Helle Thorning-Schmidt: Danes must work more
More people must work more, productivity must increase and salaries will freeze. These are central elements to Denmark’s new centre-left government’s labour market policy, which has been relatively well received by both employers’ and workers’ organisations.
There could be 135,000 new jobs, but Danes can not expect much more in terms of take-home pay even though the country now has got a Social Democrat-led government. Economic responsibility is a keyword for the new government’s policy, said Helle Thorning-Schmidt, when she as Denmark’s first ever female Prime Minister held the traditional opening speech for the newly elected Folketing (parliament) on Tuesday 4 October.
“The first big task will be to lead Denmark out of the crisis in a responsible manner,” the Prime Minister said in her opening speech.
The new Prime Minister pointed out that tens of thousands of jobs have disappeared from Danish businesses and that many families are experiencing their private economy to be “under extraordinary pressure”. Staking a course out of the crisis will be anything but easy, she warned. Changing the negative direction of Denmark’s economy will come as a result of tough choices, responsible economic policies and employers refraining from demanding considerable pay increases.
By 2020 the new government, a coalition of the Social Democrats (S), the Danish Social-Liberal Party and the Socialist People’s Party (SF), wants to create 135,000 jobs and at the very least balance the budget. This year’s public deficit is expected to reach 68bn Kroner (€9bn) and the former government’s budget for 2012 included a deficit for 2012 reaching 85bn Kroner (€11.4bn)
The new government’s first step trying to turn this around is to kick-start the economy by investing 10bn Kroner (€1.3bn) in the public sector. This alone will create new jobs right here and now, the Prime Minister expects.
Four point plan
In addition the economy will be cleaned up and new jobs created through a four point plan:
- Increase public revenues by introducing new taxes and excises and by limiting state support for businesses.
- A new tax reform will reduce labour tax. High income tax is coming down and a proposed tax for millionaires has been dropped.
- Students will have to finish their studies in a shorter amount of time and there will be reforms of the activation measures targeted at the unemployed and people in early retirement, cash help and the flexjob system.
- An upcoming three-party agreement between the state and the social partners will increase the number of people in work, improve vocational education and make it easier to access adult and continuing education. The government expects reasonable salary demands.
“Denmark cannot and should not compete on low salaries. But the problem is that in recent years Danish salaries have increased faster than in other countries. This costs Danish jobs,” said Helle Thorning-Schmidt.
Danes must also prepare to retire later and for a considerable cut to the early retirement scheme. Before the election the Social Democrats and SF promised not to touch early retirement, but this was sacrificed when the Social-Liberal Party insisted on change. The Social Democrats are also breaking a promise to abandon the previous government’s halving of the period people can receive unemployment benefits. The new government will only extend the unemployment benefit period by six months for people who are about to loose their benefits during the second half of this year.
In her opening speech the new Prime Minister did not mention with one word the 12 minute longer working day which she talked so much about before the election as the Social Democrats and SF’s solution for how to finance a continuation of the early retirement scheme. But the new government still believes talks between the Danish state and the social partners can increase labour supply.
The employers are very positive to the invitation to three-party negotiations.
“There is nothing in the proposed three-party negotiations which we are negative to,” said Jørn Neergaard, Director General of the Confederation of Danish Employers (DA).
He notes that the new government wants to increase the labour supply, strengthen competition, strengthen education and reevaluate employment efforts. These are central labour market policy themes which means the employers‘ organisations now are positive to the negotiations.
Difficult negotiations ahead
Both the Social Democrats, SF and the Confederation of Danish Trade Unions were criticised ahead of the election for failing to explain just how people are expected to work more. They still don’t want to say. But expectations for great savings as a result of longer working hours have fallen dramatically. According to the new government, people working more will save four billion Kroner (€5.400.000) in the budget. Earlier the Social Democrats and SF said they would save 15bn Kroner (€2bn) in this way.
Yet the three-party negotiations could prove difficult. The country’s third largest trade union FOA represents some 200,000 public service workers. It has already said if workers are to give anything in the three-party negotiations they need to see something in return. The union does not want to accept a 12 minute plan as long as it doesn’t mean retaining the right to early retirement.
It is not clear when the three-party negotiations will start - probably not until next year. Before the election the Social Democrats and SF wanted to start negotiations within 60 days of taking power, but the employers’ organisations have warned against this. New agreements need to be reached within a few months in order to avoid major conflicts in the private labour market. As she started her new job as the government’s new Minister for Labour, Mette Fredriksen (S) said she has still not decided when the negotiations will begin.
The new government also wants to get 10,000 more immigrants and their children into work by 2020, and a new integration reform will introduce a so-called integration barometer which will show how many ‘new’ Danes find work.