Social partners accept joint mediation proposal for 1998 bargaining round

A joint mediation proposal for Denmark's 1998 collective bargaining is to be put to a ballot on 27 April 1998. The employers' bargaining strategy, in which the industry sector took an exclusive role, dominated the bargaining round. In the view of the LO trade union confederation, this strategy brought negotiations to the brink of conflict and undermined support for the "Danish model" and its sector-based bargaining.

On 30 March 1998, the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) and Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) accepted the Public Conciliator's joint mediation proposal for the entire LO/DA bargaining area. This followed the conclusion of an agreement for the industry sector on 22 March 1998 by the Confederation of Danish Industries (Dansk Industri, DI) and the Central Organisation of Industrial Employees in Denmark (Centralorganisationen af Industriansatte i Danmark, CO-industri) (DK9803158F). The ballots among LO and DA members on this joint mediation proposal, bringing together and renewing approximately 600 collective agreements, will be finalised by 24 April 1998. The notified strikes and lock-outs have been called off and will be dropped if the proposal is accepted. If the proposal is rejected, strikes and lock-outs will take effect three days later, on 27 April 1997.

If 40% or more of the relevant employees make use of their right to vote, then the outcome will be decided by a simple majority. If the participation rate is less than 40%, then 25% of all those entitled to vote would have to vote "no" before the mediation proposal can be rejected. In 1997 and 1995, 30% and 33% respectively of all employees participated in the ballot.

Main elements in the joint mediation proposal

The key points of the public conciliator's proposal for the DA/LO bargaining area are as follows.

  • Pay. From 1 March 1998 and next year, the minimum pay rates in those agreements which set out only minima which are then subject to additional bargaining at company level, are increased by DKK 2 per hour. In standard-wage agreements, which set out actual rates, pay and piecework pay are increased by DKK 2.35 per hour from 1 March 1998 and by DKK 2.10 from 1 March 1999.
  • Pay supplements. Allowances for overtime, staggered hours and public holidays increase by 4,5% from 1 March 1998.
  • Pensions. Total contributions to occupational pensions funds will increase by 0.9 percentage points from 1 July 1998 (1.8 points in the industry sector, which was falling behind in this area).
  • Pay during maternity leave. This is increased by DKK 5 per hour from 1 March 1998.
  • Pay during sickness and a child's first day of sickness. This increases by DKK 5 per hour from 1 May 1998. In standard-wage agreements, with no additional company bargaining, the rate will rise by an extra DKK 5 from 1 May 1999.
  • Days off. Employees within the industry sector will have a paid day off on Christmas Eve, while employees in other sectors will have two extra days off in connection with a public holiday, as a "trade-off" for not seeking to follow industry's additional raise in occupational pension contributions.
  • Shiftwork. Pay premia for shiftworkers increase by 5%-7% and their weekly working time is reduced by one hour.

On 4 April 1998, LO recommended that its members vote in favour of the mediation proposal and DA is also likely to do so at its general assembly. The president of LO, Hans Jensen, said that a good result had been achieved with regard to pay, occupational pensions and family issues such as improved pay during maternity leave, while at the same time securing the competitiveness of Danish companies. As the minimum pay system, whereby actual pay is negotiated at company level, applies to more than 80% of the entire area covered by DA, it is difficult to offer a precise estimate of the total cost of the mediation proposal. However, using the wage increases in the standard-wage system as a point of reference for the company bargaining to follow, the cost will be 3%-4% per year.

Employers' strategy jeopardises Danish model

From the outset, DA's affiliates agreed to make explicit use of a "one-legged" or "single-tier" strategy, meaning that employers in other sectors refrained from initiating collective bargaining before the industry sector had finished. The background to this bargaining strategy was threefold.

  • With modest cost developments in Germany and Sweden on the one hand and continuing economic growth, decreasing unemployment and emerging labour market bottlenecks on the other, the risk of a costly outcome to the 1998 bargaining round was clear, and had to be avoided at nearly all costs, including that of a major conflict. In this way, it was important to let the industrial export sector set the norm, thus ensuring a modest development in Danish costs.
  • A second part of the strategy was the issue of occupational pensions. It was important to avoid a situation where trade unions duplicated the pension contribution improvements in industry, which were needed to close the pensions gap which had opened up in that sector. This would simply bring about another pension gap between industry and the rest of the private sector bargaining area covered by LO and DA.
  • The third and most subtle part of the strategy was arguably DA's need to display its ability to act cohesively and to leave behind the internal differences which occurred in the 1995 collective bargaining round, where the transport sector agreed to improvements which were unacceptable to the DI.

It was this strategy, according to some commentators, which resulted in a period of two and a half months of stalemate in the negotiations and brought Denmark to the edge of a major conflict. The last time Denmark experienced a major conflict was 1985. From this viewpoint, the bargaining strategy not only heightened the risk of an unnecessary conflict but, according to the president of LO, Hans Jensen, it could undermine the support for the "Danish model" of industrial relations: "The Danish model is a good model which has shown its efficiency. However, support for the model presupposes that the social partners negotiate their own results in their respective sectors. If there is no closeness [ie between between decision-makers and employees] and democracy in the decision-making process the system will collapse. And this should be noted by DA."

In the 1998 round, employers invented a new name for the bargaining process, calling it "coordinated decentralised negotiations", conducted at the sector level. The trade unions see the 1998 bargaining round as a successful attempt on behalf of DA to control decentralised bargaining. In their view, DA played a role which resembled the one it played during the period of centralised bargaining period up until 1981 (DK9803158F).

Hans Jensen recommends that DA consider a return to the decentralised and sector-based bargaining whereby sectors conduct bargaining simultaneously - ie not awaiting the outcome of bargaining in industry. In the view of LO, the central organisations still have a role to play, though this role should be less direct and controlling: "We [LO] have nothing against employers' solidarity within DA, on the contrary it is a prerequisite for the continuation of the Danish model, as one of the cornerstones of the Danish welfare system. But the politburo-like methods must be replaced by modern leadership methods, where cooperation regarding common goals is at the top of the agenda."

Although all of DA's affiliated organisations supported its strategy, both small and large affiliates have publicly aired their irritation, stating that they have been given the role of spectators. Both the 1995 and 1998 collective bargaining rounds have revealed an ongoing tension within DA, mainly related to the asymmetric balance of power within the employers' confederation.

Asymmetric balance of power in DA

The asymmetric balance of power in DA is a result of the reduction and merger of affiliates from 150 organisations in 1989 to merely 18 in 1998. The establishment of DI especially has made the industrial sector the dominant actor within DA. DI, with its 25 affiliated employers' associations representing 4,300 companies, is the largest affiliate of DA, representing employers responsible for 52% of DA's total paybill. DI is more than three times larger than the second largest affiliate of DA, the Federation of Employers for Trade, Transportation and Service (Arbejdsgiverforeningen for Handel, Transport og Service, AHTS).

The three largest DA affiliates - DI, AHTS and Danish Commerce and Service (Dansk Handel & Service, DHS) - represent between them 71% of DA's total paybill. The 13 largest affiliates which constitute DA's board of directors set out binding guidelines and procedures for collective agreements. Affiliates must obtain prior approval from DA before commencing collective bargaining on general questions (reduction of working time, general pay increases, new minimum rates, longer paid holidays etc) and agreements are subject to approval by DA.

Compared with LO, substantial powers are vested in DA in relation to its individual affiliates. LO can set out bargaining demands which can be followed by its affiliated unions but LO cannot reject agreements made by these affiliates.

The bargaining role of the central organisations

LO recognises that the Danish model - with increasing decentralisation of negotiating competencies to sector and company level - functions only if there is both coordination via overall framework collective agreements negotiated by strong sectoral organisations, and also an overall coordination between the sectors. In this respect and with regard to influence on policies bearing on the labour market, the central organisations have a role to play. Their role should hardly, though, be direct and "proactive", as it was during the centralised bargaining (nationwide multisectoral bargaining) period from 1951 to 1979.

A return to centralised bargaining is, as the 1970s showed, more likely to be a return to negotiations characterised by deadlock. Out of the 15 bargaining rounds conducted in the period between 1951 and 1979, eight rounds were not completed before the Public Conciliator was involved and a conciliation proposal presented. Six of the rounds ended with political intervention, of which three were successive (1975, 1977 and 1979). All in all, this period did not demonstrate the social partners' ability to achieve results by their own means. A return to or a continuation of the active coordinating role played by DA in 1998's collective bargaining will, according to some commentators, be constructive neither for the bargaining system nor for solidarity within DA.

LO recognises the role of DA as a strong coordinator of sector-based negotiations, which does not allow affiliates to put their own interests before the common interest of DA. As a consequence, LO and its affiliates may have to accept that agreements will be rejected by DA, if they are seen as jeopardising competitiveness.

Total synchronisation of all bargaining areas?

The present situation is one in which the collective agreements within LO and DA area will be negotiated in even-numbered years (eg 1998), whereas the collective agreements in the agricultural, financial and public sectors will be renewed in odd-numbered years (eg 1999).

The risk of "spillover" and trade unions' use of a "leapfrogging" strategy is imminent, and would increase costs and the risk of conflict. This may convince the public sector employers to take it upon themselves to renew the 1999 collective agreement with a view to synchronising the expiry dates with the LO and DA bargaining area. Since the agricultural sector would be affected by a major strike in the transport sector if a major conflict evolved, it too may opt for synchronisation.

Commentary

Both sides are fairly pleased with the outcome of the mediation procedure, which in essence is a classic compromise. Employers gained an overall modest increase in costs and LO achieved a real wage increase, extra paid days off, increased pay during maternity leave and sickness, and a further improvement of occupational pension schemes.

In contrast with most European countries, the Danish social partners conducted bargaining within a framework of economic growth, a decreasing unemployment rate and emerging shortages of labour. To put the result of this year's collective bargaining in context; in 1987, when Denmark was in a similar economic situation of growth, trade unions managed to achieve bargained pay rises which had a negative effect on the economy. Since then, and in line with the social partners' 1987 joint statement on keeping cost increases lower than those abroad, the social partners have agreed to avoid repeating the mistakes of the mid-1980s.

Notwithstanding the internal organisational turbulence the employers' "single-tier" strategy may have caused, difficulties may still be in the offing. It may be difficult to "sell" the mediation proposal to the individual members, as all social partners but the industry sector had little influence on the outcome of 1998's collective bargaining. Consequently, one question awaits an answer before the bargaining round comes to an end. Will employees who expected a six-week paid holiday to be introduced and who have been reading about record high outcomes for shareholders be satisfied with the result? (Kåre FV Petersen, FAOS)

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