Wage autonomy, political reforms, and the absence of social pacts in Denmark

Abstract

The Danish case represents a somewhat atypical European case as the crisis was handled mainly within the realm of the existing political and corporatist institutions without any austerity measures negotiated with the social partners. The long-term tendency of declining corporatist policymaking in Denmark, which has been ongoing since the late 1970s, was not changed by the crisis. The wage-setting system was also unaffected as this is still left entirely to the social partners and hence remains bipartite rather than tripartite, and the unions still have the power to maintain the legacy of a bargaining partner vis-à-vis the employers. While the wage development negotiated bilaterally between the social partners was very modest and hence met the expectations of the political system, it did not result in concession bargaining in the various national bargaining industries and sectors. Some significant labour market policy reforms were pushed through during the crisis without the involvement of the unions; however, this is not per se a break with how this was handled previously. Rather, it can be seen as a continuing decline of traditional corporatism in labour market policies. The crisis management, through other policy measures combined with wage moderation in the bargaining system, demonstrates very well how crises and economic ruptures have traditionally been handled in the Danish political system, although the current Corona crisis appear to alter this completely.