New framework agreement can re-establish the influence of LO and DA
A so-called climate agreement concluded in September 1999 by the LO trade union confederation and DA employers' confederation aims not only to improve bargaining procedures during the forthcoming 2000 private sector collective bargaining round, but also takes a more long-term political perspective. The agreement may prove to have historic significance, as the two confederations hope that it will enable them to recapture a substantial influence on the government's labour market and economic policy through a tripartite forum.
On 14 September 1999, Denmark's largest employers' organisation and trade union confederation - the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) and the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) respectively - concluded an "agreement on the framework for the arrangement of decentralised collective bargaining rounds" (DK9909148N). Besides increasing the coordination of collective bargaining rounds (DK9910150F), the so-called "climate-agreement" also provides the two confederations with the opportunity to strengthen their political influence. Under the agreement the two confederations will, together with the government, determine the overall socio-economic framework for bargaining rounds in a "tripartite forum" which was established in August 1998. Importantly, these tripartite talks will give DA and LO an opportunity to draw up a broader platform on political issues - in the first instance over an extensive reform of the adult education and further training system (DK9909145F). Consequently, the new "climate agreement" may prove to have historic significance.
The Danish model
Traditionally the social partner confederations, and primarily DA and LO, have had considerable political influence. While the "Danish model" of industrial relations is based on agreement, an element of the model has at the same time been that the social partners have been included in the decision-making process over legislation which directly affects the labour market. On legislation regulating the relations between the parties - the Labour Court Act and the Official Conciliation Act - the social partners have a direct right of veto. There is an absolute principle that change in these areas can occur only if there is prior consensus between the confederations on the contents of the change. With regard to other legislation concerning the labour market, the social partners have generally also been involved, according to this system of consensus. Furthermore, the organisations have to a large extent had an influence on the entire structure of the welfare state.
This policy of consensus has been based on the rationale that, by involving the social partners, the government has obtained solutions for which the parties directly concerned are jointly responsible, and which they have been able to implement and administrate effectively. Furthermore, legislation which is based on input from the organisations which have a direct connection to the areas affected is more likely to take account of the actual problems.
Consequently, it has been the social partners themselves that have had to create political compromises between their often diverging interests. The results which they have been able to achieve have perhaps been inferior to those which either side might have achieved on their own with a political ally. However, the results have been valid and independent of changing political conditions.
These characteristics of the Danish model were developed in the long period from the early 1930s to the early 1980s when, with very few interruptions, the country was run by a Social Democratic government, often with the Social Liberal party as a coalition partner or supporting party. The Conservative-led Centre-Conservative government which came to power in 1982 initially came into conflict with the trade union movement when it sought to alter economic policy as the context moved from prosperity to recession. Accordingly, the government revoked the automatic indexation of pay to prices, and the confrontation culminated in a political intervention to resolve a failed bargaining round in 1985. However, from this point the picture changed and during the rest of the period up to and including 1992 there was to a large extent cooperation between the Centre-Conservative government and the social partners. A "joint declaration" was concluded by the social partners and the government at the end of 1987, whereby the former committed themselves to the principle that pay increases should be at the lower end of the range in Denmark's main competitor countries. In return, the government supported the occupational pension schemes which were established in the public sector in 1989 and in the private sector in 1991.
In February 1993, the Social Democratic Party returned to power, and has stayed in government since in alliance with one or more centre parties. Paradoxically, the change in government led to a decline in political influence for the social partners and they were not included in the decision-making process to the same extent as previously. For instance, the government carried out extensive reform of labour market policy, including changes to benefit rules, without the involvement of the labour market parties.
While it is the Social Democratic Party which more than any other party has been behind the development of the Danish model, at the beginning of the 1990s the government led by Poul Nyrup Rasmussen apparently felt a need to demonstrate its independence by accentuating a modern Social Democratic policy of reform which, if necessary, was to be carried out despite the trade union movement's opposition. On the contrary, the former Conservative prime minister Poul Schlüter gained considerably from allying with the union movement and thus realising his government's austerity policy.
When the 1998 private sector collective bargaining round collapsed and ended in a major dispute (DK9805168F), DA and LO found themselves with a prominent role again, when they had to "clean up" after their member organisations and attempt to draw up a new settlement. The attempt failed but the process greatly improved contacts between the confederations - not least between the general secretary of LO, Hans Jensen, and the managing director of DA, Jørn Neergaard Larsen. This was one of the factors which made it possible for the confederations to attempt to bring about a renaissance of their political role in the late summer of 1998.
In August 1998, on the suggestion of the government, a new "tripartite forum" with a statistics committee attached was created, aimed at playing a role in future collective bargaining rounds and in the political process. The committee's first major assignment was to consider a third reform of labour market policy, whose aims included making the "activation" of unemployed people more efficient in order to avoid labour shortages in the context of a strongly declining unemployment rate (DK9809177F). It was a major surprise when the social partners succeeded in agreeing the contents of the reform, including a reduction of unemployment benefit entitlement from five to four years (DK9810187F). This was not least a surprise for the government, which had assumed that benefit entitlement reduction would be subject to political negotiations with the parliamentary opposition. In fact, a completed reform was delivered directly by the social partners and, since it had support from a large majority in parliament, is was converted unchanged into legislation.
The labour market reform was a test case for the use of the consensus principle within the Danish model. It showed that it is when the two major confederations, DA and LO, agree on a joint initiative that they can ensure themselves a substantial influence. Unfortunately for LO, in autumn 1998, soon after the labour market deal, its second largest member organisation, the General Workers' Union (Specialarbejderforbundet i Danmark, SiD) threatened to scupper the agreement due to large-scale resistance to the reduction in benefit entitlement (DK9810187F). There thus appeared to be limits on how far LO could go in the future if a similar opportunity arose.
During the 1999 state Budget negotiations later in the autumn of 1999, the Social Democrat government agreed a reform of the early retirement scheme with the Liberals, without the involvement of the social partners (DK9812197F). Therefore, it was a common perception that the involvement of the social partners in the labour market reform was to be an isolated occurrence.
With their recent "climate agreement", DA and LO have given themselves a new opportunity to recreate their political influence. The first big question on which the parties' commitment to involvement will be tested is the negotiation of an "adult education and supplementary training reform" (Voksen- og Efteruddannelsesreform,VEU). The organisations fear that the government intends to postpone a more extensive reform, and do no more than impose a larger part of training expenses on employees and enterprises, in connection with the 2000 Budget negotiations. If such a development is to be avoided, it is necessary for the organisations themselves to agree on the contents of the reform, but this means resolving their own disagreements concerning future financing. At the end of September 1999, it proved that the parties could agree on a number of principles for the contents of a future reform. This joint solution involves not just LO and DA but also seven other important trade union and employers' organisations - the Salaried Employees' and Civil Servants' Confederation (Funktionærernes og Tjenestemændenes Fællesråd, FTF), the Confederation of Professional Associations (Akademikernes Centralorganisation, AC), the Employers' Association for the Financial Sector (Finanssektorens Arbejdsgiverforening, FA), the Confederation of Employers' Associations in Agriculture (Sammenslutningen af Landbrugets Arbejdsgiverforeninger, SALA), the Organisation of Managerial and Executive Staff (Ledernes Hovedorganisation, LH), the Association of Local Authorities (Kommunernes Landsforening, KL) and the Association of County Councils (Amtrådsforeningen, ARF).
However, in the first round of talks, the organisations could not agree on principles for the financing of training and education. LO and DA had been able to resolve the politically sensitive issue of financing in the case of the 1998 labour market reform, and without a corresponding agreement on the financing of the VEU reform, it must be expected that the government and the political parties will conclude that the parties are not able to come up with a real result. This issue is thus a decisive test for the efforts of LO and DA to re-establish their political influence.
The possibilities which have been created by the new "climate agreement" can be seen as a realisation of the strategy which LO general secretary Hans Jensen stated publicly in August 1997 in an article in the Berlingske Tidende newspaper. Whether or not the new possibilities are used by DA and LO is quite another matter. LO's idea is that there must be be a renewal of the 1987 joint declaration, which means support for pay restraint in line with the principle of competitiveness, in return for joint social partner input into larger political reforms. More generally, LO wants the new arrangement to contribute to supporting the welfare state, in line with its other initiatives in this area (DK9908142N).
DA, and especially some of its member organisations including the Confederation of Danish Industries (Dansk Industri, DI), has been against the type of very close link to the political system envisaged by LO. There has been a degree of aversion to becoming too involved in the political "game". It is under no circumstances the case that Danish employers want to withdraw from the system of extensive social partner representation in various councils and boards, as Swedish employers did in the early 1990s. However, Danish employers have been marked by a liberalising tendency, and have thus been opposed to binding cooperation with the political system. Typically, they have turned their backs on any participation in tripartite negotiations and have at the most been able to participate in less binding tripartite debates.
Perhaps the employers are now ready to give an alliance with LO, whereby a more binding political influence is sought, another chance, because they have experienced the way in which the government's independence from the social partners in the 1990s has made it easier to implement legislation which places costs on enterprises. Such developments are better controlled when the social partners are involved in the political process according to the principles of the Danish model. (Jørgen Steen Madsen, FAOS)