Tripartite agreement reached on content of new labour market reform

On 29 September 1998, the social partners and the government agreed on the content of Denmark's third labour market reform in recent years. While a number of unions are sceptical - and one has opted out of the deal - the agreement has been positively received by parliament.

On the basis of a document released in August 1998 (DK9809177F), which set out possible adjustments to present Danish labour market policy, tripartite talks began on 17 September 1998 and an agreement - entitled a "joint conclusions paper" (fælles konklusionspapir) - was reached by the government and social partners on 29 September 1998. These changes represent the third reform of labour market policy during the 1990s, following initiatives in 1994 and 1996.

Main points of agreement

The tripartite agreement, which will serve as the guideline for legislative proposals, can be summarised in 10 points.

1. Activation offers brought forward. The right and obligation for unemployed people to undergo "activating" measures is brought forward to an earlier point in their period of unemployment. For unemployed people over the age of 25, activation will take place within 12 months, and for unemployed people under the age of 25, activation will be offered within the first six months of unemployment.

2. Shorter period of benefits. The period during which unemployment benefit can be obtained will be reduced from five to four years.

3. Improved activation. Offers of activating measures will not only be made at an earlier point, but will also be of higher quality, while there will be more frequent dialogue between unemployed people and the public unemployment service.

4. More efforts directed at the most vulnerable group of unemployed people (the long-term unemployed).

5. Improved efforts to integrate people from ethnic minorities into the labour market.

6. Special rules changed for unemployed people in the 50-59 age group. Whereas the "special rules" for people aged 55-59 years remain in place, the special rules for the 50-54 age group are eliminated. At present, according to the rules, a 45-year-old unemployed person can remain unemployed for five years until the age of 50 and then, due to the special rules for those aged 50-59, remain in the unemployment system until the early retirement age of 60.

7. Training of unemployed people to be improved and made more demand-oriented.

8. Increased availability for work of unemployed people and improved control of this availability.

9. Improved relationship between the public employment service and companies, with a larger role for the latter.

10. Greater clarity in the respective roles of the different actors in the regionalised structure of the public employment service.

Reactions

Whereas the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA), the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) and nearly all the political parties in parliament are pleased with the result, two other union confederations and a number of individual unions are less content.

There is little doubt that the agreement marks an important victory for both LO and DA: a victory in the sense that - in spite of differing opinions on several points - they were able to compromise and take the initiative, whereby they managed to limit the government's and parliament's scope for political manoeuvring.

In terms of content, it was important for LO to avoid a situation whereby the right-wing political parties, with their far-reaching demands, had a say. In terms of influence, it was a chance for LO to show its ability not only to compromise, but equally to be a proactive participant in both the present reform and the reform work which will continue on other labour market issues. It was therefore with great satisfaction that LO could announce that an agreement had been reached. The president of LO, Hans Jensen, said that: "I am convinced that the tripartite agreement will result in more unemployed people getting jobs and that long-term unemployment will be reduced. This is why the agreement is beneficial for the members of LO-affiliated unions.".

DA notes that the government's call for a contribution from the social partners has been met and that the agreement meets some, but not all, of DA's own demands. As the director of DA, Ole Krogh, said, "something has been achieved, but more awaits". What awaits is a discussion on the current schemes which make it attractive for people to leave the labour market (early retirement and leave arrangements) (DK9807179N).

As well as LO, two other trade union confederations - the Confederation of Salaried Employees and Civil Servants in Denmark (Funktionærenes og Tjenestemændenes Fællesråd, FTF) and the Danish Confederation of Professional Associations (Akademikernes Centralorganisation, AC) - are also party to the new agreement. However, they are not fully pleased with the final text. By way of comments made about the agreement, FTF and AC have voiced viewpoints which differ from the agreed text. The central point of disagreement is the reduction in the previous five-year period of receipt of unemployment benefits, which FTF and AC do not see any reason to reduce to four years, since the new early activation will in itself improve the supply of labour. FTF and AC have declared that they do not find that the agreement displays an appropriate balance in the totality of the joint conclusions drawn.

In parliament, the agreement was well received by all but the left-wing parties. The right-wing parties, although they favoured more changes, recognised the importance of the agreement. As the president of the Liberal Party (Venstre), Anders Fogh Rasmussen, said:" we have no interest in creating difficulties for the leaders of LO by proposing new demands not already in the agreement." After the agreement was concluded, many political commentators noted that the agreement had taken parliament by surprise. Parliament had expected that the reform issue would take up much of its political work during the autumn.

The aftermath - union opts out of the agreement

Seven days after the agreement was reached, in his opening speech to parliament on 6 October 1998, Prime Minister Poul Nyrup Rasmussen called for a simplification and modernisation of the way unemployment benefits are calculated. A number of trade unions strongly oppose any changes in the method of calculation, and the second largest union, the LO-affiliated General Workers' Union in Denmark (Specialarbejderforbundet i Danmark, SiD), took the radical step of simply announcing (on 7 October 1998) that it could no longer be a party to the tripartite agreement on labour market reform. The reason is that SiD views the Prime Minister's proposal as constituting a breach of the agreement.

From the moment that the agreement was signed, SiD's local branches had argued that the union should not be party to the accord, but the president of SiD, Poul Erik Skov Christensen, disregarded the criticism and voted in favour of the deal, hoping that the internal criticism could be worked out afterwards. He was mistaken. On 9 October, SiD's executive body verified the decision to opt out and indirectly gave the president a verbal reprimand.

SiD had signed the agreement principally to avoid what it regarded as a worse option - namely giving the right-wing parties a say on the reform. SiD signed the agreement on the conditions that the text contained all the issues which the government could legislate on, and that no further proposals or additional cut-backs were to be made. SiD was wrong on both counts. In a press release, SiD deplored the Social Democrat-led Government's additional proposals, saying that the union "had to draw the line".

As many members of SiD work in sectors characterised by seasonal and short-term work, they will tend to be affected by the proposed changes in the method of calculating unemployment benefits. Instead of calculating the benefits on the basis of earnings in the last 12 weeks' work before becoming unemployed, the government proposes basing the calculations on the whole previous year's earnings. Although the Prime Minister emphasised that the aim was not to reduce unemployment benefits, and although the government intends to cooperate with the social partners on this matter with a view to avoiding a negative impact on certain groups of workers, SiD decided to opt out.

In order to understand the dramatic decision to opt out, which is unlikely to have any bearing on the progress of the reform, it should be remembered that a few years ago, SiD was arguably the most radical and protest-oriented trade union of all trade unions in Denmark. Following a change in its presidency three years' ago, SiD is slowly moving from being a "rebel" union towards a more consensus-seeking position.

The Minister of Labour has stated that he does not understand the reasons for the opt-out, as the social partners will be invited to talks on how to modernise the method of calculating the unemployment benefit without lowering the level of compensation for unemployed people. LO deplores the choice made by SiD, and says that it will not affect the reform.

Commentary

The third labour market reform is designed to meet a situation where unemployment is low and there is a need for labour. If the present world economic crisis continues and results in rising unemployment, the reform may be difficult to implement, as this would mean that an increasing number of unemployed people would have a right to activating measures at an earlier stage. In this perspective, it is of great importance that labour market policy instruments remain flexible and, not least, capable of being changed. As three reforms have been undertaken during the 1990s, Danish labour market policy meets this requirement.

The latest labour market reform has been more of an internal trade union struggle than a struggle about the contents of the reform. The government has at all times been able to obtain the required support for radical changes in parliament, and was by and large not dependent upon the social partners' input. Well aware of this, LO and its affiliates had to compromise substantially in order to achieve two objectives: avoiding giving the right-wing parties a say on the reform; and regaining lost ground vis-à-vis the political system.

The price LO had to pay in order to achieve the two goals has not only been internal differences but also ignoring the views of the two other union confederations, FTF and AC. Whether the price has been or will be too high, only time can tell. (Kåre FV Petersen, FAOS)