Denmark: Pay rises for public sector workers

A collective agreement giving Danish public sector workers a 4.45% pay rise over the next three years has been agreed by the Ministry of Finance and the Danish Central Federation of State Employees’ Organisations. In return, the unions have agreed to take no industrial action while the agreement is in force.

General wage increases

The agreement was struck between the Ministry of Finance and the Danish Central Federation of State Employees’ Organisations (CFU) on 6 February 2015, and entered into effect from 31 March. The unions made strong demands for wage rises during the negotiations because of the minimal increases in public sector wages in 2011 and 2013. Employers agree that this rise is economically viable.

The agreement, including general increases, means a total agreed wage increase over the coming three years of 4.45%. The social partners expect an increase of 2.1% at local level.

Union concessions on ‘adjustment mechanism’

The unions made three main concessions.

The first was a change in the ‘adjustment mechanism’, which ensures that wage increases in the public sector do not exceed those in the private sector. This means that the private sector pay increase is always ahead but that the public sector keeps pace with it.

The main principle of this relationship is the monitoring of the difference in the actual wage increases between the private and the public sector and a corresponding automatic adjustment when necessary. For instance, if wages increased by 4% in the private sector, and by 3% in the public sector, the mechanism would ensure that 80% of the difference (0.8% in this example) would be added to the public sector wage. The regulation is normally made annually, but with a small delay, after the actual wage increases are known.

In recent years, the economic crisis resulted in public sector wage rises outstripping those in the private sector. In 2008, the public sector negotiated a very favourable agreement which put its wages ahead of the private sector in 2009 just as the crisis hit wage bargaining. This brought the mechanism into play, meaning the public sector simply had to ‘pay back’ the surplus, until the 80% balance was restored.

During the latest collective bargaining talks, it was agreed that the adjustment mechanism will be applied differently for the next year. The 80% rule still applies if private sector wages increase by more than those in the public sector. However, if wages in the public sector outstrip those in the private sector, as happened during the crisis, the difference is 'paid back' at 100% to ensure swifter rebalancing. This ‘private wage safeguard’ (privatlønsværn) means the public sector cannot ‘owe’ more than they already do regardless of the general wage development.

However, despite this, the second concession by the unions in the public sector negotiations was that they agreed that the Ministry of Finance could suspend the adjustment mechanism in 2015, meaning there is no implementation from the adjustment mechanism on 1 April 2016, ‘regardless of the wage development in the private and the public sector’.

The third concession was that the unions agreed to a declaration of intent saying that it was a common aim to level the wage difference between the public and the private sectors from 2018. This means the public sector risks having another period with no wage increases – or even having to wait longer if the percentage is negative.

Important organisational agreements

Teachers’ working time rules created the biggest hurdle in the 2013 public sector wage negotiations, and there were fears that this would be repeated in the 2015 bargaining round.

The 2013 disagreement ended when the government implemented a compromise settlement by law (Act 409). However, long negotiations were needed to find a solution in the latest round when it was clear the teachers would not adopt the terms of this law as a collective agreement. The agreement reached was, in many respects, the same as Act 409, but the importance of finding a solution to the problem at local level rather than imposing it was clear.

Negotiations also took place between the Danish Trade and Labour Union (FOA), and Local Government Denmark (KL). Before the 2015 bargaining round the two unions had a common goal in an educational programme called ‘from unskilled to skilled worker’. Many of FOA’s members are unskilled and the proposal would have guaranteed an improvement in their qualifications by introducing not only a right to take part in training courses, but also a duty to do so. However, although negotiators in KL and FOA came to an agreement, FOA’s executive committee surprisingly voted down the proposal because its child and youth educators’ section said the programme would cut members' pay in the short term. The proposal, seen initially by many social partners as an interesting project in the long term, was abandoned.

Projects and soft regulation in the agreements

Some agreements in all three sectors, state, municipalities and regions have been marked by many joint projects, common understandings and declarations of intent which have come to nothing. Examples include an agreement on the psychosocial work environment, a declaration of intent about the adjustment mechanism, a project that focuses on maintaining the Danish labour market regulation model in the local government sector, and numerous similar projects in regional government.

It is not new for the social partners to agree to discuss common projects while the main collective agreement is in force. However, success in finding sustainable solutions lies, to a great extent, in the motivation and willingness of the partners. This seems to be the case with projects agreed during the 2015 negotiations.

Commentary

One could question whether the agreement reached in 2015 in the public sector was merely a renewal of existing agreements, or one offering new perspectives. However, it has led to a noticeable increase in real wages, in contrast to the two former bargaining rounds. It also includes a significant change to the adjustment mechanism. Finally, and most importantly, teachers have reached a kind of truce after long and tough negotiations over their working time.

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