4. The Danish labor market and JRT
The effect of JRT on wage return at least in theory depends on the labor market in which JRT occurs. In this section the Danish labor market is described and afterwards the extensive amount of Danish JRT taking place is illustrated.
The Danish labor market
The Danish labor marked is characterized by a so-called flexicurity model, where the labor market is flexible because it is easy to fire and hire employees (like in the US) and at the same time there exists a highly developed social security system (like in the other Nordic countries). Given the generous social security system, the influential labor market organisations, high income taxes, and a minimum wage floor, the wage structure is very compressed.20 So overall, the Scandinavian countries have a very compressed
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The unions play an important role in the wage determination of Danish jobs. In 1995 more than 80 percent of the workforce was a member of a union organization. Even though the percentage has decreased over the last decade the organization degree is still above 75 percent. The employee’s unions and the employer’s union are two of the players in the Danish tripartite labor market model. In this setting, the employer’s union and employee’s union discuss wage and working condition regulations. “The State” only interferes if problems occur regarding the centralised collective bargaining agreements. Until 1995 the central collective bargaining agreements occurred every second year. Since then it has become more flexible within each subdivision of employer’s and employee’s unions (that were involved in the original bargaining negotiations). This tripartite model and the existence of other labor market institutions clearly distort the free movement of wages and labor. Thus, the standard human capital theory assumption of perfectly competitive labor markets with fully flexible wages and no imperfections does not hold for the Danish labor market.
The share of skilled employees in the Danish work force has increased dramatically over the last decade. In 1995 around 60 percent of the adult population between 25-64 years of age had an upper secondary education (OECD 1997).21 Thus the adult population was skilled but not as highly educated as the Czech Republic, Germany, Norway, Switzerland and the US. The US had more than 80 percent of their adult population with an upper secondary education. By 1999 the share of people with an upper secondary education in Denmark increased to 80 percent (OECD 2001). Thus Denmark entered the group of countries (Czech Republic, Germany, Japan, Norway, Switzerland and the US) with the highest skilled adult population.
Figures 3 and 4 show clearly that the share of people with tertiary education (i.e. Danish vocational education and further education) have increased since 1994.22 Therefore the educational level among the adult Danish population has increased. The educational development follows the Danish policy-makers intention of improving the educational skills in the Danish workforce to meet globalization requirements. Therefore, formal education is generously subsidized in Denmark (for a detailed description of the formal education system see Weatherall (2007)). The formal
21 In the Danish system upper secondary education is high school +
22 In OECD terms tertiary education include vocational and further education.
educational framework is very different from the JRT framework that is initiated by employees and employers.
The Danish JRT
In addition to the investment in formal education, Danish policy makers have been encouraging firms to invest more in training their current employees (both with and without a subsidy from the Danish Government). This kind of education and training is what OECD calls “job-related continuing education and training”. Denmark’s participation rate in job-related continuing education and training is about 50 percent among 25 to 64-year-olds in 1998/1999 (OECD 2001). The Danish participation rate is the highest among OECD countries. In the workforce, the participation rate is highest among adults with a tertiary education. In Denmark, 29 percent of the population with a lower secondary education participated in job-related continuing education and training in 1998/1999. 51 percent participated among the people with an upper secondary and post-secondary non-tertiary education. Finally, 70 percent participated among the people with a tertiary education. Highly educated women in Denmark had an especially high participation rate compared to men. The mean hours women used on job-related training were high as well relative to men.23
Among the Danish employees the participation rates in job-related education and training are 52 percent among men and 58 percent among women, which is still the highest among all employees in OECD countries in 1998/1999. Although, the mean number of hours employed participants use on job-related education and training is relatively high (111 hours) it is lower than the mean number of hours used in other countries such as Ireland, the Netherlands, New Zealand, and Norway.
This paper focuses to a certain extent on what the OECD refers to as “job-related continuing education and training” among the employed. More precisely an employee is defined as a JRT participant if he or she has participated in any kind of job-related education or training within the last year. The JRT participant group is further
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The compressed wage structure in Denmark, the generous formal education system, and the extensive and broadly defined JRT program are important to have in mind when comparing the empirical results of this paper with empirical results on JRT in other countries.