Low wage growth

Decentralised bargaining in Australia and Denmark compared

Søren Kaj Andersen, FAOS, University of Copenhagen
Russell D. Lansbury, The University of Sydney Business School
Chris F. Wright, The University of Sydney Business School

This paper departs from recent debates in Australia and Denmark on low wage growth (Wright 2018, Andersen 2018). These two countries are typically characterized as ‘most different’ employment relations systems in as much as the Australian labour market is liberal while the Danish is embedded in a Social Democratic coordinated economy. The question – or puzzle – is why do we see apparently similar debates on low wage growth in these two countries? What are the differences and similarities in the debates; is low wage growth equally outspoken in the two countries; is it effecting specific parts of the economy or a more general phenomenon?

In answering this question, we adopt a two-phase approach, firstly presenting and discussing wage trends in manufacturing and private services in the past ten years. Manufacturing is included as this is the key-bargaining sector in the two countries to varying degrees setting the pace for wage trends in other parts of the economy. Contrary we expect that private services to a lesser or larger extend is lagging behind wage trends in manufacturing.

Secondly, we will do a case study of how wages are actually being settled in the two sectors in the both Australia and Denmark. Both countries have over recent decades been through a decentralization of wage bargaining, although this has happened in very distinct ways in the two countries. Australia characterized by a legalistic pathway based on the award system creating a floor for wages with the possibility of company agreements replacing the industry award. In contrast, Denmark is enshrined in a system of coordinated sectoral bargaining with certain bargaining competences delegated to the company level (Andersen, Kaine & Lansbury 2017). Further, this approach allows a testing of theories of sectoral institutions and their influence across national systems (cf. Katz & Darbishire 2000; Bechter et al. 2012). In this case by an in depth comparison of two identical sectors in a European coordinated market economy (Denmark) with a non-European liberal market economy (Australia) through a ‘most different’ case study lens.

A number of assumptions will guide the case study. Firstly, we expect that company level wage bargaining in Danish manufacturing is more encompassing compared to the Australian case, also meaning that Danish employees have a stronger position vis-à-vis employers than Australian manufacturing employees. This assumption is building on previous research showing that the negotiation based Danish employment relations system offer better opportunities for reproducing the local partnership than the legally enacted Australian system of company level bargaining (Ilsøe, Pekarek & Fells 2018). Secondly, we expect that wage trends in service sectors will be lagging behind manufacturing due to lower collective bargaining coverage and weaker trade union presence in both countries, although with significant differences between the two countries, as we expect the coordinated Danish bargaining system to ensure at least partly wage catch-up for service sector workers. Thirdly, we expect both sectors in both countries to be affected by certain global trends. These include a low inflationary economic regime potentially hindering wage growth; changing global value chains including manufacturing firms offshoring production and service sector companies employing migrant workers all affecting wage trends in the industries.

The assumptions will be analyzed and discussed in the paper.

The applied methods will include interviews with representatives of employers’ associations and trade unions in Australia and Denmark, statistical data, documents and secondary literature.