Mon Jul 28th, 2008 at 05:00:23 AM EST
As promised, here's the diary on the structure of the Danish labour market.
It is tempting to jump straight into the nuts and bolts, but I believe that a little bit of history is needed to fully understand the evolution of the Danish labour market:
Denmark was a late industrialiser. To take just one simple metric, our first three rail lines were completed in 1847, 1856 and 1862. By way of comparison, the UK built its first serious railroads in the fist third of the 19th century and the USA built its first transcontinental railroad from 1860 to 1869. Thus, many of the socialist ideas that had painstakingly evolved in the early industrialisers such as France and the UK could be adopted rapidly once a certain concentration of was reached.
In practise this meant that the syndicalists and social democrats (who swiftly became one unified movement in Denmark) started at a level playing field w.r.t. the communists, anarchists and assorted more or less radical and more or less militant movements. It is important to note at this juncture that the term "social democrat" has drifted since those times. To take a very striking example, during most of the late 19th cent. the Danish social democrats were opposed to private ownership of productive assets, a point of view that would be considered hard-line socialist just half a century later.
Edited to put more above the fold - afew
The difference between the early social democrats and the early communists was thus not so much in ends as in means. Where the communists maintained that the democratic institutions were insufficient to achieve the goals of a class-less society and communal ownership of the means of production, the social democrats held that anyone who could count on his fingers and toes should be able to see that universal (male) suffrage and an organised labour movement would mean that social democrats would have a permanent lock on power in a parliamentary system, which could be translated into the desired social change without necessitating the nastiness of an actual revolution.
During the latter half of the 19th cent., the Social Democrats came to increasingly dominate the labour movement (outside a few crafts that remained dominated by communist long into the post-war period). At the same time, the labour movement grew in size, organisation and power.
In 1899, after a series of strikes and retaliatory lockouts that had brought the country to a screeching halt, the September Agreement was signed, which has since provided the foundation of the organisation of the Danish labour market.
The agreement stipulates that the labour movement recognises the right of employers to direct the work and to hire and fire - in other words, the labour movement recognised private ownership of productive assets. In exchange, the employers recognised the right of labour to organise and the right to strike and blockade as well as accepting a prohibition against union busting.
Both parties agreed to enter into overenskomster - binding agreements regulating wages, working conditions, etc. for a stipulated length of time and both parties agreed that strikes, blockades and lockouts could only take place in the absence of a valid overenskomst. A labour market court system (voldgiftsretten) was set up to enforce the overenskomst agreements and a reparations payment scheme was instituted to compensate victims of overenskomststridige (lit. agreement-violating) lockouts, strikes and blockades (i.e. lockouts, strikes and blockades taking place despite the workplace in question being covered by a valid overenskomst).
The September Agreement was eventually replaced by a series of Main Agreements from 1960 onwards, which are more detailed but substantially the same story.
This marked the most significant historical victory of the social democrats over the communists, but is quite remarkable in a couple of other ways as well.
To the best of my knowledge, the fact that labour unions and employers set up a separate court system is unique to the Scandinavian labour markets. [I have since been advised that this conclusion had more to do with my lack of knowledge about other countries' labour markets than with reality...] And the fact that the labour movement did not unilaterally recognise private ownership of the means of production also carries a symbolic significance: This recognition is conditioned on the civilised behaviour of the employer side - which implies that it can be reversed if the employers systematically fall short on their end of the agreement.
Thus, we have a separate system of labour market negotiations that is in principle completely independent of the political system (in practise this is not the case, of course, nor was it ever intended to be - the social democratic idea was to dominate both the labour market negotiations and the parliamentary political system).
This means that many - if not most - if the rules governing the Danish labour market are in the realm of agreements between labour and employers rather than the realm of laws and regulation (with unemployment subsidies being the most notable exception). This was initially not so much a conscious decision as a consequence of the fact that the labour unions were more effective in securing the rights of workers than their parliamentary counterparts - often the law lagged behind the agreements already entered into on the labour market, and at some point the politicians stopped bothering with trying to catch up and made a virtue of necessity by insisting (at least rhetorically) that the labour market sort its affairs out on its own.
History and institutional framework aside, how does all this work? Entire books can and have been written on the function of the Danish labour market, but here are a couple of highlights of what I find important and/or interesting from an ET perspective:
The vast majority of all workplaces are covered by an overenskomst, and those that are not face frequent blockades and other disturbances (and are fair game for strikes, of course). On those workplaces that are covered by an overenskomst, the workers elect representatives (tillidsmænd) among them, who are given time off from their regular duties (as in paid time off) to serve as the labour union's liaison with the management. This usually involves keeping on top of all the rules - general and workplace-specific - governing safety, wages and working conditions that are applicable to the workers at the workplace in question, to serve as the workers' representative in disputes with the management, to keep the labour union's central organisation up to date with conditions on the workplace, etc., etc., etc. If, for some reason, the workers fail to elect a representative, the local union chapter will send a member of their staff (a fællestillidsmand).
Should the employer fail to observe the terms of the general overenskomst or any of the local agreements (lokalaftaler), the labour union will usually notify the employer that they expect compliance. If a stern letter or two doesn't lead to improved conditions, the union has the option of suing the employer in voldgiftsretten, the labour market court system, which can impose fines and compensation on any party found to be in violation of the overenskomst.
The overenskomst is renegotiated whenever the existing overenskomst expires. Typically this means once every two or three years. By tradition, the negotiations take place in mid to late spring. Historically this was because spring was the time of year when labour unions could best afford a strike: In Denmark, you have to heat your home during the winter, so the household budget had more leeway when it wasn't winter, because in a pinch you could cut down on your coal consumption which was often a significant part of the budget.
If negotiations succeed, everyone is happy. If they fail, the parties proceed to forligsmanden (link in Danish), a supposedly neutral governmental mediator who is tasked with striking a compromise between the parties. Forligsmanden can postpone advised strikes and lockouts for two weeks (four if they target functions judged to be vital to the functioning of society or the health of the citizens), and can issue formal compromise proposals.
If the mediation fails - which it, perhaps surprisingly, doesn't always do - strikes (and occasionally lockouts) usually commence. According to the terms of the Main Agreement (found here in Danish), any organisation (labour or employer) wishing to open the possibility of a strike or lockout must advise their counterparts (employer or labour, respectively) of the possibility of a strike at least two full weeks before it is scheduled to take effect. This first notice serves only to put the option on the table - the actual decision can be postponed until seven days before the strike or lockout is launched.
Such preliminary strike warnings are routinely issued by labour unions before negotiations even start, particularly when they expect tough negotiations, but occasionally the need to use strikes or lockouts catches an organisation by surprise. The recent health care and child care strike provides an example of this: The municipalities' organisation hadn't expected to need a lockout - probably because they had banked on government intervention (see below) - and were caught with their pants down: They eventually issued a lockout warning, but the conflict was resolved less than two weeks later, so the lockout never came into effect.
Finally, if the conflict drags on for so long that it becomes a serious problem - or if it affects certain critical sectors, such as transportation - parliament will end the conflict by giving the formal compromise proposed by forligsmanden the force of law. Parliament is usually wary of using this power, however, because it will usually piss off either the captains of industry or a substantial part of the electorate (or both!). And both the labour unions and the employers' unions are rather protective of the Danish labour market model, so even those who got the best cut from the mediation proposal are likely to be wary of such parliamentary action.
The other significant aspect of the Danish labour market structure is the unemployment insurance system (A-kasserne). Any unionised worker has the option to join an unemployment insurance that is 80 % government funded. The compensation in the event of unemployment is 90 % of your wage, but is capped at about 100 € pr. day or 60 € pr. day, depending on the nature of your insurance. Members are eligible for unemployment insurance when they have half a year to a full year of regular, full-time employment (or equivalent number of hours) within the last four years (six years if you haven't actually been drawing compensation for some reason). I've heard a couple of different figures for the latter two numbers, but the ones given here are in the right ballpark.
Another requirement for this unemployment insurance is that one must be "available to the labour market" - which has meant different things in different decades. A couple of decades ago, it meant you had to be more or less actively looking for a job - and were expected to take an offered job. Today it means that you must jump through a number of hoops - you must update your CV regularly, log on to a job seekers portal several times per week and fire off at least two job applications per week.
Oh, and you can turn down only one job. You have to take the second one you're offered, regardless of the nature of the job (well, almost - you can't be forced to take a job as a prostitute, despite this being a legal and recognised line of work in Denmark), as long as it's within a "reasonable distance" - which last time I checked was a total of four hours in commute each day (this was, admittedly the next best thing to ten years ago, but I doubt it's gotten better since). So much for eight hours of work, eight hours of sleep, eight hours of free time...
Needless to say, this is a pretty serious item on the finance bills. In fact, this type of unemployment insurance accounts for the next best thing to five percent of Danish GDP.
(As an aside, there is a second safety net - kontanthjælpen - which is available to anyone who is without an income and who is "available to the labour market." But the rates are a sick joke (approx. 1200 € pr. month, half that if you're under 25 or a recent immigrant). That just doesn't cut it for the "security" part of "flexicurity.")
Now, these things go together. If you want to talk about "the Danish model" or "flexicurity," you can't just pick out one or two of these items. You have to have them all for the system to work:
- Strong labour unions (so the overenskomst negotiations don't become crushingly one-sided)
- Good unemployment insurance (to the tune of several percent of your GDP)
- A dedicated court system to swiftly rule in disputes and decisively squash attempts to do an end-run around an overenskomst
- Good relations and regular liaison between employers and labour unions (this is partly a culture thing, but mostly it's about the employers behaving in a reasonably civilised fashion)
- Reasonable overenskomster so neither party simply picks up his toys and leaves the system of negotiated overenskomster - both labour unions and employers must believe that they get a better deal by staying within the overenskomst framework than by risking the strikes and lockouts (and blockades) that go with abandoning it (this is possible because strikes and blockades are a negative-sum game - thus, a system that reduces their frequency is positive-sum).
Any proposal that doesn't contain at the very least the first three bullets quite simply isn't "flexicurity" - it's just a bad, old-fashioned power grab by capital at the expense of workers, dressed up in fancy language.