Endo and the Danish solution

Since President Duterte on the 26th of July vetoed the Security of Tenure bill, there has been a variety of different opinions expressed in the media. This comment will not relate to these positions, but will try to contribute to the debate by describing traits of the Danish Labour market model, which gradually has developed and made the labour market in Denmark among the most efficient in the world using “flexicurity.”

In the discussion in the media of the endo-problem, it almost appears that it is a question of squaring the circle. The employers’ organisations are worried they get stuck with workers, they don’t need. And the trade unions are worried that they get fired after a short time and they don’t get benefits and security to survive in a decent way. In my country, Denmark, we have for many years practiced “The Golden Triangle Principle.” Let me explain how. 

In Denmark, the State does not play an active role in determining the wages and working conditions of the labour market. The wages and working conditions are typically defined by collective agreements (CA) agreed upon by the trade unions and employers’ organisations. For the same reason, one will not find a statutory minimum wage defined by law. In Denmark, the labour market is regulated by the trade unions and employers’ organisations together. They represent the majority of the workers and companies. 69 percent of the Danish labour force are members of a trade union, and most of the companies are members of the employers’ organisations.

The trade union side is concentrated in four central organisations, for workers, civil servants,  professionals, and the executives. The employers’ organisations, which negotiate and enter into CA’s with the trade unions, are for the private sector organised in a few organizations. For the public sector, it is The Ministry of Finance and LGUs negotiating.  Typically, the CA’s last for 2- 3 years. Before the CA expires, the parties will meet to negotiate and renew them. A special characteristic of our system is the general peace obligation, meaning that, in the periods between renewal of the CA, it is illegal for the social partners to take industrial action. But they may take action, if they cannot agree on renewing the CA.   

The CA’s consists of rules regarding: wages and working hours –– holidays – shop stewards – conditions and rules in case of illness and maternity/paternity leave – dismissal – and pension. The organisations have three kinds of CA’s: the general agreement, the cooperation agreement and the code of rules for the resolution of labour disputes. All CA’s are legally binding and they can be enforced efficiently by the Labour Court. The trade unions and employers’ organisations are thus responsible for ensuring a flexible, secure and well-functioning labour market. This Danish way of organising is typically referred to as ‘the Danish Labour Market Model’. The key word is “Flexicurity” from the composition of the two words flexibility and security.

The Danish employment system, the so-called ‘golden triangle’ is characterised with its combination of flexible dismissal rules, generous unemployment benefits and active labour market policies. The golden triangle exemplifies how flexibility and security on a national scale reconcile for the mutual benefit of workers as well as employers.  Herein lie five dynamics: security – stability – trust – efficiency – and flexibility.

The “golden triangle” provides high flexibility as it is easy to lay off people. There are many job openings – 1/3 of the Danish workforce change job in a year. Around 2 million people are member of an unemployment insurance fund. As a member, you are guaranteed an amount of regular income if you become unemployed. The average wage, before tax reduction, in Denmark is 320.000 DKK (app. 2,4 mio PHP) per year. In case of unemployment, a member must fulfil certain criteria to be fully eligible to receive some 226.000 DKK a year through the insurance fund.

However, one is allowed only to enjoy this benefit system for a maximum of two years, but this period will give time to look for the right job, pay the bills – and in fact, help one find a job. If the unemployed cannot find the right job or does not possess the right qualifications as demanded by the labour market – the active labour market policy will focus and help the unemployed to obtain better/different qualifications. This will on the other hand give the unemployed the right and duty to accept job offers.         

Collective agreements are the rational compromise between conflicting interests and the many common interests of employees and employers. The Danish Trade Union movement and Employers’ organisation have now for some years being working with local Philippine partners. Hopefully, they will be able to inspire the Filipinos to organise and think differently about labour market policy.

“Flexicurity” is the way forward.

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(Jan Top Christensen is the Ambassador of Denmark.)