Public sector unions anticipate conflict in wage bargaining round

Collective bargaining in the public sector scheduled for early 2008 in Denmark is on a collision course before the actual negotiations have even started. High expectations among employees of significant wage increases, alongside intervention from the political parties, have created a turbulent atmosphere. In this unprecedented context, the largest public sector trade unions are preparing for a major conflict in relation to renewing the collective agreements.

Since September 2007, a heated debate about expectations regarding the outcome of the forthcoming collective bargaining round in the public sector in early 2008 has resulted in open disagreement between the Danish trade unions. Moreover, in an unprecedented move, the political parties have involved themselves in the proceedings and there is now widespread belief among industrial relations organisations and labour market experts that a major conflict will ensue.

The hot topic is wage increases for employees in the public sector. Basically, some political parties have promised an earmarked ‘bag of money’ to low-wage professions in the public sector, which has resulted in a debate among the trade unions on how these extra funds, insofar as they are made available, should be divided.

Background

Traditionally, wage bargaining in Denmark is exclusively settled between employers and employees in regular collective bargaining rounds (DK0605049I). No statutory minimum wage exists and the government and political parties do not interfere at any level. This situation has, however, been questioned in recent years. Labour market spokespersons from the parliamentary parties and top economists from the financial services sector have from time to time warned the trade unions against demanding too high wage increases that would change the balance of the currently sound Danish economy. However, the social partners have repeatedly told the politicians in particular to mind their own business – just as they did at the previous negotiations in the private sector in early 2007 (DK0703019I, DK0703029I).

Nonetheless, as at late 2007, a forthcoming bargaining round has never been debated so much, and with such a level of disagreement within, as well as across, the institutionalised industrial relations boundaries. The situation has been characterised by the President of the Confederation of Salaried Employees and Civil Servants in Denmark (Funktionærernes og Tjenestemændenes Fællesråd, FTF), Bente Sorgenfrey, as follows:

I have never experienced such a high pressure of expectations from the public employees; and I have never before experienced such serious conflicts within the trade unions’ negotiation cartels. It will be a blow for the Danish model of regulation if the parties fail to ‘land’ the negotiations through collective agreement. The situation is difficult and there is a great risk of a major conflict.

According to labour market researchers, all of the central actors can be said to bear a larger or smaller part of the blame for the current political imbalance in the Danish model of wage bargaining. The researchers have pointed to a range of factors under the following headings as having triggered a highly unstable environment for the forthcoming negotiations.

Tensions among trade unions

In a surprise move, the large bargaining cartel the Association of Local Government Employees’ Organisations (Kommunale Tjenestemænd og Overenskomstansatte, KTO), consisting of 48 trade unions and representing 525,000 employees in the municipalities and regions, changed its president in September 2007. The timing was unusual because the president is the top negotiator with the employers in the municipalities and regions, and the best moment to make changes at senior level management is definitely not when the overall discussions have commenced and demands are about to be exchanged.

The reason for the leadership change pertained to internal disputes. The President, Dennis Kristensen, had been elected from the largest public sector union, Trade and Labour (Fag og Arbejde, FOA) – with a membership of 200,000 workers – affiliated to the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO). Mr Kristensen resigned as president of KTO because he chose to support a political proposal to favour his own members – mainly healthcare workers – with an earmarked amount of DKK 5 billion (€670 million as at 20 December 2007). The proposal was brought forward by the supporting party of the government, the Danish People’s Party (Dansk Folkepartis, DF). Unsurprisingly, the other influential trade unions in KTO could not accept an earmarked pool of money for a single group of employees. According to the principle of the Danish model of wage bargaining, any extra funding should be distributed during the actual negotiations.

The President of the Danish Teachers’ Union (Danmarks Lærerforening, DLF), Arne Bondo Christensen, was subsequently elected as the new President of KTO. Thus, for the first time ever, the KTO chair is not occupied by a person from the LO trade unions, since DLF is affiliated to FTF. Moreover, the large FTF-member trade unions, such as DLF, the Danish Nurses’ Organisation (Dansk Sygeplejeråd, DSR), the Danish Federation of Early Childhood Teachers and Youth Educators (Børne- og ungdomspædagogernes landsforbund, BUPL) and the Police Union in Denmark (Politiforbundet), do not intend to accept a go-it-alone approach from FOA. So far, a joint strategy between the FTF trade unions and FOA seems unlikely.

Employers prepared for deadlock

The public employer organisations Local Government Denmark (Kommunernes Landsforening, KL) and Danish Regions (Danske Regioner) also added fuel to the fire. As a response to employees’ high expectations and the involvement of the political parties, Danish Regions proposed a ‘time-out’. The agreements currently in force should be extended for one year without changes and then be renewed. Meanwhile, a commission would have the time to investigate thoroughly whether the supposition is correct that certain occupational groups in the public sector have been left far behind in the overall wage development scheme.

Due to the unrest in the public sector, the municipal employers in KL seem to take the view that the negotiations will end in a deadlock and therefore inevitably be continued under the direction of the Public Conciliator. Seeing as the bargaining round has not even started yet, this tactic is rather unusual.

In late November 2007, the employers’ confederation in the private sector, the Confederation of Danish Employers (Dansk Arbejdsgiverforening, DA), published wage statistics that showed that healthcare workers did not lag behind other groups when all benefits, including pension, sick pay and holiday pay, were included in the wage calculation. Mr Kristensen described the statistics as ‘circus calculations’ and accused DA of untimely interference in the public sector negotiations. DA responded that, if the public sector accepted too high wage increases, this would lead to a wage spiral in the private sector. The private sector generally sets a trend regarding pay and DA could not accept agreed wage increases on the basis of inappropriate wage calculations in the public sector.

Government’s election campaign promises tax reductions

During the summer of 2007, the government issued a ‘Quality reform for the public sector’, which was partly based on a tripartite cooperation with the social partners. The reform aims to secure the development of ‘competences of the employees, attractive workplaces and recruitment of employees to the public sector’. The reform involved a budget of around DKK 6 billion (€800 million) for the improvement of education and continuing vocational training of employees. The political negotiations on the tripartite agreement in the parliament were to begin in the autumn of 2007 but by the beginning of December they had not yet started. The trade unions led by FOA complained that collective bargaining on education and training cannot take place unless the partners know the exact pool of money to be negotiated.

At the time of the publication of the tripartite reform agreement, the healthcare workers affiliated to FOA went on strike. They demanded an improvement of wage and working conditions beyond the level of the tripartite agreement. As noted above, DF took this opportunity to promise the healthcare workers an earmarked pool of DKK 5 billion (€670 million) for improvement of their wages. The government was not inclined to agree to the offer of an extra pool, but the issue was now in the public forum.

The early spring of 2008 was also the deadline for a new general election. Parliamentary elections coinciding with collective bargaining in one of the main sectors of the economy complicates matters somewhat. Because of the unusual turbulence during the prelude to the bargaining in the public sector, the Prime Minister, Anders Fogh Rasmussen, chose to call the general election early, before the actual negotiations began. If he had scheduled the election for afterwards and then had to make a governmental intervention in the negotiations, as prescribed in Danish labour law if the parties are unable to reach an agreement, his political position among the public sector employees would have been weakened when they subsequently went to vote.

A Danish election campaign takes three weeks; thus, Prime Minister Rasmussen called the election for 13 November 2007 – and won for the third time in a row. During the campaign, one of the main promises from his side was ‘tax reductions and increased welfare’, claiming that the government could afford both. However, this only gave more fuel to the demands of high wage increases among the public sector employees. The low-wage groups pointed out that they would not benefit from a tax reduction. Instead, they demanded a pay raise that would be higher than the percentage increase agreed in the private sector earlier in 2007, which is unheard of.

After resuming office, the regrouped government declared that it was impossible to respond to the demands of the employees and urged the social partners to show responsibility. However, the employees claimed that, if there were no funds for wage increases, then ‘drop the tax reduction scheme’. In December 2007, the Chair of the Economic Council (Economist Råd), Peter Birch Sørensen, agreed that the prime minister, through his expansive finance policy and promises of tax reductions, himself bears the responsibility for the extraordinary pressure for higher wages in the public sector.

Opposition parties support wage increases

Outside the government, a welfare-political majority consisting of the Social Democrats (Socialdemokratiet), the Socialist People’s Party (Socialistisk Folkeparti, SF), the United List coalition of socialist groups (Enhedslisten) and the DF supported extra earmarked wage pools for low-wage earners. This has created frustration and anger not only among the employers but also among the trade unions that fear that the self-regulation of the social partners is at stake.

Shortly after the new government bill was written, DF announced that it still supported the extra pool, but that it should be paid after the conclusion of the collective bargaining when the discussions about the new Finance Bill would begin. The party now also imposed the condition that, if the negotiations end in a major conflict, the extra pool will not be released – which only brought more confusion than clarification to the situation.

Latest developments

Tensions have now been heightened even further. The trade unions are steadfast in their views on the earmarked pool. In early December 2007, the larger trade unions declared that they were ready to strike if their wage demands are not met. The nurses are demanding a gradual monthly increase of DKK 8,200 (€1,100) by the end of the agreement period in 2011. Inspired by the Finnish nurses (FI0710039I), some 83% of the workers in DSR state that they are ready to strike and 63% threaten that they will even look for a new job, for example as temporary agency workers, if their demands are not met.

The other large trade unions are looking for similar wage increases as DSR. Overall, the trade unions demand that DKK 33 billion (€4.5 billion) should be released during the three-year agreement period; however, this is far too much for the employers to accept. The government is still refusing to put an earmarked pool at the disposal of the public sector negotiations, let alone at the disposal of a single group of employees. Nonetheless, FOA is still claiming its right to receive a special pool for its members. If the nurses and the other FTF trade unions stick to their wage demands, a major conflict seems inevitable.

Conflict, settlement or a ‘combi-solution’

A turbulent prelude in which political interference from the parliament created sky-high expectations about wage increases and an internal power struggle among the trade unions offers a bleak outlook for the conclusion of collective agreements in the public sector for 2008. Concerning the municipalities and regions, a conflict scenario followed by government intervention appears almost certain.

In the public sector at state level, however, the outlook seems brighter. Indeed, the possibility of a settlement scenario in which the public sector at state level paves the way for a joint compromise is definitely real, although complicated. The state level always ends negotiations first. The most likely possibility then is a repetition of the 2002 bargaining round, that is, a breakdown in the municipal and regional negotiations despite a settlement in the public sector at state level.

The most probable conclusion of the 2008 collective bargaining round is thus a combination scenario in which smaller settlements in different areas will contribute towards a joint solution that may finally be achieved through government intervention. A joint settlement in the public sector at state level will be a significant breakthrough which will put pressure on the negotiation partners at municipal and regional level. However, a settlement in minor areas such as local wage schemes could also facilitate a joint solution.

Carsten Jørgensen, FAOS

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