Social dialogue and the public services in the aftermath of the
economic crisis: strengthening partnership in an era of austerity –
the case of Denmark
Mikkel Mailand, Employment Relations Research Centre (FAOS), Department of Sociology,
University of Copenhagen
European Commission project: Industrial Relations and Social Dialogue VP/2011/001,
November 2012
Executive Summary
Introduction
The research aims to understand the particular challenges facing the social partners, what
strategies they are putting in place to manage change and what contribution forms of
employee consultation and involvement i.e. social dialogue can make in maintaining high
quality public services. A key goal is to encourage the adaptation of these systems of
consultation and involvement to deal with new challenges.
The analysis builds on a series of broader underlying research questions:
1. What have been the main drivers and measures of austerity adopted in each country?
2. How have these changes been implemented and to what extent has social dialogue
contributed to the change process at national, sectoral and workplace level?
3. How have institutions of social dialogue influenced industrial relations processes/
outcomes in the public services?
A particular strength of the research has been to build on and extend our understanding of
macro level developments by researching workplace change. This has involved detailed case
study work in local government to identify how local employers are affected by, and are
responding to, national austerity measures.
This report outlines the structure of the public sector and patterns of social dialogue,
considers austerity measures and the way in which they have been implemented, before
examining the responses of two local authorities to budgetary reductions.
Measures
Denmark has adopted a combination of stimulus and austerity-related measures, which
have been mainly quantitative in nature but also with some qualitative features, and have
had a clear but comparatively modest impact on job levels. The impact on wages and
working conditions in the public sector as a whole has been relatively limited, despite a wage
freeze for 2011 and very limited wage-increases in 2012 in all three main public sectors
(state, regional, and municipal government). Although the policies are all related to the crisis
and some include austerity elements, the drivers behind them are not exclusively about
improving public finances.
The liberal-conservative government in power from November 2001 until September 2011
initially responded to the crisis in 2008 by introducing stimulus-packages. These packages
were followed by budget cuts and welfare reforms combining austerity measures with
measures to increase the labour-supply in the long term.
The Social Democrat-led centre-left government that came into office in September 2011
has continued cutting the budgets, but has also planned some more employee and trade
union supportive initiatives. The most important crisis- and/or public sector related
initiatives of the new government - many of which are included in their ‘2020-plan’– are
examined in the report and relate to investment in infrastructure, tripartite discussions on
competitiveness, and attempts to reduce procedural controls of public sector workers, build
trust, but also strengthen the use of evaluation.
Social Dialogue
In Denmark, the austerity measures and other responses to the crisis have been
implemented through a public sector employment relations model characterized by
relatively limited legislation, bipartite collective agreements at all levels with high coverage
rates, (ad hoc) tripartite social dialogue, an extensive system for employee involvement, and
relatively strong trade unions. This is an ER-model where one would expect the social
partners to play more than a marginal role in the response to the crisis and also expect trade
unions to resist at least some of the government’s crisis related policies.
However, regarding government policies, the recent tripartite negotiations in 2012 under the
new centre-left government is the only of the recent government initiatives where the social
partners have been more than superficially involved. Some of the other policies – including
those concerning the unemployment benefit reform, the reform of the voluntary early
retirement scheme as well as those in relation to other work and employment related
initiatives – were introduced by the previous liberal-conservative government despite strong
protests from the trade unions. Although a lack of involvement can be identified in the
policy formulation at national level, Denmark has a tradition of social dialogue and prior to
these developments the social partners had some involvement even during the liberalconservative government. Moreover, it is likely that the social partners will be involved in
future reforms. Further reasons for the limited involvement of the social partners in the
crisis related policies could be related to the following factors: Firstly, the role of the social
partners in addressing the crisis issues has been much stronger at the sector-level. Second,
austerity measures have been relatively modest and although unemployment has increased
substantially, it is still below EU-level. Thirdly, strike action of most kinds is relatively rare in
Denmark. The last general strikes were in 2008 and 1998 in connection with the renewal of
collective agreements. Apart from rare large scale strikes, these strikes arise as part of the
collective bargaining process in the private sector during periods of contract renewal.
Local Government
The results of the public sector collective bargaining round in 2011 were very meagre. The
outcome was a wage-freeze for 2011 and very limited wage-increases in 2012 across the
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public sector. Apart from that the result included, inter alia, flexibilisation of the central
codetermination committees’ agendas, increased job security for shop stewards, and – in
the agreement for the municipalities - a security fund for some employees made redundant.
The trade unions achieved very few of their demands in the bargaining process. Most trade
unions had expected some kind of compensation in the form of job, employment or income
security or other benefits in exchange for wage restraint. But all the trade unions’ demands
on job security (e.g. prolonged terms of notice, redundancy payments) were rejected. These
demands were clearly related to the crisis and the increasing number of redundancies in the
public sector. However, in the municipal sector the employer part (KL) proposed at the end
of the negotiation process a ‘security fund’ to finance further training for redundant workers
as a kind of compensation for all the rejected demands. The fund was financed by unused
pension funds and therefore did not incur additional expenditure for employers. Crucially, It
was only in the municipal sector that an agreement on this issue was included.
Nevertheless, it can be argued that the trade unions succeeded in blocking the employers’
aims regarding , e.g. , increase in the share of wages set at local level, increased working
time, and a movement from collective to individual bargaining at the local level. Overall, the
outcome of the 2011 bargaining round was not very dramatic. Although state, regional and
municipal employers took advantages of their stronger power position and acted tougher
than usual to the confusion of the trade unions, the bargaining round did not lead to any
dramatic changes in wages, working conditions, challenges of employee rights or any other
basic qualitative features of the public sector employment regulation system. To date, the
crisis and austerity policies have not led to any important structural changes, although both
the process and the outcome of the collective bargaining round in 2011 reflected a change in
power relations between the public employers and trade unions.
The two case study municipalities in this report have both witnessed above average
cutbacks, and are not necessarily representative of how far the crisis has impacted industrial
relations in Danish municipalities in general. However, they provide important pointers.
Although austerity measures have played a role in the form of tighter budgets, they are not
the only or even most important driver behind the cutbacks described in the two
municipalities. The so-called ‘Structural reform’, including problems controlling expenses in
the disability area, demographic development (Mariagerfjord Kommune) and unforeseen
effects from privatisation (Silkeborg Kommune) were also among the drivers of change.
Overall, the case studies, with a particular focus on the so-called school-area covering basic
education, show that in many cases, social dialogue and employer-trade union relations can
be harmonious and constructive and largely characterised by a good degree of openness and
involvement. As such, both cases provide examples of ‘innovative’ measures such as the use
of job-rotation and job-banks.
Conclusion
Denmark’s public sector employment relations model is characterised by relatively limited
legislation, bipartite collective agreements at all levels with high coverage rates, (ad hoc)
tripartite social dialogue, an extensive system for employee involvement, and relatively
strong trade unions. In all three main bargaining areas - state, regions (health) and
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municipalities – sector-level bargaining, that normally takes place every second or third year,
plays an important role. The negotiations cover the overall costs for the bargaining round as
well as cross-occupational working and employment conditions. While social dialogue has
been affected by the crisis, trade unions were still able to gain concessions within the
bargaining processes. Organisational bargaining takes place more or less simultaneously
with the sector-level bargaining and in times of tight budgets, there can be very little to
bargain on at this level. Local level bargaining has gained in importance due to the partial
decentralisation. Other issues than wages can be bargained on as well. This is the case for,
inter alia, working time, training and policies for senior employees.
Although the crisis has had an impact on public service and public sector ER austerity
measures have been relatively modest in scope and impact. The reforms have mostly been
of the quantitative type, although some initiatives also imply qualitative changes. The drivers
of the crisis related policies, including austerity measures, have not only aimed for budget
control, but also to increase labour demand. Austerity measures are not the only important
driver of change regarding job-levels and public sector ER in Denmark. The role of the social
partners in the austerity measures has been modest on the national (tripartite) level, but
they have played a greater role in relation to austerity on (bipartite) sector- and local levels.
Overall, the processes and institutions of social dialogue have remained the same although
austerity has had an effect on the outcome. Yet, while a change in power relations can be
observed, at sectoral level social partners played a much greater role. Although changes in
the intensity and form of local level social dialogue can be observed, institutions of local
level bargaining and employee involvement still play a very significant role.
While local government has been affected more greatly with respect to wages and working
conditions, the two case studies have illustrated that the social partners (de facto the trade
unions) can play a constructive role in implementing redundancies in local authorities. The
two case studies showed a fruitful use of tools such as (limited) remuneration and extra
pensions, natural wastage, job banks and job-rotations projects. Furthermore, they stressed
the importance of open attitudes, early involvement of the trade unions and clear divisions
of labour and time schedules in order to minimise the damage from redundancies.
Key references/ sources
 Hansen, N. W. (2011): Lokal løn i det offentlige. Fakta. FAOS, Sociologisk Institut,
Københavns Universitet.
 Ibsen, C. L., T. P. Larsen & J. S. Madsen (2011): ’Challenging Scandinavian
Employment Relations – The Effects of New Public Management Reforms.’ In
International Journal of Human Resource Management 22:11.
 Mailand, M. & N.W. Hansen (2012): ‘Public service relations in an era of austerity –
the case of Denmark. Paper to the Special Seminar ‘Public service employment in an
era of austerity: from cutback management to structural reforms? ILERA World
Congress, Philadelphia, July 2 -5, 2012’.
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