President of union confederation calls for moderate wage increase demand

With the collective bargaining rounds of 2007 properly under way, the President of the Danish Confederation of Trade Unions, Hans Jensen, publicly announced that an annual wage increase of 4% would be a reasonable outcome for employees. Such a significant and unequivocal statement after the start of the negotiations is extraordinary. Given that trade union representatives rather than LO are actually conducting the negotiations, some chairpersons of member unions consider the announcement to be undue interference in the bargaining process.

Bargaining process begins

The 2007 collective bargaining round got properly under way on Friday, 5 January, when the two sides in the influential industrial sector, the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Confederation of Employers (Dansk Arbejdsgiverforening, DA), held their first official meeting. As is customary, the Central Organisation of Industrial Employees (CO-industri) – comprising nine trade unions – and the employer Confederation of Danish Industries (Dansk Industri, DI) are expected to reach a compromise in the coming weeks concerning pay and working conditions for the 250,000 employees in about 6,400 industrial enterprises. If they succeed again in reaching an agreement this year, it will have a direct impact on all sectors of the Danish economy covered by LO and DA. In all, these account for about 600,000 employees in the large economic sectors of industry, manufacturing, commerce, services, and building and construction.

LO President’s announcement

The negotiations had only just started, when on 10 January LO president, Hans Jensen, stated in a television programme that he considered a total annual wage increase of 4% – about DKK 10,000 (€1,342 as at 30 January 2007) – to be a reasonable outcome. This would not, he said, ‘impair competitiveness, job growth and real wages’. As LO (and its counterpart, DA) are not themselves taking part in the negotiations – these have been left to the sector organisations – this statement from the LO president created a sensation on both sides of the bargaining table. Some considered it as untimely interference, while others thought it to be a tactical move at the right moment.

There are a number of reasons why the LO president may have made this announcement at this time (DK0612029I):

• The run-up to the bargaining process was characterised by a wide variety of speculation concerning the wage negotiations. (In Denmark, wages are negotiated together with a number of other questions such as working time, pensions and social improvements, not as an independent issue as in other EU Member States.) For some time, economists from banks and other financial institutions have been expressing concern about wage inflation, thus increasing the risk of the Danish economy overheating. This is the result of a historically low level of unemployment, low interest rates, low wage increases for a number of years and labour shortages in a number of sectors while private consumption, exports and investment are continuing to expand. Economists have repeatedly warned, therefore, against excessively high wage increases which might jeopardise the economy, calling for restraint from the bargaining parties prior to the start of the negotiations.

• At the same time, employees have high expectations for greater wage increases this year, compared with those obtained from wage bargaining rounds in the last few years. In contrast to pessimistic predictions from economists of excessive wage inflation, increases in recent years have been characterised by a high degree of responsibility on the part of employee organisations out of consideration for competitiveness and the effects of globalisation. During the three years of the agreement period now coming to an end, total wage increases were 3% per year, including improvements in pensions, continued and further training, holiday pay and maternity leave. Moreover, employees currently have a favourable bargaining position at a time of labour shortages in certain sectors and low unemployment. Last but not least, good business results and, in particular, some bonus schemes that have benefited a handful of top executives have caused uproar. Some trade unions have accused the employers concerned of hypocrisy, criticising the ‘greed’ of top executives and management boards which contradicts their call for restraint when it comes to wage increases for employees. In some circles this has led to a demand, verging on a moral principle, that employees should have their fair share of the good times, too.

Over the course of the day, the signal sent out by Mr Jensen was interpreted as an attempt to reduce the pressure of employee expectations. In a bargaining situation where the expectation of wage increases has been constantly increasing and where media has shown a keener interest than for many years, the LO president felt it crucial to present a clear position. On the one hand, it had to be made clear that the trade unions are aiming to improve on the outcome of the 2004 collective bargaining round (DK0403103F), with an annual wage of increase of 4% instead of the previously 3%. On the other hand, the necessity to remain within a framework that will not jeopardise Danish jobs had to be emphasised.

Trade union reaction

It is very unusual for such a strong and clear announcement to be made when the negotiations have already started. Mr Jensen was criticised from his own ranks for untimely interference with the ongoing bargaining process, especially from those bargaining sectors where centrally determined wage increases are of key importance.

For instance, the transport sector is one of the so-called ‘normal’ wage sectors. These are sectors where wage bargaining does not take place at company level as a continuation of the central sector negotiations, as happens in industry. On the day after Mr Jensen’s announcement, the Chair of the transport group of the United Federation of Workers (Fagligt Fælles Forbund, 3F), Orla Petersen, stated that a 4% wage rise would correspond to an increase in the hourly wage in the transport sector of about DKK 3.50 (€0.47) which he thought was much too low. ‘Prior to the negotiations, our executive committee stipulated an increase in the hourly wage of at least DKK 5.00 (€0.67)’, he said on the DR 1 television news.

The Vice-Chair of HK-Handel – the commerce section of the Union of Commercial and Clerical Employees in Denmark (Handel og Kontorfunktionærernes Forbund, HK Danmark) – Herdis Poulsen voiced the same criticism in a television news programme. With commerce, she represents the second most important sector – after the transport sector – dependent on centrally negotiated wage rate increases. This is not a ‘normal’ wage sector, but overall a low pay sector where the wage rate increases agreed at sector level follow the actual enterprise growth rates. For this reason, HK-Handel has an interest in giving top priority to wage increases at the sector level of bargaining. It is obvious that these trade unions would wish to determine the starting level of the wage negotiations themselves and how the bargaining process should then be organised in order to achieve an acceptable compromise. Jensen’s announcement lowers this starting point and narrows room for manoeuvre in the bargaining game.

Commentary

LO felt it necessary to make this announcement when it did. Once the negotiations were under way, those actually in charge of the bargaining process were not able to make any comments themselves. Mr Jensen opted to appear on the Danish television programme ‘Money Magazine’ (Magasinet Penge – DR), and chose to make this highly unequivocal statement in order to give a more realistic picture of the possibilities. In this respect, he wished to reduce the pressure of expectation for future wage increases.

Moreover, since Mr Jensen became LO president, ongoing, informal contacts between LO and those directly involved in the negotiations have been part of the relations between LO and the major trade unions during the collective bargaining rounds. It might be presumed, therefore, that Mr Jensen informed others about his participation in the TV programme in advance. He may have kept the details to himself, but he probably felt a widespread concern among the unions in the face of ever higher expectations.

To date, the employers have not commented on Hans Jensen’s announcement. Mr Jensen was given support, however, by some otherwise rather pessimistic economists in the financial sector and by the business magazine Børsen. Employers are thus under a certain pressure to find a solution that will lead to a higher increase than resulted from the collective bargaining rounds in 2004, without jeopardising competitiveness and risking the loss of Danish jobs.

Carsten Jørgensen, FAOS

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