Would American Neoliberals Be Happy With Denmark?

In recent years, anti-leftist liberals (and even some libertarians) have taken to saying Denmark and other Nordic countries are actually neoliberal countries. The latest version of this argument comes from Jonathan Chait:

Denmark as the closest thing to a real-world model for his ideas. But, while “socialism” has meant different things throughout history, Denmark is not really a socialist economy. As Jonathan Cohn explained, it combines generous welfare benefits and high-quality public infrastructure with highly flexible labor markets — an amped-up version of what left-wing critics derisively call “neoliberalism.” While Denmark’s success suggests that a modern economy can afford to fund more generous social benefits, it does not reveal an alternative to the market system.

I don't like the term "neoliberalism" because I have no idea at this point what anyone means by it. But I am curious whether American "neoliberals" like Chait would actually be happy with being Denmark. Statements like the above suggest they would, but when you look at the differences between the two countries, it's hard to imagine that being true.

1. Employment Protection

Despite popular lore to the contrary, Denmark is not a land lacking in employment protections. The OECD provides detailed qualitative descriptions of each country's employment protections and an index of overall employment protection. In both measures, Denmark clearly has more employment protection than the US has.

1a. Qualitative

In Denmark, employers must provide notice to employees before terminating them. The length of the notice depends on the employee's tenure and the nature of their work. Blue-collar workers with a tenure of 0 to 9 months are owed no notice. Blue-collar workers with a tenure of 9 months to 2 years are owed 21 days notice. A tenure of 2 years to 3 years gets you 28 days notice. And so on, up to a tenure over six years, which entitles you to 70 days notice. In the US, employees get no notice.

In Denmark and the US, employers may not terminate someone for reasons related to discrimination by race, gender, religion, and other identity categories. Beyond that, the US has no restriction on termination whatsoever. Some unions win so-called "just cause" restrictions in contracts, but unions cover a very small portion of the US workforce. In Denmark, on the other hand, workers are protected against dismissals founded on arbitrary circumstances. Dismissals are only deemed fair if they are done because of incompetence or economic redundancy (i.e. a reduction in force), and employers have to give a reason for termination. Workers who feel they have been unfairly dismissed can apply to a Board of Dismissal to seek redress (usually some kind of compensation, though sometimes reinstatement).

In Denmark, workers who have been employed for a sufficient tenure are also owed severance. In the US, they are not. I could go on, but it suffices to say that Denmark's employment protections exceed the employment protections of the US. If you want to see more details, read the OECD reports (US, Denmark).

1b. Quantitative

The OECD also publishes an employment protection index, which summarizes a country's employment protection into a single number comparable to other countries. As with all indexes, this involves some judgment calls, but overall it seems reasonable. You can read the entire index methodology (here), but in broad strokes, the index aims to "measure the procedures and costs involved in dismissing individuals or groups of workers." This involves looking at notice and consultation requirements, severance pay requirements, the difficulty of dismissing workers, the severity of the consequences if it is determined that you dismissed a worker unlawfully, and so on.

Here are the employment protection index numbers for 2013 for some selected countries:

Denmark is no Belgium when it comes to employment protection, but it's also way above where the US is. The US sits right around the bottom of the scale with its Anglo buddies, while Denmark sits in the middle of it.

Both the qualitative and quantitative indicators show that to become Denmark would involve making US employment protections much stronger than they currently are. Is that what US neoliberals have in mind?

2. Public Workers

As I discussed previously, in Denmark, 31.5% of the country's workers are employed by the government, either in more traditional government worker jobs or in government-owned enterprises. In the US, the same figure is 14.6%.

To become Denmark would require a more than doubling of the public workforce in the US. In terms of levels, that would mean adding 25 million public workers. And that's assuming that we add those workers only by sucking them out of the private sector without expanding overall employment. If we added them while also expanding our workforce to match the much higher employment rates Denmark has, it would mean adding even more than 25 million public workers.

Is this what US neoliberals have in mind? If a candidate for president said that they planned to have the government hire 25 million more workers, would Jonathan Chait and Austan Goolsbee say "that sounds basically fine." I doubt it.

3. Strong Unions

Finally, let's consider the case of unions. On a pure numbers level, 80% of Danish workers are covered by union contracts while just 13.3% of American workers are. But beyond that, Danish unions can, when they want to, actually bring major corporations to their knees. And they do.

For one study on how the two countries differ in this regard, consider the case of McDonalds. In the US, unions targeting McDonalds have started broad-based media-focused campaigns like Fight for $15. These campaigns have clearly moved legislators in various parts of the country, but they haven't done much to organize a McDonalds union or cause McDonalds to cede to any union demands.

When McDonalds arrived in Denmark in the late 1980s and insisted that it wasn't going to follow the relevant sectoral collective bargaining agreement, it was swamped with union-led boycotts and sympathy strikes so debilitating that it had to give in.

The kinds of sympathy strikes used by Danish workers to bring McDonalds to heel are illegal in the United States. Once again, I am left wondering if this is what US neoliberals like Chait have in mind when it comes to emulating Denmark's "neoliberal" labor market institutions? As with amping up employment protection and hiring 25 million public workers, I am going to guess the answer on this one is also no.

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