Breakthrough in industry sector on brink of conflict

In March 1998, after two and a half months of negotiations, the social partners in Denmark's industrial sector agreed to renew their collective agreement. The risk of a major conflict has now been diminished, but the issue of occupational pensions may be a new stumbling block for the peaceful conclusion of the 1998 bargaining round.

On the brink of a conflict and after 41 hours of non-stop negotiations, the Confederation of Danish Industries (Dansk Industri, DI) and the Central Organisation of Industrial Employees in Denmark (Centralorganisationen af Industriansatte i Danmark, CO-industri) reached a compromise over a collective agreement for the industry sector on 22 March 1998 (DK9801147F). The new two-year agreement succeeds a three-year deal concluded in 1995.

The bargaining period of two and a half months bears witness to a very long and troublesome process, in which there seemed to be an unbridgeable gap between the parties' demands and a lack of will to conduct negotiations. Furthermore, the general election held on 11 March added to the complexity of bargaining in industry. On 22 February, negotiations between DI and CO-industri broke down. Two days later on 24 February, the Public Conciliator decided to postpone the notified industrial action by 14 days, with the result that a conflict could be initiated on 16 March at the earliest (DK9802155N).

During the campaigning over the general election, speculations about a new government and government intervention on the one hand, and various political proposals on the other, contributed to the deadlock in the negotiations. Consequently, the Prime Minister, Poul Nyrup Rasmussen, urged the social partners to conclude "responsible" agreements in cost terms, rather than speculating about political intervention. The Prime Minister also stated that the Government did not in the years to come intend to pass legislation which would increase employers' costs.

On 16 March, the Public Conciliator borrowed more time by making use of a second and last possible 14-day postponement. However, the Conciliator gave the social partners an ultimatum, saying that if there was no progress in the negotiations by 18 March, he would stop the conciliation process and allow a major conflict to break out from 20 March. At the last minute, the social partners showed their willingness to offer the necessary concessions. After over 40 hours of direct negotiations without the participation of the Public Conciliator, the social partners announced at 06.00 on 22 March that a compromise had been reached.

Details of the compromise

The compromise was a trade-off between more flexible provisions on working time, pay rises and an increase in pension contributions. The main elements of the new two-year collective agreement for the industry sector (1998-2000) are as follows:

  • more working time flexibility. The reference period within which the working week can be varied, while averaging 37 hours, was extended from six months to one year. Such working time arrangements requires local agreement between shop stewards and management;
  • as a new feature in Danish collective agreements, provisions on home-based work were written into the agreement;
  • the total contribution to the occupational pension scheme is increased by 0.9 percentage points from 1 July 1998 and by a further 0.9 points from 1 July 1999, of which employers pay 0.6 points and employees pay 0.3 points. The total pension contribution will thus stand at 5.7% of pay for blue-collar workers and 4.8% for white-collar workers;
  • pay during maternity leave is increased from 1 April 1998. For blue-collar workers, the maximum amount per hour is increased from DKK 95 to DKK 115 and for white-collar workers the maximum amount per month is increased from DKK 15,232 to DKK 18,438;
  • a reduction of working time for those engaged in shiftwork. From 4 October 1998, weekly working time for those working the second and third shifts in shift-cycle arrangements is reduced from 35 to 34 hours;
  • 24 December each year will be am extra day off with pay; and
  • the present minimum wage of DKK 76.40 per hour is increased by DKK 2.00 from 1 March 1998 and again from 1 March 1999.

The social partners evaluate the cost of the new agreement differently. When calculating the benefits from the new flexible provisions on working time, DI estimates the total cost of the agreement to be a 0.7% increase in costs per year. Since the agreement will be followed by company-level bargaining over wages, DI emphasises the difficulty in making a precise cost estimation. DI announced that it has played its part in securing the competitiveness of Danish companies; now it is up to the other bargaining units and company-level bargaining to play their part.

CO-industri traded an annualisation of weekly working time for more pension contributions, better pay during the 14 weeks of maternity leave and one more day off. The new collective agreement did not alter the shop stewards' right to co-determination and the requirement for local agreements on flexible working time. Before 1995, employers had a unilateral right to plan weekly working time. Max Bæhring, the president of the largest trade union affiliated to CO-industri, the National Union of Metalworkers (Dansk Metal), said that a good result has been achieved - better than that achieved three years ago. In the view of CO-industri, the agreement entails an overall improvement of 2.4% for employees, which leaves room for local wage bargaining that will preserve Danish competitiveness and employment.

As the industry sector's difficulties had blocked negotiations in other sectors, following the settlement 500 collective agreements still awaited renewal before 31 March 1998.

Pensions may prove to be a new stumbling block

Since all areas other than industry last conducted collective bargaining in 1997 (DK9705110F), when they agreed an 0.9 percentage point improvement in the pension contribution (to a total of 4.8% of pay), the goal of CO-industri was to close the 0.9-point "pension gap" and also to achieve the anticipated results of bargaining in the other areas which are due to negotiate subsequently. By concluding an agreement containing a pension improvement of 0.9 points in the first year and 0.9 in the second year (to a total of 5.7%), industry expects that agreements in other sectors will not exceed a 0.9-point increase in contributions. To ensure that pensions in industry will not lag behind other sectors negotiating subsequently, a protocol has been attached to the main industry collective agreement. The protocol, which is a conditional agreement, states: "It is a precondition for the collective agreement concluded on 22 March 1998, regarding the renewal of the collective agreement in industry, that the increase of the total pension contribution to 5.7% at the latest by the end of the two-year agreement levels out the differences in the pension contribution in relation to bargaining sectors within the bargaining area of the Danish Confederations of Trade Unions (Landsorganisationen i Danmark, LO) and Danish Employers Confederation (Dansk Arbejdsgiverforening, DA)."

However, the social partners have two different versions of the effect of the protocol. In the view of CO-industri and LO, the protocol means that if other bargaining sectors should raise the pension contribution above 5.7%, then the pension contribution in industry will be increased equally. In the view of DI and DA, the protocol means that if other areas exceed a 5.7% pension contribution, then the preconditions for the entire industry collective agreement become void.

After a meeting on 24 March 1998 called by the Public Conciliator, the president of LO, Hans Jensen, said that he was deeply concerned about DI's point of view, adding that the risk of conflict has increased. Other trade unions have announced their intentions to duplicate the improved pension contribution made in industry. The Federation of Building, Construction and Wood Workers' Unions (Bygge-, Anlæg- og Trækartellet, BAT) and the transport workers' group of the General Workers' Union in Denmark (Dansk Specialarbejderforbund, SiD) have stated that they too will demand a 1.8-point improvement in the pension contribution and that they do not intend to deviate from this demand. Both unions see no problem in having different levels of pension contributions; in their view, industry created the pension gap by signing a three-year agreement in 1995 instead of a two-year agreement.

Although the agreement in the industry sector has prevented a major conflict and paved the way for bargaining in other bargaining units, the pensions issue may bring 1998's collective bargaining back to the verge of conflict. Given that members of trade unions affiliated to LO see the improvement of pensions as the fourth most important task for 1998 (DK9801152N) it will be interesting to see if LO can persuade its affiliates to refrain from duplicating the pension improvement in industry and instead negotiate other improvements - for instance, an extra week of holiday entitlement.

Interventions and disputes

1998's collective bargaining has been the most tense since the conflict and government intervention of 1985. It is therefore the first time in 13 years that the Danish labour market has been close to a major conflict. Whereas the risk of conflict is regarded as a necessary element in the way collective bargaining is conducted in Denmark, seldom do the social partners realise their threats. History reveals that if a conflict breaks out in the context of centralised collective bargaining, then seldom does the conflict last for long before intervention from the political system occurs.

The "Danish model" of collective bargaining is voluntaristic and based on the principle of autonomy. This does not mean that the political system is without influence: beside the Public Conciliators Service, based on statute, a practice of political intervention has evolved where the social partners have been unable to solve the situation. It is regarded legitimate that government and the parliament (Folketinget) should intervene, when a conflict has serious consequences for society.

The first political intervention took place in 1933 and was already a feature of the Danish model in the 1930s. A review of the period from 1933 to 1997 shows that the most common form of state intervention applied to resolve a deadlock in collective bargaining has been the enactment as legislation of conciliation proposals, or, in some cases, draft conciliation proposals. On six of the 10 occasions on which the government has intervened in connection with bargaining on general demands covering the LO/DA area from 1933 until 1997, a conciliation proposal or draft conciliation proposal has been submitted to parliament as a bill and enacted. The advantage of applying this procedure is obvious. Unlike compulsory arbitration, it can be held to be a part - or at least a direct extension - of the collective bargaining system itself. Despite the hand of the legislator, the solution is - in terms of content - a result of the bargaining conducted between the parties under the aegis of the Public Conciliator.

The table below sets out a schematic survey of the various instances of intervention over the 1945-97 period.

Intervention and disputes in connection with collective bargaining on general demands in the LO/DA area, 1946-97
1946 (Intervention/dispute). Negotiated solutions in most agreement areas, but strike action taken by 30,000 members of the general workers' union. Dispute terminated after four weeks, when parliament enacted the conciliation proposal as legislation. Proposal approved by the general workers' union, rejected by the employers.
1956 (Intervention/dispute). Major dispute terminated by parliament, which enacted the conciliation proposal as legislation. Proposal rejected by workers, approved by employers.
1961 (Dispute). The division into (sector-based) groups stipulated in the negotiating rules resulted in adoption of the conciliation proposal by six of the eight groups. In the metalworking industry and transport sector, where the workers voted against the proposal, the disputes were terminated after - respectively - two and five weeks, via ratification of a revised conciliation proposal.
1963 (Intervention). Parliament prolonged the existing collective agreements by passing an act, often when the Public Conciliator had terminated the mediation process. The act provided for a supplementary amount to be paid to low-wage workers and introduction of the "labour market supplementary pension" scheme (ATP). Intervention effected with the undisclosed approval of the trade union movement.
1973 (Dispute). The Public Conciliator was compelled to give up mediation and a major dispute ensued. At the instigation of the Prime Minister, mediation was resumed and the dispute ended after three weeks, when both parties adopted the conciliation proposal.
1975 (Intervention). Thedraft conciliation proposal was enacted as legislation, when both DA and LO refused to consider a proposal based on the draft.
1977 (Intervention). The draft conciliation proposal was enacted as legislation. LO approved the draft but DA rejected it. Thus the draft could not be used as the basis of a proposal. However - in private - the employers relied on the votes of the Conservatives in parliament to have the draft adopted.
1979 (Intervention). Parliament passed an act prolonging the existing agreements - with certain adjustments - for a further two years, when the Public Conciliator's attempts failed. This intervention was carefully planned and effected on the basis of a prior agreement with the trade union movement, despite protests from the employers. The intervention was effected by a coalition government of Social Democrats and Liberals. The Conservatives voted against the bill.
1985 (Intervention/dispute). Parliament legislated to terminate a dispute. The centre Government decided to apply its own narrow solution when drafting the legislation, although a "provisional draft conciliation proposal" had been drawn up, which LO had privately approved and DA had rejected.

Note: The survey lists only instances of intervention related to the entire LO/DA area - apart from the intervention to end the strike by the general workers' union in 1946, which was a key issue in the bargaining. There have been numerous instances of intervention to settle disputes in specific areas - on more than 30 occasions between 1933 and 1998. For the past few decades the government has also intervened by introducing economic policy measures.

The intervention and the disputes can be perceived as characterising situations in which the collective bargaining system - in the form of direct negotiation between the parties and attempts at mediation by the Public Conciliator - have failed. If we confine ourselves to the post-war period, it emerges that eight of the 27 bargaining rounds conducted during the 1946-91 period failed, totally or partially. Problems have thus arisen during roughly every third bargaining round. The survey also reveals, however, that the problems arose mainly during the 1970s, with a major dispute followed by intervention on three successive occasions.

Commentary

As in the 1995 collective bargaining round, DI has played a major role in the 1998 collective bargaining round. This role has been criticised by trade unions, which state that not only has DI, via DA, kept employers in other bargaining units from initiating negotiations for two and a half months, the industry employers have also taken the liberty of defining what should or should not be negotiated in other sectors. In the eyes of trade unions, the centralised bargaining between LO and DA abolished in 1981 has merely been replaced by a strong centralisation conducted by employers in industry. Although it was agreed within DA that DI should conclude its agreement prior to other sectors, some dissatisfaction has been voiced by DA's affiliates and major companies. DI is clearly the largest affiliate of DA, representing employers responsible for 52% of DA's total paybill and 25 affiliated employers' associations representing 4,300 companies. The 1995 and 1998 collective bargaining rounds suggest that in the future a better balance will have to evolve - a balance which takes into consideration the large minority of employers in transport, construction and service. (Kåre FV Petersen, FAOS)

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