Danes need to work longer, says Ministry

In January 1999, the Danish Finance Ministry published an analysis which indicates that the existing level of social provision can be maintained in the coming decades only by Danes working longer, or else by increased taxation. One solution proposed by the Ministry would be the abolition of compulsory time off in lieu for overtime and the introduction of a new right to receive pay for holidays not taken. These ideas have been rejected by trade unions, though without closing the door totally.

It would cost DKK 8 billion, equivalent to 0.7% of Gross National Product, to finance the sixth week of annual paid holidays currently demanded by employees, if no cuts were made in existing public services. This is the conclusion of an analysis carried out by theFinance Ministry and published in a document entitled Arbejde og Service (Work and service) on 6 January 1999.

The analysis appeared just a week ahead of the start of bargaining over new public sector pay settlements, in which a sixth week of holiday is one of the key demands on the employees' part (DK9812198F). However, finance ministerMogens Lykketoft underlined at a press conference called on 6 January to launch the analysis that the study should not be seen as a negotiating position from the public employers. Instead, it is an attempt to raise an important socio-economic and political problem, for which solutions must be found if levels of social provision are to be maintained.

Danes are keen to maintain their public services. That is plain from repeated user surveys, but if the trend towards more leisure time continues, this can only be at the cost of increasing already high tax rates - an unrealistic option, according to Mr Lykketoft.

Until now the greater leisure enjoyed by those already in employment has been offset partly by rising taxes, partly by the fact that more Danes are coming onto the labour market. Denmark has achieved record labour market participation rates, both generally and among women. However, the tax route is no longer viable and in coming years population trends will reverse. The cohorts of labour market entrants will be relatively small, while large numbers will be leaving each year. The only remaining solution is for Danes in general to work longer, the Finance Ministry concludes.

That is why the Government has embarked on the highly controversial reform of early retirement pension provisions (DK9812197F). The aim is to raise the effective age of retirement and thus help to mitigate the problem. Also under consideration are schemes to bring young people more quickly through the education system. This could also help to increase the number of years which individual Danes spend on the labour market.

Overtime and holidays

The main plank in the government's new proposals is not that those who are already working long hours should work for even longer, but that Danes should on average continue to work the same number of hours over their lifetime or even a few extra. There must be greater flexibility both in the ordinary organisation of daily work and over whole working lives.

Mogens Lykketoft summarised these ideas in the expression: "Don't work harder, work smarter". The Finance Ministry is thus proposing doing away with existing rules which put a brake on more flexible working practices. That applies not least to opportunities for overtime working. The rules providing for compulsory time off in lieu and overtime charges must be abolished, to make payment of salary for overtime work the usual course. Prohibitions against additional jobs "on the side" must also be eliminated. As regards holidays, under the current law there is not only a right but an obligation for employees to take the stipulated statutory five weeks' holiday within a single holiday year. There is not even the possibility of deferring holiday from one year to the next, let alone allowing holidays not taken to be paid back as salary. Changes are required here too, in the interests of greater flexibility, it is claimed.

The Finance Ministry has calculated that additional working hours equivalent to 20,000 extra full-time jobs would be created if just half the overtime presently recompensed by time off in lieu were paid in cash. This is seen as especially necessary if the incipient labour market bottlenecks are to be tackled - such as those in the social and health sector or public education.

Labour shortage

This discussion should be seen in the light of Denmark's unusually high employment rate, with unemployment down to 170,000. This figure continued to fall steadily during 1998. The unfavourable economic prospects following the international financial crisis will perhaps check this tendency and bring about a modest rise in unemployment. For the time being, however, there is no prospect of a dramatic rise. Not only that, but the small cohorts of entrants to the labour market in coming years, substituting for the large numbers departing, will develop this tendency into a real labour shortage.

The principal of the Centre for Business Analysis at the Danish Technological Institute (Dansk Teknologisk Institut), Peter Plougmann, feels therefore that the initiatives suggested by the Finance Ministry are sorely needed. The only question is whether they will be sufficient. According to Mr Plougmann, of over 150,000 unemployed people, only around 100,000 form a real "labour reserve", and in terms of training, these are ill-matched to the needs. That is why the government needs to appeal to those who are already working hard to work even longer. The need is not just for more hours, but for more highly qualified hours, Mr Plougmann suggests. He advises therefore that there is also a need for highly educated immigrants if the Danish economy is to stay on track.

Commentary

If the demand for more holiday time - corresponding to that offered to employees in the private sector through the government's own intervention in collective bargaining in spring 1998 (DK9805168F) - is to be accommodated in early 1999's public sector pay bargaining, then the need for greater flexibility in working hours is even greater. Furthermore, the Government will have difficulty avoiding this demand, since in May 1998 - in response to the need for a favourable outcome of the referendum on the Amsterdam EU Treaty - it was responsible for giving rather too much leisure time, compared with its own policies, to wage earners covered by collective agreements.

It can therefore be expected that the demands from public employers for the introduction of more flexible working hours rules will be an important element in the public sector collective bargaining initiated in mid-January. Agreement may be possible on a central framework, permitting the organisation of working hours through local agreements, in order to match local needs precisely. It may prove sufficient to allow room for extra holidays in such a way that there is no extra strain on either working time or the economy.

If extra holiday time is granted in such a way that it can also be paid as salary if unused, this could also be seen as an element in the government's effort to create working hours which are globally more flexible, rather than a step in the direction of lower average working hours seen over the whole working life.

In this context, it should be noted that comments from trade union leaders on the Finance Ministry's Work and service document generally reflect the view that the holiday legislation's provisions on the taking of holidays are a protection for workers which must be maintained. However, at the same time, the door is being held open to allowing extra holidays over five weeks per year to be paid as salary. Hans Jensen, general secretary of the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) commented in the Aktuelt newspaper on 7 January: "We cannot allow rights to the five weeks' holiday to be signed away. But I am more relaxed about freedom with regard to additional holiday." The director of the Confederation of Salaried Employees and Civil Servants in Denmark (Funktionærernes og Tjenestemændenes Fællesråd, FTF), Jens Kragh, stated in the same newspaper that FTF would not support changing the statutory rule that holidays had to be taken, "but several FTF groups would like the possibility of choosing between extra holidays or cash. That applies, for instance, to nurses, teachers and nursery school workers."

It may be added that in public sector negotiations at national, county and local level, an agreement was previously reached on a change to the holiday rules, allowing holiday not taken to be deferred from one year to the next, and with the possibility, in a few special and rare cases, of having outstanding holiday entitlement paid in cash. This holiday agreement was never put into practice, but was blocked by the Labour Ministry because it conflicted with the holidays legislation. So here is a prime opportunity to find a solution - with new agreements between the parties in spring 1999 and a subsequent amendment to the Holidays Act. (Jørgen Steen Madsen, FAOS)