Denmark - AGS 2015

European Semester Officers (ESO) in your country:

Torbjorn OLAUSSON
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torbjorn.olausson@ec.europa.eu
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Michael VEDSO
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michael.vedso@ec.europa.eu
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Comments for the ETUC on the Annual Growth Survey 2015
Denmark: LO, FTF and Akademikerne

On 28 November 2014, the Commission published its Annual Growth Survey (AGS) for 2015. In the AGS, the Commission outlines the EU's and member states' main challenges in terms of the economy, growth and employment and points to necessary measures at the EU and national levels. The ETUC has therefore asked the national member organisations to submit their comments on the AGS with special attention to four specific areas:
- Reference on decentralisation of collective bargaining
- The need to link wage trends with productivity
- Further fragmentation of the labour market and the impact it can have on wages
- Reference to an enhanced role of social partners all along the Semester process
By way of introduction, LO, FTF and Akademikerne would like to refer to Article 153, point 5 of the Treaty in which it is stated that negotiations on wage and, thereby wage formation, is a national competence and not an EU competence. We would like to make the comment that wage development does not merely depend on productivity but also on other factors such as supply and demand of the required skills and, not least, the products that companies produce.
Furthermore, it is entirely up to the social partners to decide to what extent their collective agreements shall “allow a certain degree of flexibility for differentiated wage increases across sectors and within sectors according to specific productivity developments”.
1) Reference on decentralisation of collective bargaining and 2) The need to link wage trends with productivity:
The majority of the collective agreements in the private sector are based on minimum wages where specific wage rates are agreed at company-level. There is thus a close correlation between the competitive situation of the company, the wage agreements concluded by the companies themselves and the minimum wage development agreed between the social partners.
The public labour market is linked to the private sector wage developments by means of a regulation mechanism which ties public sector wages to the wage development in the private sector. This helps ensure coherence in the labour market and, in time, ensures a relatively uniform wage development across sectors. Continuous budget adjustments contribute to a similar development in productivity. Nevertheless, the health services have shown higher productivity compared to, for example, the retail trade.
Today, most public sector collective agreements allow individual or group developments in wages based on qualifications, functions or achievements which, in theory, supports the connection to increased productivity.
3) Further fragmentation of the labour market and impact it can have on wages
The Danish labour market is, to a wide extent, covered and regulated via collective agreements between the social partners. This ensures that the agreed wage development reflects the economic "sustainability" at the corporate-, industry- or sector level.
Increased fragmentation of the labour market can have a negative impact on workers’ opportunities for negotiating good wages and working conditions which, eventually, leads to a weakening of wage developments - both for the individual employee and for workers in general.
In the Annual Growth Survey, the Commission underlines that there is still a need for structural reforms in the member states. LO, FTF and Akademikerne agree with the assessment that there may be a need for labour market reforms in a number of countries. Further fragmentation of the labour market can be alleviated, among other things, by creating increased flexibility on the labour market while ensuring a strong safety net, for instance in case of dismissals. It is crucial that the social partners are involved in the shaping and implementation of structural reforms.
4) Reference to an enhanced role of social partners all along the Semester process
It is absolutely vital that the social partners at central and local level and across industries and sectors are involved in "the European Semester" so that recommendations from the Commission can reflect the actual cyclical and institutional conditions on the national labour markets and, not least, base its recommendations on these conditions. In this way, we could avoid recommendations from the Commission that are based on simplified key figures and, instead, to a higher extent, they could reflect the nuances in, for example, wage developments (distributed to industries and sectors) and their interplay with fiscal policies in the individual member states.

Confederation:

National Reports

1. FTF agrees Growth Survey‘s greater priority to growth and employment. But FTF disagree Growth Survey’s positive picture that the recovery is on track and that EU countries just ought to continue the EU's existing economic agenda. It is not a sufficient policy. EU needs an ambitious investment plan.
2. FTF agrees that there must be an implementation of the youth guaranty in all EU countries, as identified in the Growth Survey. However, FTF do not agree with a recommendation that wages must correspond to productivity. Firstly, the EU should not interfere in the national wage setting. Secondly, it may lead to a decline in real wages.
3. It is good that social indicators are introduced. It is important with a more balanced approach in the European Semester of economic considerations and social. However, there is a need for social indicators are used more aggressively in the European Semester and supplemented by additional and/or more accurate indicators of social differences, etc. FTF fear that it brings only a numerical analysis.
4. FTF believes that the modernization of the survey virtually is reduced to a question of deregulation. It is reprehensible. FTF looks at the public sector as an innovative sector which is a key requirement for private companies' growth. Moreover, it is an important demand force. Finally, the impact of public expenditure on GDP and productivity, such as education, is often underestimated.

LO-DK does not believe that the Annual Growth Survey has had a direct impact on either wage formation or collective bargaining in Denmark.

LO Denmark is, however, very concerned about the Commission repeatedly returning to recommendations on wage moderation and the need to weaken the collective rights.

The Commission lay out the narrow focus that productive improvements may only be achieved by wage moderation. It is worrying since investments in education, research and innovation has proven far more effective.

LO Denmark

LO and FTF have the following comments for the National Reform Programme 2014. In connection with the meeting in the liaison committee for the 2020 strategy on 27 February 2014, LO and FTF have been informed that the Government, in its National Reform Programme 2014, does not describe new initiative but, to a large extent, analyses and accounts for initiatives that have already been adopted or will be in the near future.
In the consultation material provided, chapter 2 of the National Reform Programme had been left out. LO and FTF therefore have not had the opportunity to submit con-sultation responses regarding the overall economic framework for Denmark.
LO and FTF agree that there are indications that the Danish economy is improving and that the economic prospects look favourable. Danish competitiveness is strong and the public finances are sound. These are good preconditions for job- and growth creation. Should the expected improvement of the Danish economy fail to materialise, it is important to tackle the short-term challenges. Sound public finances will provide the financial latitude for this.
LO and FTF agree that the reform of the vocational education and training system (section 3.2.2.) contains mainly positive aspects. However, LO and FTF will closely monitor whether adequate resources are also allocated to raise the quality of educa-tion, increase the number of lessons and ensure the necessary guidance efforts as well as the proposal for a new "combined upper secondary education programme" which is to ensure that everyone has access to education.
As regards the aim to ensure faster completion of studies of higher education pro-grammes, LO and FTF are positive. However, it is necessary to point out that ele-ments of these initiatives may have a negative effect. All else being equal, the initia-tives to promoter faster completion of studies could increase the drop-out rates if it is not implemented in connection with other initiatives such as better student guidance. It is a specific challenge to ensure that adults with work experience who embark on continuing training later in their career are not faced with further obstacles to access to and completion of higher education.
LO and FTF would have preferred that the 2.2 bn cost reduction due to the reform had been kept in the education system to strengthen the quality of the training and education programmes. Unfortunately, this did not happen. The reform has therefore led to considerable cost cutting in the field of training and education - something which is contrary to the EU-Commission's recommendation to the member states to strengthen investments into training and education systems.

LO and FTF have prepared a joint proposal for the Expert Committee on Quality in Higher Education in Denmark, cf. section 3.2.4. LO and FTF support the increased focus on the quality of higher education, their relevance and coherence, since it is vital to ensure the best possible match between the qualification requirements on the labour market and the supply of education programmes. It is important to ensure that training and education lead to relevant employment.
LO and FTF suggest targeted efforts in five fields if the education programmes are to continue to constitute attractive alternatives to the university education programmes. These fields include relevance of the training programmes, knowledge base, practical guidance, study environments and the links to further and continuing training and education.
A number of Danish professions regulated by law require the person who performs the profession to have completed specific training. This specific training requirement contributes to ensuring that certain tasks are performed in accordance with certain stipulated standards and quality requirements. It is paramount to LO and FTF that the coming measures to increase competition in professions regulated by law in Denmark (section 3.3.2.) place considerable emphasis on securing a high level of quality in connection with the performance of professions, for instance in the field of healthcare and education.
In section 4.1 LO and FTF note that the local authorities have only established 1,500 resource clarification processes in 2013 - and the aim was originally 17,000. There are a number of indications that suggest that the local authorities keep citizens with complex problems on cash benefits rather than offering them resource clarification processes which aim to improve their working capacity. In addition to this, the Gov-ernment's efforts in terms of integration have not been fully successful. 16 % of non-western immigrants are unemployed compared to only 5% of ethnic Danes. These challenges also apply to both unemployment benefit and cash benefit. It is therefore difficult to understand why the government has chosen to discontinue the governmen-tal, nation-wide special task force for ethnic employment (SEBI) which has helped job centres with a focused and effective effort when it comes to unemployed persons with a migrant background. The local authorities do not - as was previously the case - have a minimum target for reducing unemployment among the group of persons with a migrant background. There is a need for re-evaluating the entire effort to re-duce the far too high unemployment rate among immigrants and to set specific targets for these efforts in the local authorities and the unemployment insurance funds.

It is positive that the government cf. section 4.4.2 has earmarked funds for the double skills upgrading of the workforce. However the considerable cost-cutting to tertiary education is not mentioned in this section. By abolishing the SVU-scheme (economic support for adults in case of loss of earnings or reimbursement for the employer) for persons with, among others, a professional bachelor degree and the continued in-crease in users fees for Open Education, there are reasons to fear a further decline in continuing and further education among employees in both the public and the private sector.
LO and FTF agree that the seven principles for cooperation between partners in the public labour market on modernisation, in the Trust Reform, is an important starting point for further development of the public sector in order to ensure better conditions for the employees - something which, simultaneously, improves service standards for the citizens. Meanwhile, it is important for LO and FTF to underline that the trust reform must not be perceived as a cost-cutting exercise, but as an important element in the further development of an already well-functioning public sector.
LO and FTF also agree that a strengthened public-private cooperation can contribute to developing the public sector even further. Public-private cooperation must take place voluntarily - where it makes sense - and not be forced through. Here, it is par-ticularly important that quality in the public-private cooperation is raised by means of an innovative approach to public sector task handling, including the development of new and better service solutions to the benefit of the citizens. In addition to this, it may be a benefit to involve private players in the innovation of new welfare solutions since this can contribute to both raising the standard of public services and to creating new products with marketing possibilities at the benefit of private-sector employ-ment. However, it is of the utmost importance to LO and FTF that all public-private cooperation is based on Danish collective agreements and Danish legislation so that the Danish model is supported and upheld.

LO and FTF

Text from: LO, FTF and Akademikerne

In the AGS, the Commission outlines the EU's and member states' main challenges in terms of the economy, growth and employment and points to necessary measures at the EU and national levels. The ETUC has therefore asked the national member organisations to submit their comments on the AGS with special attention to four specific areas:
Reference on decentralisation of collective bargaining
The need to link wage trends with productivity
Further fragmentation of the labour market and the impact it can have on wages
Reference to an enhanced role of social partners all along the Semester process
By way of introduction, LO, FTF and Akademikerne would like to refer to Article 153, point 5 of the Treaty in which it is stated that negotiations on wage and, thereby wage formation, is a national competence and not an EU competence. We would like to make the comment that wage development does not merely depend on productivity but also on other factors such as supply and demand of the required skills and, not least, the products that companies produce.
Furthermore, it is entirely up to the social partners to decide to what extent their collective agreements shall “allow a certain degree of flexibility for differentiated wage increases across sectors and within sectors according to specific productivity developments”.
1) Reference on decentralisation of collective bargaining and 2) The need to link wage trends with productivity:
The majority of the collective agreements in the private sector are based on minimum wages where specific wage rates are agreed at company-level. There is thus a close correlation between the competitive situation of the company, the wage agreements concluded by the companies themselves and the minimum wage development agreed between the social partners.
The public labour market is linked to the private sector wage developments by means of a regulation mechanism which ties public sector wages to the wage development in the private sector. This helps ensure coherence in the labour market and, in time, ensures a relatively uniform wage development across sectors. Continuous budget adjustments contribute to a similar development in productivity. Nevertheless, the health services have shown higher productivity compared to, for example, the retail trade.
Today, most public sector collective agreements allow individual or group developments in wages based on qualifications, functions or achievements which, in theory, supports the connection to increased productivity.
3) Further fragmentation of the labour market and impact it can have on wages
The Danish labour market is, to a wide extent, covered and regulated via collective agreements between the social partners. This ensures that the agreed wage development reflects the economic "sustainability" at the corporate-, industry- or sector level.
Continues...

Increased fragmentation of the labour market can have a negative impact on workers’ opportunities for negotiating good wages and working conditions which, eventually, leads to a weakening of wage developments - both for the individual employee and for workers in general.
In the Annual Growth Survey, the Commission underlines that there is still a need for structural reforms in the member states. LO, FTF and Akademikerne agree with the assessment that there may be a need for labour market reforms in a number of countries. Further fragmentation of the labour market can be alleviated, among other things, by creating increased flexibility on the labour market while ensuring a strong safety net, for instance in case of dismissals. It is crucial that the social partners are involved in the shaping and implementation of structural reforms.
4) Reference to an enhanced role of social partners all along the Semester process
It is absolutely vital that the social partners at central and local level and across industries and sectors are involved in "the European Semester" so that recommendations from the Commission can reflect the actual cyclical and institutional conditions on the national labour markets and, not least, base its recommendations on these conditions. In this way, we could avoid recommendations from the Commission that are based on simplified key figures and, instead, to a higher extent, they could reflect the nuances in, for example, wage developments (distributed to industries and sectors) and their interplay with fiscal policies in the individual member states.

Joint comment by FTF, LO and AKADEMIKERNE

FTF, LO and Akademikerne have looked through the EU Commission’s country report in the framework of the European Semester concerning Denmark. Except for a few areas and subjects, the report gives no reason to greater concern among the organizations.
In regards to the three topics that the ETUC asked the organizations to comment on please see below.

• Analysis of the Country report concerning impact on collective bargaining and wages
The report makes no impact on the areas of collective bargaining or wages in Denmark.

• Analysis of the Country Reports concerning labour market and labour reforms (in coordination with the members of the Economic and Employment Committee)
The report asks the Danish Government to keep a focus on people on the outskirts of the labour market - i.e. immigrants, (vulnerable) young people, people with disabilities etc. We support this. We support the Commission’s critical view on the situation where the Danish Government has changed some of the periods where unemployed can receive social benefits. The Commission concludes that this can affect the Danish Flexicurity Model which we agree could be a consequence.
We do not agree with the Commissions view on the future growth of the workforce in Denmark, since it is based on figures which are not valid enough to interpret on.
We do agree with the Commission that the Danish Government has adopted a lot of labour market reforms
which we are still to see the results of. Therefore we also agree that it is too early to predict that the reforms are all a success and will work according to the objective.
We agree with the Commission’s assessment of the challenges in the field of VET such as high drop-out
rates, low completion rates and a lack of attractiveness. But we believe that the implementation of the VET
reform adopted in 2014 will deliver solutions to some of these challenges.

• Key political messages to be delivered at EU level
The EU Commission should – in the light of their new Investment Plan – make sure that the member states
leave enough room for maneuver and public investment to initiative and support the initial growth. Public
investment also leads to private jobs and private investment.
Education is an important issue for workers on all levels, and therefore education should also be a priority
at EU-level to ensure that there will be a continuously growing number of educated workers in the European workforce. Education should still be an area of national competence but the Commission should
keep pushing member states to maintain focus on education. And it is important to have a broad focus on
education that includes all aspects of life long learning. In Denmark we have a strong tradition of close
involvement of the social partners especially in VET that supports the development of skills that are in
demand by the labour market. We believe this is a strong example of a well functioning social dialogue.
We believe that a stronger involvement of the employees and a focus on employee-based innovation can
help to strengthen the link between research & development and the business sector thereby increasing
productivity. Innovation often comes from the people who are closely involved in the daily production.
We need to have focus on the follow-up of the reforms already carried out in Denmark to prove the effect
the reforms have. - Positive or negative, so a reaction can be made if the reforms are pushing Denmark in a wrong direction.

In the Country Specific Recommendations to Denmark the Commission doesn’t address wages, wage setting or collective bargaining.
They only propose two CSR’s to which we have the following comments.
1st CSR: “Avoid deviating from the medium-term objective in 2016”.
Danish Trade Union Confederation’s Comments:
The first CSR aims at making the Danish government stick to the goal of a maximum deficit of 0.5 percent on the structural balance. But in this regard, we in the Danish Trade Union Movement have noted the following on the economy of the local and regional authorities which is regulated by Danish Budgetary Law:
The 0.5 percent from the Danish Budgetary Law is an implementation of the rules of the EU Stability and Growth Pact and the Fiscal Compact. But as the Danish Economic Councils pointed out in 2013, the EU has recalculated the so-called medium-term objective for Denmark, so the EU would allow Denmark's deficit limit to be set at 0.75 percent of GDP instead. We therefore recommend that Denmark adapts the Budgetary Law accordingly. Currently the Budgetary Law restricts the economy for the local and regional authorities more than the EU actually requires, hampering for example the local municipalities to use the amount as they need or can to provide public services.
2nd CSR: “Enhance productivity, in particular in the services sectors oriented towards the domestic market, including retail and construction. Ease the restrictions on retail establishments and take further measures to remove remaining barriers posed by authorization and certification schemes in the construction sector”.
Danish Trade Union Confederation’s Comments:
We do not believe that easing of the restrictions on retail establishments will create growth and productivity. Rather we believe that it will have a negative influence on the possibility of the retail sector to educate people and create employment.
Today small companies in the retail sector contribute to educating people thus securing a skilled work force. The smallest companies take on a larger share of trainees that have to fulfill practical training as part of a VET programme. Small retailers also generally hire skilled workers whereas large scale supermarkets make more use of unskilled workers and part time workers. If you ease restrictions on retail establishments this will lead to an increase in the number of very big retailers on the expense of smaller companies. Thereby you will encourage a process where skilled workers in the retail sector will be replaced with unskilled workers and part time workers. We do not believe that this will benefit either the sector as such or society at large.
A liberalization should not take place without first carrying out a thorough analysis of the possible consequences in both the short and the long run.
As regards the recommendation to remove barriers posed by authorization and certification schemes in the construction sector we oppose the idea that the current demands are barriers. The regulation aims to ensure that for example electricians and plumbers live up to certain standards when working in buildings. The standards are set by the Danish Security Agency. In the end these standards benefit citizens and consumers. Foreign companies have the possibility to apply for exemptions.