Danish labour market model under pressure

On 27 April 2006, representatives of the social partners, politicians and industrial relations bodies came together with university researchers to discuss the Danish model of collective bargaining at a round table conference. The conference aimed to discuss the status of the Danish self-regulating model in the labour market, and its ability to survive in the face of pressure from the EU, government and company level.

Conference on threat to Danish model

A large-scale conference took place on 27 April 2006, involving participants from all sections of the Danish labour market. At issue was whether the existing regulation of the labour market in Denmark, which has been coined the ‘Danish model’, would be able to survive the pressure coming from three sides: EU regulation, government and at company level. The Danish model operates on a voluntary basis and with a high degree of self-regulation by the social partners in relation to wage and working conditions.

The Employment Relations Research Centre (Forskningscenter for Arbejdsmarkeds- og Organisationsstudier, FAOS) at the University of Copenhagen organised the conference, and the participants represented all of the decision-makers in the Danish labour market: top representatives from the employer and employee organisations, the Ministry of Employment, the Labour Court, the Conciliation Board, the Parliamentary Labour Market Committee (Arbejdsmarkedsudvalget) and university researchers. As journalist Peter Andersen from 3F, the largest trade union in Denmark, outlined in an article: ‘They were all there – the Danish model personified, heeding the call’.

Pressure from three sides

The specific occasion for the conference was a new book, From major conflict to maternity fund – discontinuation or renewal for the Danish model, published in early spring 2006 by Professors Jesper Due and Jørgen Steen Madsen. The book is a sociological and historical examination of the bargaining rounds of the private sector labour market in 1998, 2000 and 2004. As noted, a current concern is that the social partners’ supremacy in labour market regulation through collective agreements is under pressure from three sides: EU regulation, government involvement and at company level.

Professor Steen Madsen repeated this theme in his introduction. All three factors are a challenge to the role of the historically dominant, self-regulating sectoral level. First, the European Commission has demanded that EU directives should be extended to the 15% of Danish workers who are not covered by an agreement, by extending the relevant collective agreement in force by law. Secondly, the increased focus on social issues in collective bargaining, such as pensions, adult and continuous training, and sick pay – which traditionally have been political issues – has resulted in a ‘double regulation’ of both collective agreements and political initiatives. The third pressure factor is at company level. In the most recent bargaining rounds, there has been increased decentralisation of decision-making from the sectoral to the company level. The question is whether there will still be a need for a controlling central sector level if local negotiations are further strengthened.

The conclusion of the conference was that the Danish model would survive these challenges, without losing its fundamental character of self-regulation. It has experienced challenges and even crises in the past, and has always been able to adjust. The Danish model is not a static entity; indeed, part of its strength is its ability to be flexible. However, the speakers at the round table conference also pointed to the fact that a precondition for the coherence and legitimacy of the self-regulating model is a high degree of membership density. The steadily decreasing union density in the last decade was a source of concern among the participants in general, although union membership is still high at around 79% (DK0508103F).

EU level

Vice-president of the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO), Tine Aurvig-Huggenberger, did not regard the EU directives as a threat to Danish self-regulation. Of the existing 22 directives concerning the labour market, more than half were introduced in the 1970s and 1980s, and these were relatively painless to implement in the collective agreements. Indeed, the LO vice-president found that the challenge from the EU directives – including the new dual method of extending the collective agreement by law – has sustained the Danish agreement model, since the directives are implemented through the agreements. Managing Director of the Confederation of Danish Employers (Dansk Arbejdsgiverforening, DA), Jørn Neergaard Larsen, pointed out that it is essential for Denmark to be pragmatic in its approach. He believes that the south and central European regulation models, for example, are too rigid and ‘will not stand a chance’ in a globalised world. However, he warned that a conflict between the different models, possibly provoked by the European Parliament, could result in an erosion of European unity.

Political level

The Danish model has always been characterised by close but mostly informal relations between the social partners and the political structure, as mentioned by Professor Steen Madsen in his introduction. The general rule has been a clear distinction between legislation and collective agreements, respected by both sides. However, this has changed during the last decade, as was especially evident in relation to the 2004 collective bargaining round (DK0403103F, DK0312102F). The establishment of a maternity fund opened a ‘regulation battle’ that will be difficult to handle. In that instance, the political actors set the agenda of the collective bargaining, and the self-regulation of the social partners became of secondary importance.

Interference from the political level also leads to ‘forum shopping’: if the labour market organisations cannot agree, they try to influence the political parties in order to get what they want. The round-table representatives from LO, DA and the Labour Market Committee of the Parliament agreed that forum shopping was a very negative side-effect of the intermingling of interests. Apart from that, they were not too pessimistic regarding the separation between the political system and the social partners’ self-regulation. The representative of the Labour Market Committee, Thomas Adelskov of the Socialdemocrats, commented that not all tripartite cooperation in Denmark is of an informal and ad hoc nature, and identified vocational training and employment policy as areas where a formal and institutionalised tripartite cooperation takes place.

Company level

In general, the participants of the round table discussion agreed that it had been to the advantage of the social partners that more bargaining competences had moved to the companies and their employees. Nevertheless, as pointed out by Thorkild E. Jensen, President of the Central Organisation of Industrial Employees in Denmark (CO-industri), there is not always an equal match between the shop steward and the manager in charge of collective bargaining. The manager often has a human resources department as support, and this means that the shop stewards need continuous further training.

The CO-industri president considered that there is no need for further decentralisation at present: the priority was to find a satisfactory form of cooperation between equal parties in the companies. Furthermore, there will still be issues that will not naturally arise at an individual company level, but that must be addressed by the sectoral organisations; an example is the introduction of bigger welfare issues like labour market pensions.

Managing Director of the Confederation of Danish Industries (Dansk Industri, DI), Kim Graugaard, responded that the new possibilities for decentralised solutions within the sectoral collective agreement have not yet been used to a great extent by companies; it usually takes a few years before companies start to implement new initiatives. Mr Graugaard underlined that the key to taking advantage of the decentralised possibilities lies in cooperation. It is a precondition in the sectoral agreement concerning solutions at local level that the parties involved agree on the measures in question. Therefore, a good cooperation based on mutual confidence at local level is important.

Carsten Jørgensen, FAOS

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