5TH EDITION
INTERNATIONAL
& COMPARATIVE
EMPLOYMENT RELATIONS
Globalisation and change
Edited by Greg J Bamber,
Russell D Lansbury and Nick Wailes
CHAPTER 9
Employment Relations in Denmark
Jørgen Steen Madsen, Jesper Due and Søren Kaj Andersen
© Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th edition. Lecturers using the
book as a set text may freely use these slides in class, and may distribute them to students in their course only. These slides may not be posted on
any university library sites, electronic learning platforms or other channels accessible to other courses, the university at large or the general public.
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Lecture outline
•
•
•
•
•
•
•
•
•
Key themes
Employment relations context
Background
Employer associations
Trade unions
Government
Processes of industrial relations
Current and future issues and trends
Conclusions
Chapter 9:
2 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Key themes
• The Danish political economy can be seen as a coordinated market
economy, with clear liberal elements.
• There are high levels of trade union and employer association
membership and collective bargaining coverage.
• Collective bargaining based on the principle of ‘self-regulation’
constituted a coherent system of coordinated negotiation, however
decentralisation in recent decades has eroded this.
• The system of ‘centralised decentralisation’ with controlled
coordination is shifting towards multi-level regulation.
• Major industrial conflicts have led to significant developments in the
evolution of Danish labour market regulation.
• Denmark’s ‘Flexicurity’ policy (strong social security for wage earners
coupled with ease of hiring and firing for employers) has been
influential in the European political debate on labour market
regulation.
Chapter 9:
3 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employment relations context 1
• The unification of the labour market parties into
confederations at a national level and the
establishment of both the system of collective
bargaining and labour law came into being around
1900.
• Collective bargaining subsequently became the
preferred method of regulation for pay and working
conditions.
• Labour market and welfare policies have been
largely formulated within the framework of
tripartite agreements.
Chapter 9:
4 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employment relations context 2
• Denmark has features of a coordinated market economy:
policy development and coordination take place in a
network of trade unions, employer associations and the
political-administrative system.
• However, there are clear liberal elements:
– the principle of self-regulation by the labour market parties, and
– the absence of specific laws governing trade unions and
employers’ associations.
• For the most part, regulation takes place within the
framework of collective bargaining and not via legislation,
thus the Danish labour market is one of the most flexible
in Europe.
• Denmark has been described as a ‘negotiated economy’.
Chapter 9:
5 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employment relations context 3
• The manufacturing industry accounts for more than half of
Danish export revenues and the three largest areas of
employment in the Danish private sector are
manufacturing, financing/business services and retail
trade/hotels/restaurants.
• Public sector employment is high at over 37% of the total
workforce.
• Unemployment fell to a historical low in 2008 of 1.6%,
down from a peak of 12% in the 1990s.
• The labour force participation – more than 80% of 15- to
64-year-olds – is among the highest in the OECD countries.
• Women’s labour force participation is high at 76%.
• Various forms of atypical employment are rare in Denmark.
Chapter 9:
6 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Legal, economic and political background 1
• The Danish model of collective bargaining was born out of extensive
industrial conflict between employers and unions around turn of the
20th century.
• The ‘September Compromise’ in 1899 between newly founded
confederations for wage earners and employers created the
foundation for an institutionalised collective bargaining system.
• Conflict continued, leading to the establishment of a comprehensive
labour law system in 1910. This included a mechanism for the
arbitration of disputes, a new labour court and a state conciliation
board.
• The ‘Ghent system’ in which unemployment benefits are administered
by trade unions rather than the state was established in 1907,
practically making membership of an unemployment insurance fund
synonymous with union membership. This secured high levels of union
density and collective bargaining coverage.
Chapter 9:
7 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Legal, economic and political background 2
• Overall the Danish IR model was set up on the basis of self-regulation by
unions and employer associations. A prerequisite for self-regulation is the
‘consensus principle’ – the notion that unions and employers’ associations are
willing and able to reach a compromise between their different interests. This
principle has been largely adhered to over time.
• Originally unions and employer associations struggled over the degree of
centralisation of the collective bargaining system, with unions seeking a more
decentralised system and employers seeking a highly centralised system. De
facto centralisation was established by the Conciliation Act of 1934 and 1936.
• The state started intervening in industrial conflict from the 1930s and state
interventions became the norm in labour market conflicts.
• Unions and employers developed strong relations at the enterprise level with
a dense network of shop stewards, union branches and cooperation
committees. This helped ensure the implementation of collective agreements.
• A mechanism for locally setting pay was also established very early. This
provided flexibility for individual companies.
Chapter 9:
8 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Legal, economic and political background 3
• The decades after WWII are known as the ‘golden age’ of the
collective bargaining model, as regular highly centralised
collective bargaining rounds took place between the union
confederation LO and the employer confederation DA, with
mutual cooperation and benefit.
• The public sector expanded greatly as the welfare state was
developed from the 1960s onwards. Collective bargaining was
also introduced in the public sector and replaced the old civil
servant system.
• The 1970s saw the establishment of the most coordinated rounds
of collective bargaining whereby the private sector agreements
negotiated by LO and DA were transferred to the public sector.
• However, the high level of centralisation began to produce
inflexibilities.
Chapter 9:
9 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employers’ associations – private sector
• Danish Employers’ Confederation, Dansk Arbejdsgiverforening
(DA) was established in 1896. It is a peak body of employer
associations.
• Since late 1980s, many small employers’ associations have
amalgamated. Over 150 employers’ associations were
members of DA in the 1980s, and there are only 13 today.
Three of these associations account for 90% of total payroll of
enterprises covered by DA.
• DA has developed to be more of a coordinating body for large
organisations, similar to the trade union confederation.
• In addition to the DA and the two other main confederations
there are a few smaller associations, but companies
accounting for 40% of private sector employment are not
members of any employer association.
Chapter 9:
10 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employers’ associations – public sector
• With the expansion of the welfare state in the 1960s, employment
in the public sector grew enormously. Civil servant status shifted to
contractual employment as the dominant form of employment.
• Therefore, the public sector has acquired increasing importance as
an element in the overall IR system.
• From the 1970s, local authorities became dominant as welfare
services are administered at the local level. Today about threequarters of public employees work in the regions and
municipalities, and one-quarter at the national level.
• At the national level, the minister in charge of public sector pay
and the employing agency are involved in public sector collective
bargaining. The regions and municipalities negotiate via their
respective associations, the Association of County Councils in
Denmark and Local Government Denmark (KL).
Chapter 9:
11 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Trade unions 1
• The Danish Confederation of Trade Unions, Landsorganisationen
i Danmark (LO) was founded in 1898.
• It is the largest trade union confederation in Denmark and
represents mainly skilled and unskilled manual workers from
the private and public sectors.
• The LO’s member unions are a mix of craft, industrial and
general unions, and there is a trend towards concentration of
unions in fewer and larger units. In 2008, there were 17
member unions in the LO and the 4 largest ones represented
80% of total membership.
• The LO has always functioned as a coordinating organ rather
than an independent power in itself in order to preserve large
unions’ independence in negotiations.
Chapter 9:
12 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Trade unions 2
• The LO unions achieved high union density and thus
established collective agreements as the dominant form of
regulation in private sector.
• Other confederations represent professionals and managers
(most managers in the private sector are on individual
contracts).
• Fierce competition between the confederations is gradually
being replaced by cooperation.
• Recently membership of the LO has declined to 56% of all
organised wage-earners in 2008, a trend predicted to continue.
• Overall, union membership density across all confederations
has fallen from 73% in 1995 to 69% in 2008. Absolute
membership numbers have remained quite stable at around 1.8
million.
Chapter 9:
13 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
The role of the state
• In the Danish system of self-regulation the state’s role is more limited
than in some other countries, but is still important.
• Apart from supportive procedural legislation, the collective
bargaining system is self-regulating. Rules governing relations
between organisations and regarding industrial conflicts are fixed in
the agreements between the parties.
• State legislation is extremely limited – there is none governing formal
registration of trade unions; there is no statutory minimum wage.
• Increasing political intervention in the past decade is in part due to
EU directives requiring legislation.
• Regarding labour market policy, the state consults with unions and
employer associations on councils, boards, committees and
commissions.
• The state also plays a significant role in IR as the employer in the
public sector.
Chapter 9:
14 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Employment relations processes: collective bargaining 1
• Coverage of collective agreements very high – more than 90% of
employees are covered in the three main employer confederations (DA, FA,
SALA) areas.
• In the private sector, collective bargaining coverage is 73%. Unions have
achieved this high rate by entering into adoption agreements with
employers who are not members of an employers’ association.
• Correspondingly, more than a quarter of wage-earners in the private sector
are not covered by a collective agreement and are on individual contracts.
• Until the 1980s, coordinated collective bargaining negotiations took place
simultaneously across all areas of the economy. Since then, this system has
broken down.
• Now the LO/DA area negotiates in one year and the rest of the private
sector and the public sector follow in the next year.
• This new system increases the scope for creating leverage effects across
bargaining rounds. The public and financial sectors typically set standards
for social welfare elements in collective agreements.
Chapter 9:
15 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
ER processes: collective bargaining 2
• The economic crisis in the 1970s made it difficult for the DA and LO to
continue the culture of consensus and accommodate their divergent
interests.
• Major industrial conflict set the scene for a new collective bargaining
model, which returned the collective bargaining process from the
confederations to the sector organisations, whilst retaining overall
coordination.
• In addition, large, sector-wide organisations were formed and retained
some power to coordinate bargaining even when negotiations were
transferred to the enterprise level – hence the system that developed in
the 1980s-90s is one of ‘centralised decentralisation’.
• Traditionally, the iron and steel industry has been the key bargaining area,
and this was expanded in the 1990s to include all of manufacturing.
Bargaining is coordinated between the newly established employer
confederation, the Confederation of Danish Industry (DI) and the new
Central Organisation of Industrial Employees in Denmark (CO-industri).
Chapter 9:
16 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
ER processes: collective bargaining 3
• Decentralisation occurred as more collective agreements changed from
being standardised pay agreements with centrally determined wages to
various flexible pay systems with wages being determined at the
enterprise level.
• Second, negotiation over other areas – particularly working hours – has
also been transferred to the enterprise level. This creates possibilities
for greater flexibility and variation of work hours.
• Decentralisation is driven by the emergence of new kinds of work
organisations demanding flexibility and employee participation. Danish
employers also argue that they need greater flexibility in order to be
internationally competitive.
• Employers recognise the necessity of strong local union representation
in enterprises, as it is a prerequisite for using flexibility provisions, and
80 % of employees are represented by shop stewards at their
workplace.
Chapter 9:
17 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
ER processes: collective bargaining 4
• Since the 1990s, there has been an expansion in the scope of
collective agreements to include a number of welfare-related
issues, particularly occupational pension schemes.
• Further issues include the right to further training, sick pay and
paid parental leave.
• A system of ‘double regulation’ has developed under which
welfare-related issues such as paid parental leave are regulated
both via collective agreements and legislation.
• This double regulation of welfare issues creates interplay
between unions and employer associations and the political
players, and means politicians are gaining greater influence over
collective bargaining agendas. Thus the independent selfregulation of labour market issues that unions and employer
associations enjoy is increasingly under pressure.
Chapter 9:
18 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
ER processes: collective bargaining
• As a member of the European community, Danish labour
regulation has been under pressure from Europe and has
had to incorporate a number of European labour law
directives regulating matters such as working hours, parttime employment, fixed-term work and European works
councils.
• This has been a source of tension and debate as common
directives are difficult to implement within the finely
balanced Danish system of collective bargaining and
legislation.
• A tripartite Implementation Committee was established
and a process for implementing the directives through
collective agreements and legislation was developed.
Chapter 9:
19 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
ER processes: dispute settlement
• The right to initiate conflict is in practice reserved only for conflicts of interest –
the renewal of existing collective agreements or when entering into collective
bargaining in new areas.
• In recent history there have been four major conflicts: 1961, 1973, 1985 and
1998.
• In general, the State Conciliation Board has effectively resolved disputes
through mediation.
• Industrial conflict eventuates if the parties can not reach agreement via the
Board, but is rarely long in duration due to the tradition of political intervention.
• The largest independent conflict in the public sector was in 2008 in the health,
elderly care and kindergarten sectors. Unlike in the past, the government chose
not to intervene.
• Local disputes often lead to unofficial strikes but these have been declining
recently.
• Most conflicts of rights are resolved through the labour law system. Many are
solved locally but some proceed to arbitration or the Labour Court.
Chapter 9:
20 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Current and future issues and trends
• Recent changes to collective bargaining and labour market
regulation in Denmark have revealed some of the
challenges facing the Danish model.
• The labour market parties desire to maintain strong selfregulation and avoid increasing political control and
intervention in collective bargaining by the political parties.
• New tripartite agreements are being concluded in areas
that were previously the domain of the bipartite collective
bargaining arena.
• The public sector unions demanded large wage increases in
2008, breaking with the principle of the private sector
setting wage levels.
Chapter 9:
21 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Declining union membership
• The special position of the labour market parties in the
Danish model is legitimised by a high level of
membership and collective agreement coverage.
• Falling union density may challenge this status quo – 69%
in 2007 down from 73% in the mid-1990s.
• There has been growth in membership of the alternative
‘yellow’ unions.
• The decline in unionisation can be partly explained by
changes to regulations surrounding unemployment
insurance funds. It is now possible to join the funds of
the ‘yellow’ unions.
Chapter 9:
22 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
International pressures
• The large influx of foreign workers, mainly from Poland, is
associated with economic prosperity and the expansion of the
EU.
• There is debate centred on the Laval Case brought before the
European Court of Justice in 2007. The case is about obligations
of foreign companies with respect to pay and conditions of
workers brought in from their home countries. This is particularly
an issue in the construction sector, where many foreign
companies employ foreign workers at low wages in Denmark.
• International legal regulation also influences the Danish system
e.g. freedom of association rules have meant that closed shop
agreements had to be abolished (this also explains some of the
decline in union membership).
Chapter 9:
23 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Labour shortages
• There is an ageing population in Denmark and Europe
generally.
• A shortage of 200 000 employees by 2015 is predicted by
the Confederation of Danish Industries.
• At the same time, a surplus of unskilled workers is
predicted. Thus there is a call for increased education and
training.
• This has also led to debate about whether to allow more
migrants to work in Denmark and whether the early
retirement scheme should be retained.
• The global financial crisis diminished the labour shortage
problem, but as the economy recovers the problem is
expected to reappear.
Chapter 9:
24 Denmark
Copyright Allen & Unwin, 2011
International & Comparative
Employment Relations 5th edition
Edited by Greg J Bamber,
Russell D Lansbury & Nick Wailes
Conclusions
• Three key pressures threaten the self-regulation of
the labour market parties
1. Political players exerting influence on the system
2. Pressure from the actors at the enterprise level
3. Increasing influence of international regulation (EU)
• The Danish model remains nonetheless robust; trade
unions and employers’ associations are strong and
collective agreements retain a high level of coverage
© Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th edition. Lecturers using the
book as a set text may freely use these slides in class, and may distribute them to students in their course only. These slides may not be posted on
any university library sites, electronic learning platforms or other channels accessible to other courses, the university at large or the general public.