The Danish model under threat?

Over summer and autumn 1997, the social partners in Denmark have been complaining over their lack of influence on government policies. This feature outlines the main characteristics of the so-called "Danish model" and examines how they might well be threatened by current developments in Danish industrial relations.

The autumn and summer of 1997 has been characterised by discussions between the two dominant confederations on the trade union and employers' sides - the Danish Confederation of Trade Unions (LO) and the Danish Employers' Confederation (DA) respectively - and the Government about the lack of influence of the social partners on government policies which directly or indirectly affect industrial relations.

The modus operandi of the Danish collective bargaining system is its close relations with the political sphere, a system which is often referred to as the "Danish model". This model is characterised by voluntary and agreement-based regulation combined with participation of the social partners in political decision-making. This link is currently being called into question.

Main characteristics of the Danish model

The Danish industrial relations system regulates relationships between workers and employers in the labour market, and consists of centralised collective bargaining between organisations at national level to agree on a basic framework for wages/salaries and working conditions for the ensuing period. It covers all major groups of employees and has played a dominant role in shaping political and social developments in Denmark for the past century.

The Danish welfare state is based on the proven ability of the collective bargaining system to function as an arena in which conflicts of interest in society can be resolved, thus contributing towards stability in economic and political development. This constant capacity for releasing tensions, defusing threatening situations and breaking crippling deadlocks has made the relationships between the social partners the main pillar of the Danish model.

This model has ramifications which may not be very widely known. The social partners are actually involved in drafting legislation and in the implementation of the provisions which are subsequently passed in Parliament (Folketing). A principle of consensus has been developed, whereby implementation of legislation pertaining to the labour market requires prior agreement between the parties involved - in the early years primarily the two original main organisations, LO and DA, but later on other main organisations on the Danish labour market gradually began to be involved too. The same principle applies to any major change in administrative practice.

The Danish model is thus underpinned by the principle of agreement-based relationships between the labour market parties. As far as possible, the parties themselves are allowed to conclude agreements to regulate their relationship, and when any legislation is implemented, the emphasis has traditionally been on the application of the consensus principle.

There have been some exceptions to this general rule, but they are too few and too insignificant to pose any real threat to the system and its underlying principle. The explanation may be that the Danish parliamentary system has continuously required extensive cooperation between centrist/right-wing parties and the Social Democrats - reflecting the relationship between LO and DA.

Criticism by the confederations

The question is whether the problems which have emerged during 1997 are a sign of changes to come and whether such changes will lead to a large-scale revision of the Danish model. Such changes could presage more legislative intervention and even diminish the traditional influence on industrial relations legislation that the confederations have had.

When the Government during the spring of 1997 enacted a revised Work Environment Act on health and safety, both LO and DA criticised the Government for not having been given sufficient influence on the content (DK9705111N). As a reaction to this the DA opted out of the health and safety system, thereby making it difficult to implement the new Act (DK9706116N)

In late summer 1997 the president of LO, Hans Jensen, was particularly critical. His criticism was partly on the lack of influence that LO has on the policies of the Social Democratic Government, and partly on the exclusion of the confederations from the policy-making process. The two confederations appear to be very concerned about this development.

Commentary

In the last 10 years Denmark's collective bargaining structure has undergone much change as the new organisations and cartels covering whole sectors have begun to exert their influence. This is particularly true of the Confederation of Danish Industries (DI) and the Central Organisation of Industrial Employees in Denmark. This development has partially weakened the influence of the two traditional main confederations.

This has called into question the central tenets of the Danish model, which has been built on a system whereby Government and Parliament have traditionally accepted the right of the social partners to be closely involved so that the two sides can effect compromises and produce answers to the problems at hand. It is easier to do this when only two main conderations are involved.

It is important to note that the Danish model is not a tripartite system which gives any of the participating parties a right to veto. On the contrary, it is a system which presupposes a positive and constructive interplay between the parties. If the politicians believe that the larger confederations are stalling the political process in areas which which the government believes to be important, they will most certainly act without regard to the social partners.

In the case of the revised Work Environment Act, it seem fair to suggest that the Ministry of Labour and the Government felt that the social partners were far too passive. Although the participants in the Danish model have very different perceptions of the process leading to the passing of the Act, and although they have encountered similar cases in the past, the parties were always able to resolve their differences - thereby ensuring the continuation of the system.

Despite the heated discussion of this summer, the most likely outcome is that the Confederations will be able to effect a similar kind of compromise. For example, the Prime Minister, Poul Nyrup Rasmussen, has recently invited the social partners to discuss the question of promoting more flexibility in allowing older workers to take early retirement. (Kåre FV Petersen, FAOS)