Denmark: Heated debate about introducing minimum wage

A heated debate broke out in autumn 2014 about the introduction of a statutory national minimum wage in Denmark. The call for renewed discussion from the President of the Confederation of Professionals in Denmark (FTF) was met with opposition from most employees’ and employers’ organisations, which argued for retention of the Danish labour market model. 

Introduction

Denmark is among the few EU countries that has not adopted a statutory minimum wage or a mechanism to extend sectoral agreements. The newly elected President of the European Commission, Jean-Claude Juncker, said at his inauguration that he wants to apply a minimum wage in all 28 EU Member States. He had earlier, according to Reuters, said that he favours each Member State setting a minimum wage based on its median income. In Denmark, the coverage of collective agreements is around 85% of all employees, so 15% would at least have the protection of a statutory minimum wage.

On 16 September 2014, the European Trade Union Confederation ​(ETUC) held an executive committee meeting in Copenhagen at which the minimum wage and/or other means to safeguard European workers against social dumping were discussed. The meeting was attended by Ms Bente Sorgenfrey, President of the Confederation of Professionals in Denmark (FTF), which organises salaried employees. Ms Sorgenfrey is a member of the ETUC executive committee and also President of the Council of Nordic Trade Unions (NFS), the Nordic equivalent of ETUC.

After the meeting, Ms Sorgenfrey informed the press on 17 September that, in her opinion, and in line with most other European countries, Denmark needed a statutory minimum wage (in Danish) as an effective solution to the the problems of social dumping in Denmark and to secure a decent wage for Danish workers. She pointed to the Norwegian model where a sectoral agreement can be extended by law to cover the whole sector. Ms Sorgenfrey justified her view:

In Norway, our colleagues have positive experiences. The minimum wage has not cut them off from negotiating collective agreements and it has increased the lowest wages. Many of the European unions want the last few countries that have no minimum wage to follow suit, and besides it is not unthinkable that EU will order us to introduce a minimum wage. We ought to be prepared for this, and I think that we in Denmark can find the right solution, as in Norway, without interference from the EU.

Until the recent emphasis on minimum wages by Jean-Claude Juncker and in particular ETUC, FTF and the other Danish confederations and their respective unions – and also the majority of employers' organisations – had been standing firm on the Danish model of wage regulation. It is left to the social partners to decide minimum wages, as well as all other wage elements, through collective bargaining. This has been the common opinion since the September compromise was concluded in 1899.

Seen in this context, Ms Sorgenfrey's statement was, depending on the standpoint of the observer, either revolutionary or heretical, or seen to be bending the knee to the current European mainstream. Nevertheless, it immediately led to a heated discussion by the labour market organisations and the political parties in the Danish Parliament.

Massive ‘no’ from unions and employers

Reaction was instantaneous. On 18 September 2014, the four arguably most influential negotiators in Danish industrial relations, the president and vice-president of the union cartel in the manufacturing industry, the Central Organisation of Industrial Employees (CO-industri) and the executive director and  executive vice-director of the largest employers' organisation in Denmark, the Confederation of Danish Industry (DI), published an open joint letter in the daily paper, Berlingske, entitled Statutory minimum wage – no thanks! (in Danish) The letter begins:

FTF president, Bente Sorgenfrey, has opened a discussion about introducing a statutory minimum wage [in Denmark]. As representatives for employees and employers, it is our opinion that it will do irreparable damage to the collective bargaining model that has given us one of the most flexible and well-functioning labour markets in Europe. This model carries the characteristic that the negotiating social partners to the collective agreements also take responsibility and live with it afterwards. A central part of this responsibility is that we agree on the minimum wage [on a sectoral basis].

The letter went on to point out that a statutory minimum wage would weaken the need for individual workers to join an agreement-signing union, hence damaging union recognition, and that the essential equal relationship between the social partners would disappear. The letter claims that a statutory minimum wage would take support away from the traditional bargaining model.

This was, by and large, also the reaction from other organisations on both sides. Employers' and employees' organisations reiterated that:

  • they ‘crack the nuts themselves’ – a statement first made by the Confederation of Danish Trade Unions (LO) and the Confederation of Danish Employers (DA) in 1972 in connection with Denmark's first referendum on the EU;
  • government interference is a disaster for voluntary and broad coverage collective bargaining.

A statutory minimum wage could be high or low depending on political goodwill. The employers claimed that this would be a catastrophe for small and medium-sized enterprises (SMEs), where flexibility and absence of red tape are vital.

Painters' sector

The only organisations that had earlier supported the introduction of a kind of minimum wage were the social partners in the painters’ sector. The president of the painters' unions argued – supported by the employers – that, in his craft and trade, social dumping was a real danger for his members. He suggested that minimum wages could be introduced, through an extension mechanism of sectoral agreements, on an experimental basis in sectors with proven social dumping, such as construction – or else just in the painting sector.

Right to take industrial action could be eroded

LO, which organises both skilled and unskilled workers’ unions, also did not feel that a discussion about minimum wages was timely at the moment. A more aggressive declaration, with the character of an official statement like that from CO-industri and DI, might have been expected from LO. A possible reason why this did not happen is that talks between LO and FTF about a possible merger have intensified and LO may not want to push FTF away by overreacting. Together they would represent almost all non-academic white-collar workers and almost all blue-collar workers in Denmark, creating a new confederation of around 1.4 million active members and covering approximately 80% of all organised employees. However, LO did point out that the cornerstone of the Danish model of labour market regulation (the right to industrial action) might be in danger of losing its fundamental importance. LO believes that a statutory minimum wage would have to be enforced by the Labour Court (or even the Civil Court) rather than the existing voluntary system of out-of-court measures and the Danish Labour Court system.

Response by Bente Sorgenfrey

On 23 September, Ms Sorgenfrey defended her point of view in the daily paper Børsen (in Danish), insisting that she had never backed a statutory minimum wage solution that was issued by government bodies and monitored only by the authorities. She insisted that:

It is not left to the politicians to determine a minimum wage. This is a task for the social partners to solve. But we are forced to develop the Danish labour market model if it is to exist in the future.

She also pointed out that the Danish labour market is under pressure, as are wage-earners all over Europe. ‘Social dumping from eastern Europe undermines the wage and working conditions won over decades through continuous struggle’, she added. Again she drew attention to the Norwegian model of extending collective agreements under the authority of the social partners and the government. ‘Jean-Claude Juncker is not afraid to discuss a minimum wage in EU countries – and neither should we’, she concluded.

Commentary

The firm stance against a statutory national minimum wage among the LO family does not, however, seem to reflect the opinions of the individual members of its affiliated unions. According to a recent survey, 51% of LO’s individual members want a statutory minimum wage (in Danish) and 45% want the government to introduce legislation to make the extension of sectoral agreements possible. Respondents did not view the introduction of a minimum wage as being in competition with the collective bargaining system, but rather as complementary to it.

However, there seems to be another reason for the Danish social partners not to reject a domestic discussion about a national minimum wage. This issue is highly topical in the EU. In an interview on 15 December 2014 with the weekly LO-founded newsletter A4, the German researcher on European wage policy and collective bargaining at Hans Böckler Stiftung, Thorsten Schulten, said that while Danes might not want the EU to interfere in setting Danish wages, it is already happening (in Danish). He went on to explain:

It is correct that the EU does not have the formal competence to determine wage policy, but in practice it does - especially since the crisis, through the introduction of all these programmes which are called 'New Economic Governance': from the European Semester to the Troika programmes. ... the EU is, de facto, an actor when it comes to wage-setting.

 

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