STRUCTURAL PROBLEMS ON THE LABOR-MARKET

Denmark has for almost 19 years had almost continously increasing unemployment. Despite intensive employment policies unemployment has not been lower than 8% in recent years. This points to the existence of severe structural problems in the labour market. It is demonstrated on panel data that the liberal rules of the unemployment insurance system are partly responsible for at least 20% of all unemployment. It is also demonstrated on firm level panel data that there are fewer jobs in the bottom of the wage distribution indicating that firms are not using the lower end of the demand function probably because of the way wages are negociated. This makes it more difficult for the unemployed to find jobs. Changing these structural problems is a precondition for the successful use of macroeconomic policies to increase employment.