Employers propose reform of Danish model

In June 1999, Denmark's largest single employers' association, the Confederation of Danish Industries (DI), made a proposal for changes to the Danish collective bargaining system in the light of the major private sector industrial dispute in 1998. DI wants the use of strikes and lock-outs to be very much the exception in the future, and seeks increased decentralisation of bargaining within simplified central sectoral framework agreements, such as that between DI and its trade union counterpart, CO-Industri. DI's aim is that all the provisions of sectoral agreements could be set aside through local agreements, prevailing only if the enterprise-level parties could not agree on anything else. CO-Industri met the proposal with scepticism.

At a conference on 10 June 1999, Hans Skov Christensen, the managing director of the Confederation of Danish Industries (Dansk Industri, DI) presented a proposal for a new system of collective bargaining in Denmark. "It has to be a marked exception that a dispute breaks out, and if it occurs it has to be a logical consequence of the system's rules", said Mr Christensen. While, undoubtedly, disputes could still occur, the possibility of traditional industrial action would not not be the basis for all bargaining. Such action, according to DI, belongs to the past. Accordingly, DI proposes that the current automatic process, whereby notice of an impending dispute is issued during the bargaining round, be reconsidered.

The idea of making strikes and lock-outs more exceptional events is one of the essential points of DI's proposal for a reform of the Danish model of collective bargaining (DK9708122F), drawn up in the aftermath of the major private sector industrial dispute of spring 1998, which was ended by government intervention (DK9805168F). DI is the largest single collective bargaining party on the employers' side, representing more than 50% of the total paybill of the companies affiliated to the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA). Given its importance, there has been considerable interest in DI's preliminary evaluation work on the issue of bargaining reform, which has been underway since the 1998 dispute. The proposal presented at the June conference - perhaps because of this anticipation - was greeted by a certain disappointment in some quarters, such as DI's the closest trade union counterpart in collective bargaining, the Central Federation of Industrial Employees (Centralorganisationen af Industriansatte, CO-Industri).

DI's proposal is not entirely concrete and arguably bears closer resemblance to an introduction to a debate. As Mr Christensen expressed it at the conference, DI wants a public debate which will ensure a future development of the bargaining system which is both both promising and durable. The stated basis for DI's questioning of the way that the Danish bargaining system works today is the view the bargaining system should serve the interests of enterprises and their employees, and not the other way around,

The aims of the proposed reform

The aims of DI's proposed reform of the Danish model, and its demands for the future bargaining system, are to:

  • secure the competitiveness of enterprises;
  • make access to industrial disputes more logical and consequential; and
  • secure the largest possible leeway for local bargaining between enterprises and their employees.

It can thus be said that the reform proposal is directly connected to the tendencies which have increasingly characterised Danish bargaining over the past decade, involving a process which can be described as "centralised decentralisation" (DK9903114F) At the central level, there has to a certain extent been a move towards the creation of negotiating cartels covering larger groups of sectors, which negotiate broad framework agreements. However at the same time, within these frameworks, it has become possible to determine more and more issues, in areas including pay and working hours, through local negotiations and agreements at the level of the individual enterprise.

DI and its trade union counterpart, the CO-Industri cartel, have pioneered this development, and the former now wants to strengthen it further in order to secure a collective bargaining system which is ready for the challenges of the future.

Background to the proposals

DI's reasons for the perceived necessity of bargaining reform relate to a number of tendencies towards change, which place the bargaining system under pressure. The process of economic internationalisation is placing Danish enterprises in a tighter competitive situation, while also making them part of an international division of labour, as production has become internationalised. This strengthens the opportunities for Danish industry, but also makes it vulnerable if its costs grow faster than in other countries. If the bargaining system cannot secure an acceptable level of labour costs, the apparent risk is that activities will be moved to other countries. Internationalisation also affects industrial disputes. If a dispute forces an enterprise in Denmark to stop work, this can at the same time stop other links in the production process in other countries, and thus even brief disputes can have further reaching consequences for enterprises than previously.

According to DI, competitive knowledge-based manufacturing and service industries are a necessary requirement for maintaining Denmark's current "welfare system", and enterprises' costs are a central factor in this equation. Current low inflation rates - which will be further stabilised by EU Economic and Monetary Union and the single currency - make it particularly important to keep track of cost developments. On these grounds, DI has concerns about the existing bargaining system, which it believes has shown decisive weaknesses in terms of ensuring a reasonable development of costs.

For DI, it is clearer than ever that employers and employees share common interests when it comes to securing the prosperity of the individual enterprise. This tendency - in the eyes of DI - runs counter to a bargaining system based on 100-year-old ground-rules that assume that the parties in principle have conflicting interests and that strikes and lock-outs are a possible outcome of any bargaining situation.

Finally, DI sees changes in the composition of the labour force as an important factor. On one hand, the private sector today forms a far smaller proportion of total employment in comparison with the decades around the turn of the current century. On the other hand, the character of work has changed, with traditional hourly paid labour making up a far smaller share than previously. Employment in, for example, the rapidly growing information technology industry has become more individualised and more highly qualified and hourly paid labour is gradually disappearing completely. Thus, the traditional trade unions organise a declining proportion of private sector employees. For DI, the conclusion is that the effects of long-term disputes in the bargaining area covered by DA and the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) are no longer legitimate in relation to the rest of society.

Decentralisation of bargaining

Given that it believes that there is now very limited scope for costs to increase, DI states that it necessary to distribute a larger part of such increases directly at the enterprise level. Competitiveness can be secured only if the development of costs is determined at the level of the individual enterprise and not at a central bargaining table.

Accordingly, DI wants a bargaining system in which central sectoral collective agreements resemble more closely "umbrella" agreements. The parties at enterprise level should be able to deviate freely from these agreements by concluding local agreements to replace the provisions of the umbrella agreement. Only if it is not possible to agree locally would it be possible to fall back on the provisions of the central agreement.

Furthermore, says DI, local pay bargaining should relate more closely to individual employees in order to grant pay increases on the basis of the individual's personal contribution, rather than the enterprise's productivity and growth.

Renovation of the framework for disputes

Industrial disputes in the traditional sense are close to being considered outdated, according to DI. The background to collective bargaining should no longer be conflict, which is currently the case as strikes (and often lock-outs as well) are notified automatically during bargaining when the end of the previous agreement's term approaches. For DI, an immediate dispute is not the only valid alternative to a settlement. It does not describe in more detail what the other options are, and DI continually and entirely acknowledges the right to initiate disputes as part of the bargaining system. However, it is emphasised that all other possibilities should be tested before a dispute becomes reality, and that it has to be the natural solution that disputes in progress are suspended as soon as the parties resume negotiations aimed at reaching an agreement.

As Mr Christensen put it in his June presentation, "society has to ask us ... what right we have over and over again to threaten to paralyse society and sometimes even realise it". He questioned the perception that it was "natural" for social partner organisations "to be able to act unrestrained with serious consequences to us all".

One tangible though cautious suggestion from DI is that the lead negotiators on both the employer and the employee sides should be given an absolute authorisation to determine the outcome of sectoral negotiations, as is currently the case in bargaining at the enterprise level. The principle of membership ballots to approve agreements, which has become traditional in bargaining rounds - and which is unique in Denmark - is thus questioned. According to DI, immediate democracy will have to be replaced by a more indirect representative democracy, and any dissatisfaction with a bargaining result has to be demonstrated within the organisations concerned, and not by paralysing society.

Alternatively, it is suggested that the rules for voting in ballots on agreements be tightened so that a considerable proportion of the relevant employees must participate in a ballot to initiate a dispute. This was the case until rule changes before the 1998 collective bargaining round made it easier to reject a mediation proposal. If the old rules had been valid, the 1998 dispute would never have occurred (DK9807178F)


DI's ideas were met with scepticism on the trade union side. Max Bæhring, the general secretary of CO-Industri, did not express much faith in the possibility of accomplishing a further step in the process of decentralisation. If the bargaining level moves, the right to take industrial action will move with it, and that will be a major hazard for employers, Mr Bæhring warned.

DI's point on umbrella agreements and local distribution of increases does not seem to solve the problem of the balance between the central and the local level. When trade union members voted "no" to the proposed agreement in 1998, this was widely regarded as a sign that the contents of the central framework agreement were too meagre because they had to leave room for local pay negotiations. This problem will be exacerbated by increased decentralisation. A central umbrella agreement would contain only modest improvements, making it difficult to see that this could result in anything but complete dissatisfaction.

A solution could be to extend the term of umbrella agreements and thus create a larger framework within which to distribute the broader demands which are negotiated at this level. However, this would not change the lack of logic which decentralisation has caused: members of signatory organisations can vote directly on, and conduct disputes in relation to, central agreements, which are of diminishing importance; however they do not have similar formalised direct influence on, or a right to conduct disputes in relation to, the increasingly important local negotiations (Jørgen Steen Madsen, FAOS)

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