EU Risks Alienating Denmark as Wage Dispute Provokes Disbelief

Denmark’s relationship with the European Union has historically mirrored that of the U.K. Both countries applied for membership the same year (1961) and ultimately joined the same year (1973). Now, the government in Copenhagen says the EU’s intention to weigh in on a minimum-wage framework across the bloc might be more than Denmark is willing to swallow.

In an interview with Bloomberg, Danish Employment Minister Peter Hummelgaard Thomsen said sovereignty over labor market laws has always been a condition of Denmark’s EU membership. He said Denmark is ready to fight the EU to maintain that independence.

Back in the 1970s, Danish labor unions agreed to EU membership based on an assumption “that handing over authority to the EU would not endanger the Danish labor market model,” Hummelgaard Thomsen said. But the European Commission’s insistence on an EU-wide framework for minimum wages has triggered “frustration and concern” in Denmark, as the country wakes up to the fact that Brussels “could potentially intervene in something very, very sacred to us,” he said.

Denmark’s labor market model, dubbed “flexicurity,” is a point of pride in the Nordic country. The idea is that Danish workers are guaranteed security through unemployment benefits while employers enjoy a certain flexibility that allows them to hire and fire relatively freely. Pay is negotiated between labor unions and employers’ groups, without government intervention. The model has resulted in some of the world’s best pay levels for low-skilled jobs, a fact that Senator Bernie Sanders has frequently highlighted.

The concept of a minimum wage has taken on renewed significance amid a spike in income inequality that’s only gotten worse since the global financial crisis of 2008. In October, the European Commission presented its proposal for a new directive that would require all member states to establish procedures for “adequate” minimum wages. That’s as U.S. lawmakers failed to include a Democratic proposal for a federal $15 per hour minimum wage in the country’s $1.9 trillion pandemic relief bill.

Hummelgaard Thomsen says the answer to the widening income gap is for more countries to embrace the kind of unionized collective bargaining model that Denmark has, rather than a legislated minimum wage.

In Denmark, “politicians keep their long, greasy fingers to themselves when it comes to labor-market conditions,” he said. “The reason why employees at McDonald’s in Denmark can earn $22 an hour is that there’s no legal minimum wage.” Hummelgaard Thomsen says that if a minimum wage were introduced in Denmark, he “can almost guarantee” that workers “wouldn’t earn more than that minimum wage.”

Denmark’s not alone in its frustration with the EU over its planned minimum wage regulation. Sweden, where collective bargaining is also the norm, has voiced similar concerns. Last month, it mobilized 7 other member states aside from Denmark to join its letter to the EU’s rotating presidency opposing the directive.

For now, Hummelgaard Thomsen says his key concern is that Denmark and Sweden won’t be able to muster a big enough minority to block an EU vote. He’s therefore urging the commission to hold off and give member states more time to figure out how such legislation would impact their economies.

The directive doesn’t specify any salary levels and seeks to oblige members where collective bargaining coverage is under 70% to provide a framework for collective bargaining and establish an action plan to promote it.

The European Commission believes its minimum wage proposal “would not lead to an erosion of trust in the EU in the Nordic member states,” as it would benefit all members and “does not challenge well-functioning collective bargaining systems,” Marta Wieczorek, a spokeswoman for the EU’s executive branch, said by email.

Talks between the EU Parliament and the EU Council on a compromise are due later this year, after the bloc’s lawmakers publish a report on the proposal.

©2021 Bloomberg L.P.

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