Collective bargaining system is out of step

Denmark is heading towards uncontrollable wage increases, due to the fact that the various collective bargaining rounds have been out of step since 1995. The four-year duration of the current agreements in the trend-setting bargaining area covered by the LO trade union confederation and DA employers' confederation - which was intended to provide a long period of peace with room for a steady development in costs - risks becoming the source of unrest, politicisation and a more rapid increase in wages. These are the finding of an analysis published in September 2001 by researchers at the University of Copenhagen.

In spring 2000, the social partners in Denmark's trend-setting collective bargaining area - that covered by the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) - concluded new sectoral collective agreements with a four-year duration, providing for significant increases in occupational pension contributions, moderate wage increases and an increase in annual leave to six weeks (DK0002167F). The idea was to introduce a sort of 'stability pact' after the large-scale industrial dispute in 1998 (DK9805168F). The four-year duration was intended to created peace on the labour market, combined with bargaining outcomes which were acceptable from a social and economic perspective, and with enterprises knowing most of their increases in labour costs for a longer period than the normal two years in advance.

However, as the situation looks in autumn 2001, and after new negotiations in other smaller bargaining areas, the long duration of the agreements in the DA-LO area may turn out to be something of a 'self-inflicted injury'. This is the conclusion of an analysis published on 24 September 2001 by Jesper Due and Jørgen Steen, researchers at the Employment Relations Research Centre (Forskningscenter for Arbejdsmarkeds- og Organisationsstudier, FAOS) at the University of Copenhagen.

Vacuum leads to politicisation

According to the FAOS analysis, one of the consequences of the long agreement duration has been that a 'vacuum' which has arisen due to the absence of the normal negotiations every two years is being filled by a 'politicisation' of labour market issues, on the part of both the government and the social partners. In a certain way, it could be said that the inertia of the Danish collective bargaining model has been disturbed. Matters which would normally be resolved at the negotiation table have now turned into contested political issues.

In the light of the upcoming general election campaign (the election is due by March 2002), the right-wing opposition has suggested legislation concerning part-time work, unemployment insurance funds covering several sectors and abolition of the current tax deduction for unemployment insurance fund contributions, while all parties have been taking part in a discussion of new rules concerning maternity leave and parental leave.

The transposition of European Union social legislation has also been influenced by the new environment. The EU Directive on part-time work (97/81/EC) has been implemented through legislation (DK0106125F, which is something of a break with tradition in relation to the traditional Danish bargaining model, and a deviation in relation to the working time Directive (93/104/EC), which was implemented through collective agreements (DK0001164F).

Collective bargaining out of step

Three factors may turn out to be decisive for the future of what was intended to be a long period of peace on the labour market.

First, wages in industry, building and construction, and the transport sector (ie the DA-LO area) are growing by 5% per year in 2001 - the highest level in the western world at present (according to DA statistics). By comparison, wage growth in both Sweden and Germany, for example, is comfortably under 3%.

The second factor is the result of the 2001 bargaining for slaughterhouses and meat factories (part of the agricultural bargaining area, which is outside the DA-LO field). The negotiations in the relatively small slaughterhouse sector ended with a result which was quite contrary to 'the spirit of 2000' when the DA-LO negotiations were conducted in an atmosphere of stability and reconciliation which was most evidently manifested in the so-called 'climate agreement' concluded by DA and LO (DK9910151F). The slaugherhouse negotiations were certainly not characterised by this better 'negotiating climate' with a corresponding moderate result. Three ballots took place among the members of the Danish Food and Allied Workers' Union (Nærings- og Nydelsesmiddelforbundet, NNF) before a compromise was finally adopted (DK0104117F) The result was an increase in wages over a two-year period corresponding to the agreed wage increases in the DA-LO area during the whole of the present four-year period.

The third factor which may turn out to be a 'bomb' under the intended peace period of four years is related to this situation. Collective bargaining on the Danish labour market has become out of step - ie the pay bargaining rounds for the various areas do not coincide, with at least some sectors negotiating in each year, rather than all sectors bargaining in the same year - and this may make room for unintended wage increases. It may become more tempting for unions and workers to promote their own wage interests if bargaining takes place in individual sectors at different time intervals. Thus:

• in 2002, the state and county/municipal sectors will be negotiating the renewal of their current three-year agreement (DK9903114F);

• in 2003, the slaughterhouse sector and the financial sector will enter a new bargaining round. Both sectors concluded two-year agreements in 2001 (DK0103116F). 'Midway' negotiations will also take place in the industrial sector, but without any right to take industrial action;

• in 2004, the major, trend-setting DA-LO field - industry, building and construction and transport – will be negotiating a renewal of the present four-year agreement; and

• in 2005, negotiations will be taking place in agriculture for the so-called 'green sectors'- covered by LO and the Confederation of Employers' Associations in Agriculture (Sammenslutningen af Landbrugets Arbejdsgiverforeninger, SALA) - which in the 2001 negotiations followed the four-year period in the main private sector field DK0101112F.

Commentary

With negotiations now taking place in some sectors every year, wage growth may enter an upward spiral. Thus by 2004 when LO and DA - still attempting to continue the 'spirit of 2000'– bargain again, the wage expectations for the bargaining result in Denmark's dominant trend-setting sector may be excessive.

The problem is unlikely to arise from the bargaining rounds taking place in the public sector. Nor from the finance sector where negotiations are highly regulated, with the two sides having agreed on a new structure for bargaining and collective agreements six months before the most recent negotiations took place in the spring of 2001 (DK0011103F). The problems are in the slaughterhouse sector where the traditional 'proneness to disputes' on the employee side (DK0009198F), combined with an employer side with a weak foundation and focusing very much on economic aspects, may very well again lead again to a high settlement in 2003 - the year before LO and DA next sit down at the negotiating table.

This may have unintended consequences in organisational terms. It is possible that the employers' organisation in the slaughterhouse sector, Slagteriernes Arbejdsgiverforening (SA), will have to bend to the will of the rest of the employers and give up its independent bargaining competence. The result may be that it will join DA, perhaps through membership of the Confederation of Danish Industries (Dansk Industri, DI). This would give SA access to a protected strike fund which is not open to it now. On the employee side, the slaughterhouse workers in NNF may be forced to join the General Workers' Union (Specialarbejderforbundet i Danmark, SiD). Both scenarios are not an immediate possibility. However, a dispute is likely to break out if the two sides fail to arrive at a result in 2003 which is acceptable for the employers.

In addition, the four-year agreement period has created a vacuum for a politicisation of labour market issues. The EU working time Directive would probably have been implemented through legislation, if the two sides had not sat down at the negotiating table every second year. (Carsten Jørgensen, FAOS)