Unions upbeat about post-crisis wage bargaining

A new round of collective bargaining has begun in Denmark. On 7 January 2014, negotiations started in the private sector between union confederation LO and employer group DA. Workers are hoping for wage rises because the outlook for the Danish economy is now more optimistic. Low inflation is also raising hopes of an increase in real wages, unlike the outcome of negotiations in 2012 and 2010. Two other important issues to be discussed will be training and social dumping.

Background

On 7 January 2014, a new round of collective bargaining started in Denmark in the private sector, under the auspices of the Danish Confederation of Danish Trade Unions (LO) and the Confederation of Danish Employers (DA). The negotiations covers almost 600,000 employees.

The current agreements, which were signed in 2012, expire on 1 March 2014 (DK1201019I).

The last two bargaining rounds in the private sector have resulted in short two-year agreements. This had been mainly due to insecurity over the future of the economy as a result of the financial crisis that started in 2008 (DK0903029Q). The two previous rounds saw very low wage increases and a small decline in wages in real terms.

The negotiations in the private sector are setting conditions for two main wage systems:

  • the minimum wage system is a flexible system where only minimum wage increases are negotiated at central level and the actual wage is negotiated at company level;
  • the normal wage system where wages are negotiated at central level only.

Around 85% of the employees in the sectors governed by LO and DA are covered by the minimum wage system.

Industry sets the pace

As in previous years, negotiations in the industry sector mark the beginning of the new round of talks. These industry sector talks take place between the negotiation cartel, the Central Organisation of Industrial Employees (CO-industri) and the largest employer organisation in Denmark, the Confederation of Danish Industry (DI). The outcome of the so-called Industry Agreement, covering 240,000 employees, sets the template for other groups in the private labour market under the domain of LO and DA.

Once the social partners in industry have reached an agreement, the next sectors to negotiate will be construction with 110,000 employees and transport covering 80,000 employees. Around 45,000 clerical and commercial employees will be covered by further negotiations, as will 22,000 in the cleaning sector, and 10,000 employees in hotel, restaurants and catering.

Optimism on the union side

There appears to have been some upturn in the Danish economy, although it is still not stable. This year’s negotiations are characterised by optimism on the employees’ side.

Exports are growing again and leading economists and influential employers said publicly that they are optimistic about the state of the economy. These statements have been noted by unions, and union negotiators have said they believe that they have gained a little momentum in the talks.

Employers urge caution

Optimism from employers has come largely from exporting companies. Companies which are more dependent on the domestic-market have warned that Danish employees’ wages are still above those in Germany and Sweden, and both are influential in the Danish market.

At the opening of negotiations, the Director General of DI, Karsten Dybvad, said ‘a reasonable level of real wages is only achieved through a strong overall competitiveness’. Without going into details on the first day of negotiations, he still signalled that employees should not expect to receive large wage increases.

However, in comparison to the 2010 and 2012 rounds, wages are expected to be a more important issue in negotiations. It is also thought that the employers will find it very hard to justify a continued crackdown on wages and a final settlement is in danger of being rejected by the unions if some improvement is not accepted, leading to serious conflict and unrest.

Effect of low inflation

The current low inflation rate may help stave off industrial unrest over wages. The increase in the consumer index is the lowest in 40 years, estimated to have been just 1% in 2013 and to be no more than 1.5% in 2014. This means that even small nominal wage increases will improve real wages. The situation will, of course, be different in different companies and different sectors.

It will be easier for sectors covered by the minimum wage system to adjust to a flexible solution. The transport sector follows the normal wage system. This sector will have to interpret the signals from the Industry Agreement and transform them into a deal that remains sustainable during the agreed peace period of the agreement.

Some commentators believe low inflation could benefit both parties. They say either side could claim a ‘victory’ if a rise in real wages is secured. It is also believed that the pressure for wage increases at company level – and thus also in the normal wage area at central level – will be considerable this year after the modest increases of previous years.

Training as path to jobs

Since 2000, education and training have had an increasingly important role in collective bargaining. This year’s negotiations are expected to be no exception. Unions believe education and training is the way to secure jobs and support innovative jobs in an increasingly globalised world. Education has also been a lever for the unions when actual wage increases remained low.

Experts believe negotiations this year will focus on improved vocational training courses. These have received substantial criticism, with increasing pressure being put on employer organisations and companies to take responsibility for more apprentices.

The LO-affiliated unions are very aware that there is imminent danger of a skills shortfall in Denmark, given the quality of vocational training courses and lack of apprenticeships, resulting in a low intake of young people.

Unions may also demand individual ‘training accounts’ to give employees the right to self-selected further education and training that they can take from job to job. Currently the right to self-selected education has to be earned from scratch in each new job.

Unions and temporary agency work

In 2012, there was a significant increase in temporary agency work, particularly in industry. Denmark’s three largest temporary work agencies recorded a 20% increase in temporary agency work.

Temporary agency workers have always been an issue for the unions.

Although temporary agency work agreements are in force in most sectors, the rights of such employees to pensions and further training are unclear.

Agency workers tend to be hired by employers who want the size of their workforce to be flexible. However, unions in the industry sector claim that hiring and firing under Denmark’s flexicurity system is already very flexible, and agency work is not a solution companies need.

Unions are also unhappy that many foreign temporary agency staff work in transport and construction without a collective agreement. So during this bargaining round, the unions will probably demand that the shop steward is informed about the intended use of temporary agency workers by the company so that the issue can be more openly discussed.

Social dumping

The use of foreign temporary agency workers overlaps with social dumping, another key issue in this year’s bargaining round.

This was also an important subject in the low-wage bargaining rounds in 2010 and 2012 (DK1003031I) (DK1103019I). In this round, it is likely to be an important topic during negotiations for transport and particularly construction (DK1301019Q).

In 2012, the Construction Group of the United Federation of Danish Workers (3F Byggegruppen) argued strongly on two fronts. Firstly, the union’s leaders demanded the introduction of a ‘compensation benefit rate’ to be introduced when piecework rates are replaced by a flat rate. The argument is that many employers use the minimum wage system in the construction sector as if it was a normal wage system. They don’t have wage negotiations at company level and simply pay the agreement’s minimum rates.

The unions want the introduction of compensation for not working due to the rules of piecework.

Secondly, the union called for main contractors to be obliged to make sure subcontractors observed collective agreements.

The Danish Construction Association (Dansk Byggeri) flatly refused both demands in 2012. The challenge for the construction sector social partners in 2014 will be to see if they can make any progress on these issues.

Further developments

Other sectors have started their own negotiations in parallel to those for industry. When the industry sector reaches agreement, the other large sectors – construction, transport and service – will seek an agreement that closely follows the trend set by the industry settlement. The construction, transport and service deals will be supplemented with sector-specific agreements.

DI is also the main counterpart union in transport, in the normal wage area, and this gives the union a powerful role in private sector collective bargaining.

The current agreement expires on 1 March 2014. If social partners cannot agree, it is possible industrial action could start in mid-April. Unions have already talked about areas which could be involved in conflict.

Carsten Jørgensen, FAOS, University of Copenhagen

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