[SlyShy]

Denmark is an interesting case study of this working very well to encourage a competitive economy. In Denmark it is extremely easy to fire people, but also very easy to hire people. This actually decreases unemployment, because companies can easily downsize during recessions, weather the storm, and then hire the workers back (unlike in the US where companies have to hang on to contracts while in a downturn).

http://www.economist.com/world/europe/displaystory.cfm?story...

[arach]

This is quite interesting. Thanks for the link. It seems they are at their limit.

Quote from the Economist story: "Moreover, despite enviably low unemployment and labour shortages in industries from construction to health care, the Danes are having difficulties nudging the long-term unemployed into work. The post office complains that it cannot recruit new postmen. Newspaper distributors have started importing delivery boys from Poland. One ferry operator's effort to recruit 365 new workers was stymied by an epidemic of seasickness among the unemployed who applied. Even in Denmark, it seems, would-be workers have their limitations."

[anamax]

> It seems they are at their limit.

Ease of hire/fire isn't the only factor affecting employment. The easier it is for me to make it without working, the less likely I am to work, no matter how much someone might want to hire me.

[j_baker]

That is pretty interesting. Perhaps this is part of the reason denmark is such a happy place: http://abcnews.go.com/2020/story?id=4086092&page=1

[hristov]

This only works if there are high unemployment benefits. Otherwise, this kind of system will just turn even the slightest recession into a terrible crash.

When a recession happens, every company lays off people to keep profitability high, but the laid off people will stop spending, and then demand for goods and services will go down and then companies will lay off more people to match demand, but those people will stop spending too, so there will be a feedback cycle that will cause a world wide crash. And this is not just speculation, this is what actually happened in the 50 or so years before the new deal when you had continuous boom and bust cycles.

Again this does not happen in Denmark because of their generous government unemployment benefits, but if you do not have said benefits, it is asking for trouble.

[goatforce5]

NPR's Planet Money recently did a couple of podcasts about Denmark which echoes the points you mention. They also point our there's little or no stigma attached to being fired from a job in Denmark.

http://www.npr.org/blogs/money/2010/01/podcast_the_awesomest...

http://www.npr.org/blogs/money/2010/01/podcast_tax_me_please...

[sielskr]

> unlike in the US where companies have to hang on to contracts while in a downturn

What is your basis for believing that US companies cannot downsize as easily as Danish ones or that their costs in hiring and firing are higher? Were you an employee or hiring manager in both countries?