How They're Doing It in Denmark
The Danish government has struck a historic deal with unions and employers’ associations to stop mass layoffs during the pandemic.
Over the next three months, the national government will cover 75 percent of the wages of workers who would otherwise be laid off, up to $3,300 per month. Companies will cover the remaining 25 percent of wages, while workers will give up five days of future paid vacation time.
The deal covers companies who would have to lay off at least 30 percent of employees, or 50 employees or more. In return, companies commit to no layoffs while they’re receiving government compensation.
The Danish government was one of the first in Europe to issue stay-at-home orders for all non-essential workers. This early reaction has helped the country keep its COVID-19 toll low.
A WORTHWHILE INVESTMENT
Covering 75 percent of wages may seem like a huge investment for the government, but it is much smaller than it seems. Layoffs would mean lost tax income and the expense of paying unemployment benefits. Although the deal is partly a handout to companies, it's an investment in maintaining economic confidence and an attempt to avoid a more costly economic crisis.
Rather than relief for the financial sector as in the U.S. bills, the Danish model provides a boost to the real economy—the production of goods and services. That indirectly helps the financial sector too: for instance, fewer people will be forced to default on mortgages.
More important, the Danish way encourages and enables workers to stay home—avoiding the spectacle seen in other countries of millions of low-wage workers still feeling they must show up, despite the danger, to get paid.
Finally, for workers, staying on the payroll with a job to return to is far superior to being laid off, even if unemployment benefits are generous (in the U.S., for example, Congress recently increased benefits by $600 a week, while in Denmark the lowest level of benefits for adult citizens without dependents starts at $1,690 pre-tax. Immigrants get somewhat less, while people with a longer employment history get $2,790 for two years).
Especially for nonunion workers, who have no seniority right to their old jobs after a layoff, the Danish model addresses the profound insecurity so many workers in other countries are now experiencing.
“The echo of what we are doing now will be heard into the future. Now we are laying the tracks for companies and employees to get well through the crisis,” said Prime Minister Mette Frederiksen.
Initially, money has been set aside to cover a relative small proportion of non-public employees, but the Social Democratic government is willing to put the full financial power of the state behind the deal: “There is no ceiling,” Finance Minister Nicolai Wammen said as the deal was unveiled March 15.
The deal demonstrates the Danish tripartite model of labor relations, where employers and unions negotiate collective agreements that cover 83 percent of the workforce. The government oversees the process and resolves conflicts by law. While union density is one of the highest in the world, the new Danish law is not all-inclusive: The self-employed, owner-managers, and people on casual and zero-hour contracts (where workers are essentially on call, with no guaranteed hours) are not covered. They are already among the hardest hit by layoffs, but poorly represented by unions and other interest organizations.
What will happen after three months remains an open question. Many employers, especially in the hospitality industry, expect a much longer downturn. Such employers would rather lay workers off than pay 25 percent for staff they don’t and won’t need. However, the resolute commitment of the government and the popularity of these measures may open the door for similar policies in the near future.
KEEPING THE ECONOMY GOING
From an international perspective, the Danish model is instructive, given how deeply the failure to contain the pandemic in the UK and the United States is connected to Boris Johnson's and Donald Trump's wish to “keep the economy going.” Denmark, with its protection of employment and its solidaristic sick-pay rights, looks much better suited to weather the economic storm as well as the public health one.
These policies also make people and companies more likely to respect the quarantine: workers’ right to aid is also a matter of public health. In other countries, many will face evictions and be unable to self-quarantine, unless moratoriums are put in place or rent and mortgage strikes are organized.
The question is whether this deal is merely a temporary compromise where employers and government are forced to respect workers, or a step toward a new post-pandemic economic order. Maintaining the existing structure of employment presumes that the crisis is temporary—simply a result of the shock of COVID-19. In fact, the extreme impact of the virus reveals the preexisting vulnerability of the global economy.
To build something more lasting, the Danish government would have to reckon with the fact that the classical social democratic policies it's employed for so long now find themselves in a different world. The post-World War II boom initially helped build the welfare state, but economies in Europe and North America have been sluggish for decades. Now many of Denmark’s trading partners are facing an epic economic collapse.
After the pandemic, economic growth and profit rates are unlikely to return to the levels that allowed Denmark and other European countries to compromise with unions and instate a strong social safety net with worker benefits. Conflict between workers and employers will increase over how the losses are distributed.
Some jobs have been saved for the next three months, but it remains to be seen whether these workers will be needed after the lockdown, as the recession bites. And just as some jobs will be unsustainable for economic reasons, others are ecologically unsustainable, such as oil drilling and aviation. These are so-called batshit jobs, crazy because they require workers to participate in the destruction of the conditions of life—in order to make a living.
The crisis is an opportunity to shift employment into ecologically sustainable jobs such as teaching and health care or restorative agriculture and the windmill industry. However, it remains to be seen whether unions are ready to lead the fight for a just transition to a green economy.
In the coronavirus crisis, the Danish government has been an early mover, both on public health and on protecting jobs. It has revealed how much can be done when the political will and economic urgency is there. But in the coming global crises, unions will need bolder politics to respond to the deep recession and climate change. They will need to fight to transform labor relations and the economy more profoundly.
Bue Rübner Hansen is an editor of Viewpoint magazine. A version of this article first appeared in Jacobin magazine.