Why is Denmark opposed to an EU minimum wage law?

An agreement over a minimum wage for EU member states has been reached between the EU parliament and European Council but why has it raised concerns in Denmark?

Danish Prime Minister Mette Frederiksen and President of the EU Commission Ursula von der Leyen
Danish Prime Minister Mette Frederiksen and President of the EU Commission Ursula von der Leyen. Denmark is against an EU minimum wage. File photo: Bo Amstrup/Ritzau Scanpix

The president of the European Commission, Ursula von der Leyen, announced the agreement in a statement on Tuesday following an agreement between the parliament and council on Monday night.

The agreement must be formally approved by the EU Parliament and the Council before taking effect. That process is expected to be a formality.

A proposal to introduce a minimum wage was introduced by the EU Commission in 2020. A subsequent proposal for an EU directive on the area has since met with strong opposition from Denmark’s government.

The government opposes EU rules in an area that is normally regulated in Denmark by labour market forces, specifically collective bargaining agreements between trade unions and employer organisations.

READ ALSO: EXPLAINED: What is a Danish collective bargaining agreement?

Several attempts have been made in Brussels to accommodate the Danish concerns. Von der Leyen also repeated those sentiments on Tuesday, stating that there would be “full respect for national traditions and the autonomy of labour market partners”.

Employment minister Peter Hummelgaard, along with Swedish government representatives, have led calls by nine EU countries expressing concerns about an EU minimum wage.

The European Commissioner for Jobs and Social Rights, Nicolas Schmit, has meanwhile said that Denmark does not need to be concerned about any threat to its labour model.

Prime Minister Mette Frederiksen has also stated that she does not believe there is any threat to the Danish practice of setting wages and working conditions through labour market negotiations.

But Marianne Vind, an MEP with Denmark’s governing Social Democratic party, gave critical marks on Tuesday relating to the EU agreement.

“In the final outcome, this could mean that the Commission and EU Court can force Denmark to introduce a minimum wage,” Wind said.

Left wing parties in Denmark, notably the Red Green Alliance (Enhedslisten), have previously raised a similar concern – that an EU agreement could have the unintentional effect of forcing Denmark to introduce a minimum wage.

The EU Commission believes that a minimum wage directive would enable Denmark to continue with its current practice, however.

That is because the system practiced in Denmark ensures good wages and working conditions for employees, it said.

The aim of the directive would not be to impact countries like Denmark, but other EU member states which have a legal minimum wage, it said.

Those assurances were not enough to convince Vind. The Social Democratic MEP said that the EU directive is an intervention in an area in which the union should not legislate.

“If this proposal genuinely introduces minimum wages in Denmark, I will bang the drum (in favour of) Denmark, even if we have to do it alone, going to court against the EU,” she said to news wire Ritzau.

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Unemployment down in Denmark but analysts predict more without work

The number of people without work in Denmark fell slightly in October, with the total of 75,200 lower than September’s figure by 200.

Unemployment down in Denmark but analysts predict more without work

The data from Statistics Denmark therefore show a marginal decrease, which does not translate to a percentage drop in employment according to the agency.

That means 2.6 percent of Denmark’s workforce is still currently unemployed.

“The small drop in October is due to 300 fewer non-activated [not in return-to-work programmes, ed.] and 100 more activated jobseekers,” Statistics Denmark said.

Unemployment appears to still be trending downwards, which analyst Brian Friis Helmer of Arebejdernes Landsbank said was surprising.

“We have an economy that actually looks good but we have sky-high inflation and dreary economic forecasts. So it’s surprising that both unemployment and employment still seem to be withstanding this headwind,” he said.

But it is a matter of time before unemployment begins to creep upwards, according to senior economist Tore Stramer of the Danish Chamber of Commerce (Dansk Erhverv).

“The more forward-looking key metrics for the labour market have unfortunately begun to wobble considerably in recent months,” Stramer said.

“The number of available job notices has fallen by around 22 percent since February and the number of redundancy notices has meanwhile increased to the highest level since the coronavirus crisis in 2020,” he said in a written comment to news wire Ritzau.

The economist said he expects unemployment to go up by between 25,000 and 50,000 by the end of 2023.

An additional 20,000 people could lose their jobs in 2024, he said.

The construction and hospitality sectors could be amongst the most vulnerable,” he said.

Another analyst, Sydbank senior economist Søren Kristensen, also told Ritzau he believes unemployment will go up but said a slight cooling down of the labour market might be beneficial. Denmark is currently experiencing a labour shortage in several sectors.

“But we are concerned this might be a case of more than just a cooling-off,” he said.

“We expect a fall in employment figures of more than 60,000 persons during the course of 2023. They won’t all show up as being unemployed persons but we could easily end up in a situation where interest and inflation combine to catapult the number of unemployed people to over 100,000,” he said.