Compromise means renewed stability in Danish industrial relations

The conclusion in January and February 2000 of new four-year collective agreements covering most of the private sector has resolved an essential problem in the continuing "coordinated decentralisation" of the Danish collective bargaining system. The Danish bargaining model has adapted itself to meet the requirements for flexible, enterprise-oriented solutions which Danish enterprises are facing in an internationalised economy. The good "homework" done by the organisations prior to the start of the negotiations - including the September 1999 "climate agreement" between the LO trade union confederation and DA employers' confederation - was a contributory factor to the conclusion of the first agreements in the industry sector and in building and construction, and thus to the prospect of a solution for the entire DA/LO area with promising future perspectives.

The four-year agreement for the industry sector concluded in January 2000 between the Confederation of Danish Industries (Dansk Industri, DI) and the Central Organisation of Industrial Employees in Denmark (Centralorganisationen af industriansatte, CO-industri) (DK0002166N) (followed soon afterwards by the building and construction sector) not only created a trend-setting basis for the 2000 negotiations in the entire area covered by the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) and the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO); results were also obtained which have important implications for labour market regulation in the future and which may thus be characterised as being of a "historic" nature. The key aspects are:

• the extension of annual leave in the form of five flexible extra days of leave, which - in combination with decentralisation trends seen during the past decade - seems to draw the contours of an increasingly more enterprise-oriented, and consequently maybe more individualised, collective bargaining system;

• the trade union movement will over the coming four years achieve the preliminary target (contributions of 9% of pay) set for the extension of occupational "labour market" pension schemes when they were introduced in 1991. This ensures that the new pensions will form a solid pillar of the general pensions system in the future;

• the start of a development in direction of an amalgamation of collective agreements for, respectively, manual workers and salaried employees in the industry sector; and

• the term of the collective agreements (four years) and the continuation of both an overall solution for the entire DA/LO areas and negotiations at sector level. This provides a model which ensures a balance between centrally negotiated and locally agreed improvements and thus a higher degree of certainty for the adoption of central compromises. It is considered that it will be possible through sector-level negotiations to adapt even general improvements to the special conditions in specific sectors.

Industry operates the "minimum pay" system (whereby the sectoral agreement sets only minima which are built on by subsequent local bargaining). During the subsequent bargaining process in other sectors (DK0002167F), it turned out to be possible to transfer these results to the so-called "standard pay" area (whereby the sectoral agreement sets actual rates) in which the long agreement period could have led to serious problems because it is not possible to conduct local-level wage negotiations during the term of the collective agreement. The final result was thus an overall result for the entire DA/LO field. This means that the signs of crisis in the bargaining system which had been hovering on the horizon in recent years seem to have vanished, at least for some time to come.

Strategies prior to the start of the negotiations

The serious industrial dispute in 1998 (DK9805168F) left the Danish collective bargaining model on the edge of a crisis. This feeling of crisis was based on the fact that it was hard to imagine how the existing organisational and bargaining system would - with the instruments used so far - be in a position to produce sustainable bargaining results in the future.

The course of the negotiations for the renewal of collective agreements in 1998 left DA with such a huge internal problem that there was a serious risk of the dissolution of employers' associations. If this was to happen, the Danish collective bargaining model would be in a deep trouble. The possibility of an impending serious crisis was further confirmed by the way in which the final political intervention to end the dispute was made in 1998. Political intervention was legitimate - according to the traditions of the Danish collective bargaining model - but it arguably took place not so much because of social-economic considerations as of considerations concerning the then up-coming referendum concerning the Amsterdam EU Treaty. It was important not to lose this referendum and for this reason the government decided to add some extra freedom of manoeuvre during the last phase of the negotiations between the two central organisations, DA and LO.

The developments since 1998 clearly show that the two sides of industry have been very attentive towards any alarm signals of an impending crisis. There has been a strong common concern about the future of the collective bargaining model and both sides thought it important that the bargaining round in 2000 should be used to demonstrate that the social partners are still capable of solving labour market problems. They had to reach a compromise which would fight off any trends towards crisis. The conclusion of the so-called "climate agreement" between LO and DA in September 1999 (DK9910151F) - an agreement which showed the will to compromise - was the first clear signal that the two organisations wished to avoid a repetition of the problems in 1998. On the employee side, the start of the 2000 negotiations was clearly characterised by the fact that the union negotiators were very conscious of controlling the level of expectations (DK9912160F). From the very start, the sixth week of annual leave - in the form of five special extra days of leave - was a central demand in bargaining in 2000; the cornerstone for such a demand had been laid in the early months of 1999 in the public sector (DK9903114F) and in the agricultural sector (DK9902110F), with the introduction of three special days of leave. This was the union members' main demand which was taken up in the negotiations. In addition, there was the extension and further development of occupational pension schemes - a theme which was given high priority, not least by the negotiators. At the same time, it was an implied condition that these aims would require a longer duration of agreements - simply to obtain enough financial resources to achieve visible results and thus a higher degree of certainty that the members would support the bargaining outcomes in the subsequent ballots.

All promises kept

The negotiations were completed by the third week of January 2000 in the industry sector and on 22 January the main negotiating parties signed a four-year agreement. With five extra special days of leave and the full extension of occupational pension schemes, the results were very significant from the employees' perspective. It was remarkable that the negotiators fulfilled exactly the promises they had given prior to the start of the negotiations - not more, not less. The prolongation of the agreement period - in most cases a doubling from two to four years - was the factor which made it possible to introduce these significant improvements. For the enterprises, the long period during which they can make arrangements based on reliable knowledge about the level of labour-related costs is a vital factor. On top of this, the trend towards the decentralisation of decision-making processes to the individual enterprise - concerning working time, for example - has continued.

Commentary

Flexibility is an essential keyword in the new collective agreements. It is also the keyword when it comes to the survival chances of the Danish collective bargaining model in the new millennium. This is clearly illustrated by the fact that DI's principal negotiator and president, Hans Skov Christensen, has described the compromise as "the collective agreement of the future". Flexibility is built into one of the main results of the settlement, the five special extra days of leave. It is not an additional week of holiday - in the sense of the Holiday Act - but days of leave which are to be organised in accordance with the needs of both the enterprises and the employees; if not taken by the employee, these days may be converted into cash payment. The second key aspect of the settlement deals with the extension of occupational pension schemes. In the course of the four-year agreement period, most groups will reach the target set when the labour market pension schemes were introduced in connection with the 1991 bargaining settlement. This takes the form of contributions of 9% of pay, of which the employers pay two-thirds and the employees one-third. The third key issue relates specifically to collective agreements in the industry sector: it has been agreed to work towards an amalgamation of agreements for manual workers and salaried employees into a single "umbrella" agreement. This development reflects the trends in enterprises towards a closer involvement of employees and towards giving employees a higher degree of influence on their own working conditions.

The fourth, and most important, point is the duration of the collective agreements. The four-year period in itself justifies labelling the agreement in the industry sector as "historic" - such long agreements are virtually without precedent. This is further accentuated by the fact that there will be mid-term negotiations after three years without any right to take industrial action. It is certainly not common in Danish industrial relations for the two sides of industry - as they have done with these mid-term negotiations, in which assistance from a conciliator may be sought - to introduce a sort of arbitration system in connection with disputes of interest. While elements pointing in this direction may be found in the rules concerning the administration of existing agreements and the relationship between the two sides during the term of the agreement, it is a unique feature that something resembling new elements should be introduced into the process of renewal of collective agreements.

Finally, it should be noted that the agreements have been met with an exceptionally positive response from the members of the negotiating bodies. Seen in this light, it would be a major surprise if the compromise in its present form is not adopted for the while DA/LO area at the beginning of March - a result which would highlight the peaceful outcome of one of the most remarkable collective bargaining rounds in Denmark in modern times. (Jørgen Steen Madsen, FAOS)