and Security 
Act  went  into  effect  on  1  January  1999.  During  the  1990s,  the  Netherlands  saw  a  drastic 
reduction of unemployment and a strong job creation. Employment rates are high, in general 
(74.3% in 2006) as well as for women (67.7%). Employment in full time equivalents is lower 
due to the high part time rate. Unemployment is low (3.9%), and so are youth unemployment 
(6.6%)  and  long-term  unemployment  (1.7%).  Participation  in  lifelong  learning  is  relatively 
high (15.9%). At 11%, the at-risk of-poverty rate is relatively low. 

Fixed-term  contract  reduction  in  Spain.  Spain  experiences  a  persistently  high  share  of 
fixed-term contracts, covering about 34% of total employment. A comprehensive agreement 
was  signed  in  May  2006,  running  until  the  end  of  2007,  between  the  social  partners  and 
supported by the Government, curtailing the excessive use of fixed-term contracts and easing 
requirements on employers. Any worker having signed two or more fixed-term contracts with 
the  same  company,  and  having  served  in  the  same  post  for  more  than  24  months  within  a 
period  of  30  months,  automatically  acquires  an  open  ended  contract;  in  this  contract 
obligatory severance is reduced from 45 to 33 days' pay per year worked. 

The 'Towards 2016' Social Partner agreement in Ireland. The Irish economy and labour 
market  have  gone  through  a  period  of  rapid  change  in  recent  years.  Ireland  has  been 
transformed from a low-income, slow-growth economy with high unemployment rates into a 
country with high growth, high income and low unemployment. Ireland has a flexible labour 
market and is strengthening its investment in active labour market policies (0.75% of GDP as 
compared  with  the  EU  average  of  0.5%).  Low  educational  attainment  of  older  workers 
(41.7%  of  45-54  year  olds  with  at  most  lower  secondary  level)  reflects  earlier  under-
investment in education, but this is improving considerably for younger generations. Lifelong 
learning  participation  still  falls  short  of  EU  best  performers  and  reflects  difficulties  in 
ensuring opportunities for low-skilled and older workers. The 2006 'Towards 2016' agreement 
is taking up these challenges with a comprehensive approach. It identifies a need for greater 
participation, productivity and activation, with a greater focus on the long-term unemployed, 
unemployed youths and those who are furthest from the labour market. It also highlights that 
skills  upgrading  must  focus  on  workplace  learning  (including  basic  skills)  and  on  lower-
skilled  and  vulnerable  workers  as  well  as  migrants.  It  outlines  plans  to  expand  workplace 
learning, and to increase funding for the Workplace Basic Education Fund aimed at tackling 
illiteracy and innumeracy problems.  

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ANNEX III  
BACKGROUND INDICATORS RELEVANT FOR FLEXICURITY 

The indicators listed below, the majority of which are taken from the agreed list of indicators 
for monitoring the European Employment Guidelines, can be seen as relevant for each of the 
four components, as well as for general labour market outcomes.  

A. Flexible contractual arrangements 

– 

– 

Strictness  of  employment  protection,  total,  for  permanent  and  non-permanent 
employees (OECD) 

Diversity  of  and  reasons  for  contractual  and  working  arrangements. 
(EUROSTAT) 

B. Comprehensive lifelong learning strategies 

– 

– 

Percentage  of  the  adult  population  between  25  and  64  participating  in 
education and training (EUROSTAT) 

Educational attainment of age cohorts 45-54 and 25-34 (share of the population 
with at least upper secondary education (EUROSTAT) 

C. Effective active labour market policies 

– 

– 

– 

– 

Expenditure  on  active  and  passive  labour  market  policies  as  a  percentage  of 
GDP (EUROSTAT) 

Expenditure  on  active  and  passive  labour  market  policies  per  unemployed 
person (EUROSTAT) 

number  of  participants  in  active  labour  market  policies,  by  type  of  measure 
(OECD) 

Share  of  young  or  adult  unemployed  not  having  been  offered  a  job  or  an 
activation measure within 6 or 12 months respectively (EUROSTAT) 

D. Modern social security systems 

– 

– 

Net replacement ratios in the first as well as after 5 years (OECD) 

Unemployment trap, seen as a measure of benefit levels (OECD-EUROSTAT) 

E. Labour market outcomes 

– 

– 

– 

– 

Employment rate, total, for women, and for older workers (EUROSTAT) 

Youth unemployment ratio (15-24 years) (EUROSTAT) 

Long-term unemployment rate (EUROSTAT) 

Growth in labour productivity (EUROSTAT) 

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– 

– 

Quality in work (under construction) 

At risk of poverty rates (EUROSTAT) 

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