The concept Flexicurity describes a labor market policy that enhances national competitiveness. It does so by providing employers the flexibility to hire and fire and by providing stability and security to employees. The concept is based on the idea that guaranteeing labor market flexibility alone, without addressing a worker's sense of stability, cannot ensure National Competitiveness.
The rapid changes of globalization and its effects on technology, markets, and goods challenge countries wishing to maintain a high level of national competitiveness
Inflexible labor markets characterized by tenure and seniority limit national competitiveness. The difficulties of dismissing and recruiting workers impede businesses from adapting to changing market demands. Fixed term contracts also narrow workers' incentives to improve their human capital.
Therefore, a flexible labor market enhances competitiveness. However, it does not guarantee workers a stable income.
The strive towards competitiveness and the desire to preserve income stability for workers led to the rise of the Flexicurity model – combining flexibility and security. The model has had success in Denmark and has been adopted by the EU.