Agreement on cheap Danish labour cost to create 17,000 new jobs

Thursday, 19 April 2012
There is a prospect of job feast in the wake of the new agreements in which up to 600,000 private employees of Danish workers union voted to accept lower wage growth.

This will means that Danish labour cost would become cheaper and could make Danish productivity competitive. This would mean that by 2015 some 17,000 new jobs will be created according to an analysis by the Labour Movement (AE), prepared for the Danish trade Union 3F.

The explanation is simply that Danish companies will start allowing low wage growth against those of competitors leading to stronger foreign orders of Danish products, writes the Danish daily, Politiken.

Traditionally labour cost in Denmark has been very high making Danish companies to face stiff competition from foreign companies producing similar products and selling in similar markets.

“It shows that it is an instrument which has so much taken account of the situation Denmark is in at the moment. Those of our members voting yes, also voting yes for jobs and prosperity of the economy,” says 3F's Federal President, Poul Erik Skov Christensen.

The former chief sage and economics professor Torben M. Andersen agrees with conclusions of the analysis. The main effect is that lower wages reinforce competitiveness in relation to their surroundings. It does not pull export as such no jobs are created, according to Professor of economics at Aarhus.

Labour Movement has used Statistics Denmark's macroeconomic model, Adam, to compare the lower wage, which is expected to reach 1.5 percent this year and 1.7 percent next year, with the previous ten years of increases in wages.

According to the old sage historical model, small wage increases create more jobs.
“Last time we had such a significant period in the late 1980s when we had very low wage increases and got corrected on competitiveness. And then after a while came the employment effect of it,” says Torben M. Andersen.

Almost 70 percent of those who participated in the leadership ballot on the new agreement, voted yes, as such mediator Asbjørn Jensen could publish it yesterday.

It seems the Danish model has to do with theory which holds that excessive persistent rise in remuneration would kill the zeal to work and be creative.
By Scancomark.se Team

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