Public service employment relations in an era of austerity - the case of Denmark

Paper by Mikkel Mailand and Nana Wesley Hansen

Like many other EU-countries, Denmark has been hit hard by the financial and economic crisis and unemployment tripled from 2007 to 2009, although from a very low level.

The paper offers a two-level analysis of the public sector responses to the financial crisis at national level as well as at the local municipal level.

Firstly, the paper analyses to what extent the responses to the crisis have impacted the employment situation and employment relations in the public sector in Denmark.

Secondly, special attention is paid to the role of the social partners and to the content of the responses, i.e. determining whether the reforms only take the form of cuts or if they also affect the basic qualitative features of the public sector employment regulation system and pave the way for a deepening of NPM.

The findings are then put into a theoretical perspective by discussing the relevance of welfare retrenchment studies versus theories of path-dependency for explaining the recent development in Denmark as well as into a geographical perspective, by comparing the results with other Nordic countries.

The paper concludes that the net job loss of 2.1 percent from the peak in the early 2010 to late 2011 represents a substantial, but compared to similar developments in many other EU countries, limited reduction in public sector employment. Moreover, public sector responses to the crisis in Denmark have primarily taken the form of ‘cutback management’ affecting wage and employment levels, rather than accentuating new system reform initiatives.

At the national level, policy measurements have been taken which will inevitably have important implications for income security and work-incentives for certain groups, but none can be termed actual model changes.

However, both the processes and the outcome of the bipartite collective bargaining round in 2011 were affected by the crisis, and power relations have significantly shifted in favour of the public employers, and the less compromising attitude from the sector-level employers seems not to be a transitional phenomenon. Tougher public employers might help balancing the budgets and pave the way for NPM tools, but might also make joint solutions to long term challenges in the public sector more difficult.

At local level, the paper concludes that stronger government control with local spending clearly push austerity measures through to the local level, but the actual approaches taken to reach the economic aims mainly draw on pre-crisis reform initiatives implicating that the reduction in number of employees in the public sector is equally a measurement of institutional restructuring as it is a measurement of direct crisis impact.

The crisis’ responses pursued at national as well as at local level remain by and large dedicated to the modernization agenda from the early 1980s. However, the specific nature of change spurred by the financial crisis in the public sector continues to predominantly take place within the institutional framework of the public sector ER-system as part of the wider Danish model of labour market regulation indicating a certain degree of path dependency.

Finally, the paper offers a brief comparative perspective on differences and similarities in crisis impact and responses to other Nordic countries, namely Norway and Finland. None of the measures taken so far in these countries indicate any structural changes in their ER systems or in their public sector social dialogue.

Paper presented at the ILERA World Congress 2012, Philadelphia, USA, 2-5 July 2012.