How's this for an attractive set of statistics: the second-lowest unemployment rate in the Organisation for Economic Co-operation and Development (OECD); some of the most equal wealth distribution in the world; the most flexible labour market in Europe; a ranking of third in the World Economic Forum's Global Competitiveness Index and wages about 70% above the OECD average.

Could Denmark be too good to be true?

The country boasts secure age pensions, universal health care, child care and family-leave arrangements, free higher education … and the list doesn't stop there.

What's the Danes' secret?

Let's begin by looking at ‘flexicurity', the modern Danish social system that combines flexible job prospects with job security. The system came about following a labour compromise way back in 1899, the result of the struggle between industrial capitalism and the rising labour movement. After an increasing number of worker strikes, the Danish employers association and the central trade union federation struck a bargain: put simply, employers would give unions legal recognition, soon reinforced by the state, and in return unions would recognise employers right to direct work.

The smooth running of the country's industry centres on this labour-market strategy. The strategy allows Danes to change jobs frequently – one in three Danes changes job once a year and Denmark has Europe's highest rate of labour turnover. The frequency of job turnover is seen as something that revitalises industry rather than damages it. Because labour turnover is common practice, and employers value an employee with vast experience and a fresh outlook, employees can leave one job without fear of not being able to find another. This increases chances of work satisfaction and enjoyment.

Under the flexicurity model Danes can enjoy full employment, the support of strong unions recognised as social partners, fairly equal wages among different sectors and a set of labour-market programs that spend a whopping 4.5% of Danish GDP on initiatives such as unemployment assistance, wages subsidies and highly customised retraining.

Writing in the Financial Review (18 April 2008), Robert Kuttner described the way Denmark has overcome industry's common refusal to invest enough in its employees for fear that they will take their newly acquired skills elsewhere. “Far from interfering with the rest of the market's efficiency, public investment in the workforce actually enhances the market's dualism”, Kuttner said. “It reduces the resistance of workers to changing jobs and subsidises a more productive workforce over time”.

Denmark prides itself on a culture of collaboration in which employees and employers work under the support of strong trade unions. Theirs is a consensual style of problem solving. The unions, in return for government spending (Denmark spends about 50% of its GDP on public outlays) actively support employer flexibility and tough rules to weed out welfare scammers. Workers are understood to have duties as well as rights.

Under the Danish system, employer freedom is reaffirmed, which brings down unemployment; and employment is secure. The number of temporary work contracts has decreased steadily since the 1980s.

Here's where it gets really interesting: the vast majority of the unemployed return to work within six months. The figure for long-term unemployed is so tiny it's almost non-existent. Those who are looking for work have access to job centres which can provide free adult apprenticeships and free university level education. Denmark has the highest percentage of workers in the world in some form of continuing education (47%).

But it hasn't all been smooth sailing. The oil shock in the 1970s, and overly generous lifetime social benefits in an aging population, created a rise in Denmark's very low unemployment rate. The anti-tax Progress Party's popularity grew and it became the second largest party in the country.

The Danish response? Refine the model.

Key to the Danish system's strength is the willingness of those governing it to maintain open dialogue so that the system can be refined according to the changing needs of the people it affects.

When in the early 1990s it became apparent that a number of Danes were exploiting unemployment/disability benefit schemes, unions agreed to support a crackdown on abuses. Individualised re-employment plans were created that required the unemployed to meet regularly with councillors to seek new jobs, often in new occupations. Many of Denmark's unemployed were forced to seek and find jobs. In return, the Danish government increased resources for highly customised training and temporary wage subsidies. Denmark's culture of collaboration had won again.

The system works also because Danes are prepared to pay higher taxes – they have the world's second-highest tax rate (50%). This might seem exorbitant, but think about what Danish tax-payers get in return.

While the system faces risks, (Denmark's aging population is a threat to flexicurity, for example, as it is based on the premise that almost all workers can be trained to work a good job), so far the country has managed to keep the system intact by making adjustments when required.

The latest refinements to flexicurity are focused on further raising spending on the training of unskilled workers, as well as limiting the duration of unemployment benefits and increasing pressure on the unemployed to actively seek out new work.

While the Danish flexicurity system could not be picked up and set down in any other country – it is so heavily based on Danish culture – the world could certainly learn from the logic of far more systematic investment in the work force as a strategy for attaining greater competitiveness, equality and security.

The Danish system promotes a national commitment to maintaining an egalitarian society and a highly skilled workforce. Denmark understands the benefit of an open dialogue between employees, employers and unions; self-evaluation and refinement – the sources of strength that allow Denmark to maintain its low unemployment and its globally competitive role.