Prospects for 2004 bargaining round examined

In January 2004, collective bargaining is set to open in the major part of the Danish private sector covered by the DA employers' organisation and LO trade union confederation, which last negotiated in 2000. In a difficult economic and social context, the key issues in bargaining are likely to include occupational pensions, maternity/paternity leave, wages for apprentices and trainees, and working time flexibility. Following a mixed experience with the four-year agreements signed in 2000, the duration of the new agreements is set to be a major point of debate.

Collective bargaining in the early months of 2004 over new collective agreements in the trend-setting private sector bargaining area covered by the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) - to succeed the four-year agreements concluded in 2000 (DK0002168F) - is likely to be very difficult. The current economic situation sets a very narrow framework for the improvements that can be negotiated, while the labour market policy of the coalition government of the Liberal Party (Venstre) and Conservative Party (Det Konservative Folkeparti) since it came to office in 2001 (DK0112147F) has led to uncertainty as to the political interventions that can be expected in some key fields. It will also be difficult for the negotiators to build a bridge between the employers’ demands for increased flexibility and the trade unions' demands for improvements in relation to special working time arrangements.

It is not possible to exclude the possibility of a process like that in 1998 which ended up in a large-scale conflict (DK9805168F), but a compromise seems to be a more likely scenario. As always, it will be the bargaining parties in the industrial sector who will set the agenda. Following the usual informal discussions over the summer, the Confederation of Danish Industries (Dansk Industri, DI) and the Central Organisation of Industrial Employees in Denmark (CO-industri) bargaining cartel published on 29 October 2003 their common timetable for the upcoming bargaining rounds which will start in early January 2004. This leaves just over a month to reach a compromise as the two sides have agreed that the negotiations should be concluded by 10 February, at the latest, so that it will not be necessary to denounce the existing collective agreements. However, if the social partners in the industrial sector are to realise their ambition of once again being the first to complete negotiations and thus conclude a trend-setting agreement for the entire LO/DA field, it will - as in 2000 (DK0002166N) - be important for the agreement between CO-industri and DI to be in place several weeks earlier than 10 February. Otherwise, the partners in other bargaining fields will start to become impatient. In order to avoid such complications, a decisive phase in the industrial sector negotiations can be expected towards the end of the third week of 2004.

New negotiators

An unknown factor in the forthcoming bargaining process in the industrial sector is that three out of four of the key negotiators have been replaced since the last bargaining round in 2000. The question is whether the new participants will be able to create a balance in their mutual relations and a climate which will enhance the possibilities of reaching a compromise. In a situation like this, there is always a risk that the new negotiators may misread each other and that unforeseen complications may arise, according to commentators. However, in the present situation, it is though that this is not very likely.

On the employer side, it is still the managing director of DI, Hans Skov Christensen, with decades of experience as a compromise-maker, who will lead the negotiating team. His new partner, director Kim Graugaard, also has long experience in both DA and DI. The greatest change has taken place in CO-industri. It will be a tough job to replace the former leading negotiators on the employee side, Max Bæhring and Willy Strube. However, the newcomers are thought to have the required experience and capacity to cope with this task. This applies to both Thorkild E Jensen, the new president of the Danish Metalworkers’ Union (Dansk Metal) and thus - based on an understanding between Dansk Metal and the industrial sector of the General Workers’ Union (Specialarbejderforbundet i Danmark, SiD) - president of CO-industri, and Børge Frederiksen, the president of the industrial sector of SiD and vice-president of CO-industri, .

'Climate agreement' renewed

The timetable for negotiations in the industrial sector will set the standard for the 'rules of the game' for other bargaining fields in the LO/DA are. LO and DA have also, at the same time, negotiated a renewal of the so-called 'climate agreement' (klima-aftale) which they concluded prior to the collective bargaining rounds in 2000 (DK9910150F). During discussions within the framework of the Public Conciliation Service (Forligsinstitutionen) in connection with the conclusion of the 2000 agreements, LO and DA agreed that the climate agreement should be renewed in due time prior to the next bargaining round. However, they succeeded only at the last minute, in November 2003.

The new climate agreement for 2004's collective bargaining is mainly a repetition of the former agreement. The negotiations are to be left to the bargaining organisations at sector level. The official title of the climate agreement reflects this: Agreement concerning the framework for the organisation of decentralised negotiations on the renewal of collective agreements. The agreement sticks to the previously formulated 'rules of the game' concerning matters such as termination of agreements, and notice and timing in connection with industrial action. These rules aim at promoting compromise and reducing the risk of industrial action. The agreement also maintains the consensus about joint publication of the agreements concluded.

There is no major role for the central organisations (DA and LO) in the expected bargaining process. This will be the domain of their member organisations. The position of the central organisations is best described as a status quo situation. No change has taken place as regards the major shift which has occurred towards the sector organisations, and the central organisations have not been able to take up the tasks which they more or less imposed upon themselves in connection with the conclusion of the collective agreements in 2000, in order to maximise their influence within the framework which has now been set up (DK0003172F). There has been too much disagreement between LO and DA for this to occur. This concerns, for instance, their joint work in connection with an analysis and monitoring system in the field of equal treatment and discrimination (DK0309103F), and also an assessment of the supplementary labour market pension scheme (Arbejdsmarkedets Tillægspension, ATP) with a view to its integration into other occupational pension schemes (DK0310103F).

However, it looks as if the central organisations will have an important coordinating function in the 2004 collective bargaining rounds. This it primarily due to the fact that the employer side is sticking to the current system of 'coordinated decentralisation'. The negotiations are left to the organisations authorised to conclude collective agreements, with DI playing a major role. However, because DI - as the dominant organisation on the employer side - will not only negotiate on its own behalf, but also wishes to ensure that the parties in other sectors do not accept agreements too favourable to employees which could later have a 'knock-on effect' on the industrial sector through local wage bargaining, it will need DA to ensure coordination.

This situation will - during the last phase of negotiations within the framework of the Public Conciliation Service - give LO and DA an important role as a mediator in relation to those sectors that have not been able to come to a result on their own. It will, in particular, be political pressure for the creation of 'maternity/paternity funds' (see below) which may give LO and DA an important coordinating function, as dealing with this matter will require coordination across the various sectors.

The 'third actor'

The shift in government which took place in 2001 has led to some turbulence. Claus Hjorth Frederiksen, the Minister for Employment in the new Liberal/Conservative government, made a number of proposals under the label of a so-called 'freedom package' (DK0112147F). They were seen by the trade union movement as ideological attacks on themselves. However, these proposals have arguably proved to be nothing more than 'markers' and the changes introduced have not generally had major effects, especially as it has turned out that the Danish People’s Party (Dansk Folkeparti, DF)- on which the government relies for support - has in a number of cases become an unexpected ally of the trade unions. An example of this is the fact that it has not been possible to carry through the government’s proposal to prohibit closed-shop agreements (DK0207103F). The Danish People’s Party consider these agreements a necessary safeguard against the consequences of the upcoming enlargement of the European Union, with the addition of 10 new countries, eight of which are in central and eastern Europe, in May 2004. However, the government has had some success. The most notable was its insistence on the adoption of new legislation on part-time work which seeks to make access to part-time work easier, by means including the controversial abolition of restrictions on the use of part-time work laid down in collective agreements (DK0206102N). It could thus be argued that through these initiatives the new government - as the 'third player' in labour market regulation - has damaged its relations with employers' organisations and trade unions, notably the latter.

Difficulties soon emerged with regard to the four-year term of the collective agreements signed in 2004. When new problems arise it is difficult for politicians to have to wait up to four years to see them solved through collective agreements. The principles of the 'Danish model' of industrial relations mean that it is important that decisions are taken after consultation with - and preferably in consensus with - the social partners on matters which have a direct bearing on labour market conditions. However, the impatience of the political players and LO’s wish to obtain immediate results meant that some proposals were carried through in 2000-1 'over the heads' of the employers. LO was criticised for engaging in a form of 'forum shopping', whereby if the unions cannot obtain what they want through negotiations with the employers, they go to the politicians instead. This, it is argued, will undermine the social partners’ shared regulation. On the other hand, LO claimed that DA was not playing a very constructive role in the negotiations on the issues concerned, adopting a consistently negative attitude and lacking the necessary will to compromise which is one of the cornerstones of the Danish collective bargaining model. The result was the adoption of a number of acts, including an amendment of the Working Environment Act (DK0107128F), in spite of the protests of DA. When the new government came to office in 2001, these measures were abolished. For commentators, the illustrates that changes which are not based on prior consensus between the central social partner organisations will most often be lacking a solid foundation.

Main bargaining themes

The preparatory phase of the 2004 collective bargaining rounds has clearly illustrated which demands will feature in negotiations. The question is whether it will be possible on this basis to come up with a package of measures which will ensure trade union members’ support for new agreements. In 2000, a sixth week of annual leave and an increase in occupational pension contributions to 9% of pay were two central trade union demands which were met with great sympathy among members. It is more difficult to say what the major demands will be this time, though it appears that the most important themes will those set out below.

Occupational pensions

Further development of the occupational pension system is a central demand for all trade unions. The employers have so far been insisting that occupational pension contributions should be set at a maximum of 9% of pay.

Wages for apprentices and trainees

Higher wages for apprentices, trainees and young workers has been singled out as a central issue by the trade unions in the start-up phase of 2004's collective bargaining. This has often been an issue taken up in the final stages of the bargaining process when it is often submerged in the overall compromise which is usually starting to emerge at this stage, and is thus be given lower priority.

Maternity/paternity

Improvements in pay during periods of maternity/paternity leave is a demand which both sides have recognised as inevitable. At present, maternity pay is as a general rule paid for six months. In sectors with many women employees it will be expensive to extend it to 12 months, as suggested in some quarters. This may be costly even in the industrial sector - with its modest share of female workers - if men start taking paternity leave to a higher extent than presently. On the employer side, the attitude to higher maternity/paternity benefits varies. There is a generally positive attitude in the services sector, and notably in retail sector represented by Danish Commerce & Services (Dansk Handel & Service, DHS) which has a large number of female employees, but also a low level of wages which is not very much above the maternity benefit rate. As the benefits is paid by the state, it will not be so costly to top it up to full pay.

The establishment of one or more central funds to cover additional maternity/paternity benefits will be a difficult issue. There is a majority in parliament in favour of creating a central maternity/paternity fund so there is pressure on social partners to negotiate on the issue. Such funds already exist in a number of sectors, including the industrial sector. However, their coverage is sporadic and they do not generally cover sectors with a predominance of female employees. The Employers’ Association for the Financial Sector (Finanssektorens Arbejdsgiverforening, FA) has suggested an insurance scheme such as that for sickness insurance.

Working time

A general reduction in working time will not be a demand in 2004. This has been stated expressly by the president of CO-industri, referring to the extra five days of leave obtained in 2000 and the one-hour reduction of weekly working time for shiftworkers agreed upon in 1998. An extension of leave will also not be an issue, but it seems from statements by the CO-industri president that an increase in the level of holiday pay may be demanded. An increase in the pay supplement during annual leave from 12.5% to 16% is likely to receive a high priority among union members.

The issue of more leisure time will thus not play a major role, but the working time issue may nevertheless constitute a difficult obstacle on the way to a compromise. There are already major problems in relation to trade union demands for improvements in special working time rules and employers’ demands for more working time flexibility. This is a continuation of a long-standing battle over the duration of normal working time. Over the past decade, possibilities have increasingly been opened up for flexible organisation of working time agreed between the social partners at local level. The employers will again seek increased flexibility in terms of variations in weekly hours around an average, with an extension of the hours considered as normal working time and thus a narrowing of the period of work attracting special overtime allowances. The unions will oppose further change and demand a regulation of pay rates for work at inconvenient hours in relation to the general development of wages in the labour market. CO-industri will seek uniform rules for shiftwork and 'staggered' working hours.

Duration of agreements

A major issue is whether the parties will again opt for a long duration for the new agreements - maybe a repetition of the four-year term of the current agreements - or instead return to the traditional two-year period. The decentralisation of the bargaining system to create a system of framework agreements between the social partners at sector level has had an unintended consequence, in that it has become more difficult to ensure the backing of members for sectoral agreements. In a situation where most of the overall improvements during the agreement period are distributed through wage bargaining at enterprise level, the room for manoeuvre at the level of the sectoral organisations is rather limited. With the usual two-year agreement period there will be room for only moderate improvements in the benefits agreed at the central level, if there is also to be a possibility for reasonable wage increases which will not jeopardise the competitiveness of enterprises. Thus the sectoral agreements could seem very thin, making it difficult to obtain the support of union members.

From a general viewpoint, the employers are in favour of new four-year agreements. The trade unions are not refusing to consider this, but have a rather hesitant attitude. In this context, the combination of both political and economic uncertainty interact in a way that makes it most likely that the agreements will have a shorter duration. There may not be a return to a two-year duration, but rather a three-year duration (three-year agreements have twice been signed in the public sector). This will make it possible to avoid both 'forum shopping' and political impatience in relation to labour market regulation.

The trade unions have a 'profiling' problem as regards agreements with a long duration, according to some commentators. There is a need for openness to ensure the unions' legitimacy among their members, which is met by holding frequent bargaining rounds. If the interval between agreements becomes too long, many member may wonder if they actually need trade unions. The situation is arguably easier for employers' organisations, whose legitimacy is ensured by daily contacts with member enterprises.

It is possible that the social partners, given the uncertain political and economic situation, will agree on 'reopening clauses' which will make it possible to renegotiate parts of their agreements in the event of changed conditions. This would make it easier to accept agreements with a long period, maybe even of four years again. Reopening clauses may become a reality as it is not only the unions, but also the employers' organisations, that may have an interest in such an instrument. In the case of, for instance, political changes in the unemployment benefit, maternity/paternity benefits and sickness benefit systems, the employers may suffer a serious economic blow and thus need changes in collective agreements.

Commentary

At the start of a new bargaining round in the LO/DA sector, Max Bæhring, the retiring president of Dansk Metal, came up with an interesting proposal. Traditionally, the collective bargaining system in Denmark has a structure which means that if parties in the LO/DA field fail to reach a compromise, the immediate result will be a large-scale industrial dispute. Mr Bæhring emphasised - with reference to the experiences of the major conflict in Denmark in 1998 and the large-scale industrial dispute in Norway in 2000 (NO0005192F) - that such industrial disputes may have long-term negative implications for all parties involved.

The production of goods in the modern internationalised economy is tied up in production chains where the delivery of components from one enterprise is a prerequisite for further production in the next enterprise. If large-scale industrial disputes lead to the rupture of this chain in a particular country it might be attractive for transnational companies permanently to relocate their production to enterprises in other countries. Mr Bæhring's conclusion was that Denmark should move to a system with minor local strikes, rather than large-scale action, being used as a means of exerting pressure. This would require consensus about new rules of the game within the general bargaining system, and also in DA. This will not be an easy job, but it is possible that the parties in the industrial sector might choose to take their own action in order to protect themselves from long-term negative consequences of large-scale industrial disputes. In all circumstances, this is a problem which all parties are aware of and which will be a further incentive to reach the necessary compromises.

As already mentioned, it is the industrial sector which is again expected to be the key bargaining area. However, this will only concern other 'minimum wage' sectors where actual wages are negotiated at company level, with the sectoral agreement setting only minimum rates. It must also be possible to transfer a compromise in the industrial sector to the 'normal wage' sectors where actual wage increases are negotiated centrally. With the recent transfer of the meat processing industry to its sphere (DK0208102F), DI now represents a major sector covered by the normal wage system which could be used to set the trend also in normal wage areas. However, the question is whether DI will take a wait-and-see position and leave the field to other sectors with the normal wage system. The focus could thus be on the Commerce, Transport and Service (Handel, Transport og Serviceerhvervene, HTS) employers’ association and SiD and maybe the Union of Female Workers (Kvindeligt Arbejderforbund, KAD) if the breakthrough in this sector is to be found in either the transport or services sector. (Jørgen Steen Madsen and Carsten Jørgensen, FAOS)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment