Historic stability pact agreed in industry sector

In late January 2000, the social partners in Denmark's industry sector concluded a historic "stability pact". The term of the collective agreement has been extended to four years, while employees have obtained longer holidays in the form of five flexible extra days of leave per year, and occupational pension contributions have been increased to 9%. Due to the long term of the agreement, the total increase in costs as a result of the central bargaining will be only about 1% per year, thus leaving some room for wage increases in local bargaining without any harmful impact upon the national economy. A positive result for the employers was an agreement on more flexible working time organisation at local level.

Negotiations over a new collective agreement for the industry sector, which is taking the lead in Denmark's 2000 bargaining round (DK0001161N), started formally between the Confederation of Danish Industries (Dansk Industri, DI) and the Central Organisation of Industrial Employees in Denmark (Centralorganisationen af industriansatte, CO-industri) on 4 January 2000. The talks had been eagerly anticipated, with the dominant question being whether the negotiations would result in a deadlock, as was the case in the last bargaining round in 1998 (DK9805168F). The central organisations - the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) and the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) - were waiting on the sidelines in case anything went wrong. The negotiations took place secretly, with journalists excluded, and the expectations and possible outcomes were repeatedly discussed. In late January, the social partners suddenly emerged from the negotiating room - nearly three weeks before the deadline when negotiations would have been transferred to the public conciliation service - and declared that they had concluded a historic agreement.

The outcome can be seen as an example of what the recently deceased American labour market researcher, Walter Galenson, called "the Danish genius for compromise". It can even be described as a historic compromise. Collective agreements in Denmark are normally concluded for a period of two years, with a few exceptions of agreements running for three years. For the first time since 1911, an agreement has now been concluded which will run for a period of four years. This should mean relative peace and stability on the Danish labour market for the coming four years - a development which was naturally warmly welcomed by Danish industrial enterprises. Inflation is increasing slightly and if the Danish economy is to observe the stability requirements in relation to EU Economic and Monetary Union, it is a great advantage to have an almost complete view of the centrally agreed part of the increases in labour costs over the next four years.

The compromise in the industry sector - which to a very high degree sets the trend for the negotiations in other sectors - took the form of a "stability pact" (Stabilitetspagt). It contains positive responses to the main themes which had featured in the debate prior to the start of the negotiations. In addition to the longer agreement period, these included the question of a sixth week of annual leave and an increase in occupational pension contributions. The most important points of the agreement are as follows:

  • first and foremost, a sixth week of annual holiday has been introduced in the innovative form of five special flexible days of leave, which may be converted into wages if they are not taken by the employee. They may be taken individually over the year. The additional holiday has thus been introduced in a way which will harm production as little as possible;
  • the deal offers better possibilities for a more flexible organisation of working time at the local level. This means that the trends towards decentralisation of the collective bargaining system continues - pay and working conditions are to an increasing extent being determined by direct negotiations by the two sides at enterprise level, rather than at the central level; and
  • a further improvement in occupational "labour market" pension schemes, which were introduced in connection with the 1991 collective agreement. Over the four-year period of the agreement, pension contributions will increase to 9% of pay, of which 6% will be paid by employers and 3% by employees (the figure is only 8.1% for white-collar employees). The 9% level was the target set when the scheme was introduced and this ensures that occupational pensions will become a fundamental element of the pensions system in future.

A framework for central pay increases of about 4% for the entire period - or about 1% per year - means that there will be room for local wage improvements without this leading to increases in total wage costs which jeopardise Denmark's competitiveness. The level of increases will probably turn out to be around the 3% which was mentioned before the start of the negotiations in the report of the tripartite "statistical committee" (DK9910150F). It is also close to the 3.5% mentioned in a number of statements from LO before the start of the negotiations. This means that the agreement in itself is not so worrying as some economists have found it to be. However, the big question is now how this agreement will be implemented in the coming years by union representatives and enterprises at decentralised level.

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