After many preparations and tough political negotiations in the final phase, a reform of Denmark's "anticipatory pension" early retirement scheme for people with disabilities was finally adopted in December 2000. The Minister of Social Affairs had to give up his plan to allow people in state-subsidised "flexi-jobs" (for those with a reduced capacity to work) to join unemployment insurance funds. This was agains the wishes of the LO trade union confederation but the DA employers' confederation is very satisfied with the new reform, which in other ways means a simplification of the system. In a broader perspective, the reform represents a weakening of the role of the social partners in formulating policy in this area.
During late 2000 (DK0012105N), quadripartite negotiations - involving the government, local authorities and the social partners - were held on the twin themes on reforming the "anticipatory pension" early retirement scheme and on a more inclusive and flexible labour market, focusing on state-subsidised jobs ("flexi-jobs") with special conditions for groups with a reduced capacity to work, such as long-term unemployed people, some groups of people with disabilities and those on long-term sick leave (DK9906130N).
The anticipatory pension is a state pension payable to people below retirement age whose working capacity has been permanently reduced by at least one half due to a physical or mental disability, or to people over the age of 50 where social circumstances so warrant.
After a month of hectic negotiations, the anticipatory pension reform was finally adopted by parliament (Folketing) in December 2000. The Minister of Social Affairs ultimately had to give up his wish to let the trade union-run unemployment insurance funds administer parts of the reform. A central point of the reform is the promotion of flexi-jobs, partly with a view to reducing the number of people claiming anticipatory pensions and partly with a view to bringing more people into employment as part of the overall plan to create a more flexible labour market. At a rather late stage in the negotiation process, the Minister of Social Affairs had proposed - partly on the initiative of the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) - that it should be possible for people in flexi-jobs to become members of unemployment insurance funds on an equal footing with people in ordinary employment.
The opposition Conservative Party and Liberal Party as well as the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) were strongly opposed to this proposal. They stated, that by the very nature of the scheme, people in flexi-jobs had a reduced capacity to work and consequently could not be available for work as required for admission to an unemployment insurance fund. The result, it was claimed, could be that persons in flexi-jobs could increase outlay on unemployment benefits if they did not obtain a job. The employers also claimed tax compensation for employing persons with a reduced capacity to work.
LO continued to press for allowing those in flexi-jobs into the unemployment insurance fund system. LO argued that these people would be put in a worse position on the labour market if they did not have the same rights and duties as their colleagues at the workplace. The municipal authorities - which administer the anticipatory pension scheme - were most interested in the share of the cost which would be met by themselves, the state and the employers. All parties sought to protect their own interests and it seemed for a while that the interests of those on anticipatory pensions were coming second. Finally, the Minister for Social Affairs dropped the proposal to involve the unemployment insurance funds in the reform and obtained a parliamentary majority in return for increasing pension payments
Simplified anticipatory pension scheme
In many ways, the reform means a simplification of the existing early retirement anticipatory pension system, which consists of four different levels with four different pension allowances. This is now to be changed into a single rate which corresponds to the maximum level of unemployment benefit on top of which, depending on the level of disability, the pensioner may receive a tax-free monthly subsidy. Before an anticipatory pension is awarded to a person whose working capacity is permanently reduced, it is tested whether they can perform a flexi-job, for which public subsidies are granted.
The rules on flexi-jobs are laid down in the Act on "active social policy". These provide that a flexi-job must be approved by the municipal authorities. The amount of the public subsidy is fixed by the municipality and depends upon the working capacity of the person in question. The subsidy may be one-third, one-half or two-thirds of the minimum hourly wage set out in the collective agreement covering the occupational field concerned. Under the new reform - which will not come into operation until January 2003 - people in flexi-jobs will for the first time have a right to join the normal early retirement scheme and will also be entitled to an unemployment allowance in the event of sickness, maternity and unemployment. This allowance corresponds to 91% of the rate of unemployment benefit.
Disagreement between social partners
DA expressed satisfaction with the fact that people in flexi-jobs will not be given access to the labour market on ordinary terms. "It should still be attractive to obtain a job on the ordinary labour market and we do not wish to increase incentives to work in a flexi-job with huge wage subsidies", said Tina Voldby, DA's employment director, on the day after the adoption of the reform. DA is satisfied that it has been definitively established that people in flexi-jobs belong in the social welfare system, rather than the normal labour market. LO takes an opposite position, and would have preferred that these people became a part of the labour market, thus giving them equal dignity. The situation as it is now will reduce the incentive to establish good flexi-jobs, claims LO, with those concerned being offered poor jobs as part of the social welfare system. According to the president of LO, Hans Jensen: "The pension reform is a good reform for persons on anticipatory pensions - but bad for the flexible labour market ... The agreement does not create the integration with the ordinary labour market which would really have meant a step forward". Organisations representing people with disabilities clearly support the position of LO, believing that those in flexi-jobs within the social welfare system will be offered second- or third-rate jobs.
Commentary
The main thrust of the reform of the anticipatory pension scheme, which has been under way for a very long time and was a prestige project for the Social Democrat-led government, is unlikely to meet serious opposition from any quarter. Nobody is against the simplification of pension payments and of the criteria for obtaining a pension. However, the attitude of treating flexi-jobs in isolation does not bode well for the future negotiations about the flexible labour market which will be resumed early in 2001. Flexi-jobs will have a quite central position in these talks.
In October 1999, at a congress held amid great turmoil, LO adopted a "welfare programme" which aimed to contribute towards strengthening LO's influence in political debate on a range of issues outside its normal directly work-related sphere (DK9911155N). It was decided to concentrate LO's efforts on central issues of relevance to the welfare state, with increased participation in tripartite negotiations, it was hoped, strengthening the position of the social partners in the labour market policy field. This was also clearly in the interest of DA. The social partners made a good start in this direction with the conclusion in late 1999 of a framework "climate agreement" which controlled the process of the subsequent collective bargaining round in 2000 (DK9910151F). It is for these reasons that the content of the anticipatory pension reform in relation to flexi-jobs is a drawback for the social partners - and especially for LO. LO had a clear interest in the inclusion of flexi-jobs in the unemployment insurance system, which is administered by the trade unions. This would mean more members and a greater focus on a more active trade union movement. Both the political opposition and DA referred to this political agenda in the negotiations. However, although DA is satisfied with the outcome of the reform, it also represents a minor defeat for the employers whose unsuccessful call for a linked tax reform also suggested a hidden agenda. Cooperation with LO has been damaged and there may be difficulties with the parties' further continuation of the negotiations about the flexible labour market. (Carsten Jørgensen, FAOS)