Consensus Lost: How Posting Pressures Employment Relations in the Danish and Swedish Construction Industries

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CONSENSUS LOST

How Posting Pressures Employment Relations in

the Danish and Swedish Construction Industries

Mathias Sverre Grønn Emerek

Student Number: S2085240

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Foreword

This thesis examines the effects of posting on employment relations in the Danish and Swedish construction industries. As countries with relatively high wage levels, the Scandinavian countries are thought to be particularly vulnerable to the downwards pressures exerted on wages and employment conditions from the posting of workers. Furthermore, the Swedish and Danish labor markets are characterized by a strong non-legal tradition in which the social partners regulate the labor market through collective bargaining. Posted workers and posting companies enter the local labor markets with different interpretations of existing rules and regulations which necessitates adjustments in the collective agreement.

The thesis will show that the issue of posting leads to conflicts between the social partners making agreement in collective bargaining harder to come by. As a result, collective agreements suffer from a lack of innovation which shifts the impetus for rule-making towards the political arena and labor courts. This, however, threatens to undermine the institution of autonomous collective bargaining as its strengths are derived from the advantages inherent in the lack of political interference. The thesis will apply the theory of employer preferences to derive expectations about the strategies of

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Introduction

It is at this point trivial to suggest that European integration has led to changes to national modes of employment relations. However, the ways in which European integration leads to adjustments of national regulations vary across time and place. The most obvious instance of the adaption

necessitated by European integration is the issue of the posting of workers. The Posting of Workers Directive (PWD) (Directive 96/71/European Commission) ensures the right of European Union (EU) nationals to live and work across the EU on employment conditions similar to the ones enjoyed in the home country of the posted worker unless the hosting country re-regulates their employment terms (Arnholtz & Andersen, 2018). Posted workers are sent by employers to perform a service in the host country for a temporary period of time (European Commission, n.d.). The re-regulation of posted workers varies between countries but is limited by EU rules – in particular as it relates to the four freedoms. Nowhere is this tension between national regulations and European integration clearer than in the Scandinavian countries in which labor standards not only are

relatively high compared to most EU countries, but the national models, in which the social partners are left to regulate employment conditions through collective agreements and with little to no interference from elected officials, is a particularly awkward fit with EU regulations imposed from above (Kristiansen, 2013).

A distinction can be made between pressures to employment relations from above and below (Arnholtz & Andersen, 2018). Pressures from above refers to pressures to national employment relations coming from EU regulation. This is best exemplified by rulings from the Court of Justice of the EU (CJEU) – an instance of such a dynamic would be the so-called Laval quartet of rulings from the Court (Seikel, 2015). Pressures from below refers to challenges caused by the presence of posted workers. This presence of posted workers can according to this literature lead to so-called “spaces of exception” (Lillie, 2010) in the host country by which the posting of workers is exempt from the traditional regulations embedded in national employment relations forcing the host country to adjust its employment relations in light of this phenomenon.

These pressures have been thought to lead to a downward pressure on employment conditions and wages by shifting the balance of power between capital and labor in addition to necessitating adjustments of the national systems of employment relations (Woolfson et al., 2010; Arnholtz & Andersen, 2018; Kristiansen, 2013). As for the countries of interest in the following study, Sweden and Denmark can arguably be said to be placed on opposite ends of the spectrum when it comes to

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4 the extent of adjustments of national employment relations as a result of European integration (see for instance Seikel, 2015 or Blauberger, 2012).

Most noteworthy in this regard is the Laval judgement (C-341/05) – which will be discussed in depth later – and the regulatory fallout from the ruling. The judgement which deemed the collective action of a Swedish construction worker’s union against a Latvian construction company illegal necessitated adjustments of the national employment relations. Due to the similarities between employment relations in the two countries, it was also deemed necessary by Danish politicians to react to the judgement by ensuring that national regulation was in line with CJEU jurisprudence (Seikel, 2015). Whereas the Swedish legislative response severely curtailed the ability of organized labor to take collective action against posting companies, the Danish response broadly managed to contain the issue and maintained the ability of trade unions to take collective actions against posting companies (Seikel, 2015, Interview 3; Interview 2). The example underlines that the impact on national employment relations of European integration is not necessarily uniform but is conditioned by the national contexts in which the European jurisprudence is implemented.

This study aims to analyze these adjustments of employment relations in the Danish and Swedish construction industries. As will be shown, the Nordic countries generally rely on the social partners to regulate the labor market via collective bargaining agreements. How these institutions are

adapted to the aforementioned pressures from above and below will be the topic of the following analysis which will apply Wolfgang Streeck and Kathleen Thelen’s (2005) framework to capture the nature of the adjustments the national employment relations have undergone in the Danish and Swedish constructions sectors.

This approach to analyzing institutional change has been chosen because it emphasizes the importance of examining the strategies and interpretations of rules by the actors who make up an institution in a regime of rule-makers, rule-takers and legitimizing third-parties (Streeck & Thelen, 2005). Only examining formal institutional change risks overlooking how the functioning of an institution can change when the perceptions and strategies of actors change – without formal institutional change. Furthermore, it is also crucial to examine whether there have been shifts in rule-making forums – i.e. have new rule-makers appeared?

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5 How have employment relations in the Danish and Swedish construction industries been affected by

posting companies and posted workers since the Laval ruling?

Throughout this text, posting companies and posted workers will be used interchangeably with the terms foreign companies and foreign workers. It is not unusual for posting companies to establish themselves with local headquarters in Denmark and Sweden but for all intents and purposes, they still act as posting companies with an exclusively foreign workforce who typically receive lower wages than native workers (but not necessarily less than the minimum rates stipulated in collective agreements) (Interview 3).

In addition to the theory of Streeck and Thelen (2005), this study will apply the theory on employer preferences (Afonso, 2012). This theory stipulates that preferences of employers can determine regulatory outcomes, and that employers are in fact under certain conditions in favor of further regulations. Thus, the theory on employer preferences frames our expectations of the outcomes of the cases. Due to the differing structures of the construction industries in Denmark and Sweden, the outcomes of the two cases are expected to vary in regards to the extent of reregulation/liberalization of posting companies and posted workers in the two cases.

Reregulation or regulation will be used to refer to practices which aim to bring the wages and employment conditions of posted workers in line with native workers, and liberalization refers to measures which aim to cement or further the cost advantage posting companies and posted workers enjoy in the Scandinavian labor markets. The following section will describe the Scandinavian models of industrial relations.

This research aims to advance the state of the art by stipulating the conditions under which employers oppose or favor regulations in addition to providing further insight into the ways in which industrial relations in highly regulated contexts are effected by the posting of workers and, thus, how national labor market institutions change as a result of EU integration.

Scandinavian Industrial Relations

In terms of industrial relations, the Scandinavian1 countries can be said to belong to the same family due to the shared features of these systems (Andersen et al., 2014)2. In spite of significant

1_{In the following, when referring to Scandinavian or Nordic countries, this refers to Norway, Sweden, Iceland, Finland}

and Denmark.

2_{For a brief overview of the most important differences and commonalities between the labor markets of the Nordic}

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6 differences, these countries clearly have more in common with each other than other European models of labor market regulation. In the Scandinavian countries, labor markets are characterized by relatively high levels of organization and the central role played by the system of autonomous or voluntary collective bargaining in determining salaries and the regulation of the labor market (Kristiansen, 2013, Andersen et al., 2014). There is a strong belief – which has also been confirmed over the course of the interviews I have conducted for this research – that it is best to leave the regulation of the labor market to the social partners to the extent that it is possible.

Andersen et al. (2014) argue that the Nordic models are based on three institutional pillars: The broad base of political support for policies such as high levels of employment, basic income security, a right to education and investing in social systems to support these policies has been a necessary condition for unions to achieve these goals (Andersen et al. 2014, p. 10). These objectives have been realized in a system of “(...) comprehensive coordination between (i) welfare policy, (ii) the bargaining systems and labor market policy and (iii) macroeconomic policies (Andersen et al., 2014, p. 10). As noted by the authors, these areas of policy interact with each other and along with the importance of wage formation and the role played by unions in that regard combine to afford organized business and labor critical roles in the socio-economic policy developments in these countries (Andersen et al., 2014).

To understand the Nordic models, one must first understand their historical legacies and the context in which they came to be. The Nordic countries have long been small, open economies who must constantly adapt to developments in the global political and economic landscape, and it was also in the early beginnings of the industrialization that the Nordic trade union movements were born (Andersen et al., 2014). Following a conflict in 1899 between employers and labor, the Danish Basic Agreement - the so-called September Settlement - would institutionalize the rules of the Danish labor market: Employers have a right to manage and distribute the work while the trade unions would be the only entity able to make collective agreements about salary and terms of employment. Sweden would follow with its own Basic Agreement in 1938 - Saltsjöbadsaftalen - which followed a similarly turbulent period and the first national collective agreement in 1906 (Andersen et al., 2014, pp. 11-12).

Being formed and further developed in a time of turbulence, war and political upheaval (industrialization, the First World War, the Russian Revolution, the Great Depression and the Second World War), the Nordic models should not be seen as a result of a relatively sheltered

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7 position outside the influence of these monumental events. According to Andersen et al. (2014, p. 12), the models should be understood “(...) as a distinct Nordic response to the political and ideological impact of European events”. Being small and open economies, thus, made the Nordic countries particularly vulnerable to political, economic and military developments elsewhere in Europe, and the social models were their response to these developments (Andersen et al., 2014). The Nordic models came to be defined as what has since been called a “conflict partnership” (Andersen et al., 2014, p. 11). While the relation between capital and labor is in many ways defined by divergent interests, the model of autonomous collective bargaining was dependent upon the ability to find common ground and agreeing to collective agreements to govern the labor market. In exchange for that, there would be a minimum of legislation and, thus, the labor market would mostly be governed by rules agreed to by the social partners leading to flexibility in designing the regulation that best governs each industry while catering to the particular preferences of capital and labor in that industry (Andersen et al., 2014).

This system of autonomous collective bargaining has historically been made possible by strong labor movements with high levels of union membership. This has given trade unions not only the legitimacy but also the power to force employers to organize and negotiate collective agreements with labor (Andersen et al., 2014). The relatively high wages and a generous system of income security had the added advantage of weeding out the least productive businesses so that the

relatively high wages and thus costs of doing business in fact contributed to ensuring that the most productive companies survived in the competition, and capital and labor would as a result be directed their way (Dølvik et al., 2014; Andersen et al., 2014).

Following the Second World War, the expansion of the welfare state and the entry into the labor force of women along with the growth of manufacturing supported and cemented the institutional foundations of the Nordic models and the labor movements (Andersen et al., 2014). The

Scandinavian labor movements were not immune to some of the ideological currents permeating Europe in the 1960’s and 70’s – the movements for economic democracy in Denmark and Sweden are examples thereof – and the increased militancy in the trade unions could be witnessed by the increased strike activity. This inspired the labor movements to make demands apart from salary and working conditions – like having a say in the management and distribution of the work and a share of the profits (Andersen et al., 2014). The employers mostly resisted these more radical ideas but elements from these currents can still be seen for instance in the Swedish Co-Determination Act from 1976 (Interview 10).

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8 It is not just in terms of their labor market models that there are differences between Denmark and Sweden that are noteworthy enough to be mentioned here. The political systems and cultures also vary. Whereas Swedish politics in the twentieth century was defined by an almost hegemonic social democratic party and class politics, Denmark has a long history of minority governments, and a strong norm that the most important and biggest political agreements should bridge the left-right divide (Dølvik et al., 2014, pp. 247-248).

Sweden became members of the EU in 1995 whereas Denmark had joined the European

Community in 1972, and, thus, from 1995 onwards both countries faced relatively similar external political and economic conditions. According to Dølvik et al. (2014), in 1990 the Nordic countries:

(…) were distinguished by their universal welfare states and encompassing peak associations overseeing multilevel bargaining systems with strong company tiers. Labor law provided individual

employment protection and representation at company levels, alongside forceful dispute settlement mechanisms and strict peace duties between bargaining rounds. The welfare state granted universal rights to income security and education, typically financed by taxation. Extensive public services

and active labor market policies (ALMPs) contributed to high participation rates for both sexes. Around 20 percent of the labor force had higher education – more than doubling since 1970 (Dolton

et al. 2009). Denmark stood out with an apprentice-based vocational training system organized together with the social partners (Nelson, 2012), while the other run school-based and Norway a

mixed system (Høst, 2012) (as cited in Dølvik et al., 2014, p. 248).

EU integration gradually came to influence more and more policy areas, and so it was for the regulation of employment relations as well. Concerns were voiced in the early 2000s over the potential impact of implementing EU directives in the Scandinavian labor markets due to the tradition of autonomous collective bargaining, but for the most part, the process was

uncontroversial (Dølvik et al., 2014). However, after the 2004 EU enlargement, which led to a significant increase in labor mobility among member states, concerns again resurfaced over the compatibility of the Scandinavian models with the integration in the Single market. Specifically, there was consternation about what the introduction into the Single market of countries with

significantly lower living standards would mean for the Scandinavian models of industrial relations (Dølvik et al., 2014).

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Scandinavian responses to social dumping

The issue of what can be referred to as both social dumping or the grey economy which describes a process by which market actors undermine and/or circumvent labor market and social regulations in order to achieve a comparative advantage has been a source of contention and political debate in all the Nordic countries (Cevea, 2017). However, the national responses have shown significant variation. In 2004, Norway decided to make collective agreements universally applicable in response to a belief that social dumping was increasing in magnitude. Finland or Iceland have not introduced new legislation but Iceland has a law that makes it illegal to pay workers below the minima stipulated in collective agreements whereas Finland makes collective agreements

universally applicable in sectors where more than 50 % of the workforce is unionized. Denmark and Sweden have not adopted any legislation in response to threats of social dumping meaning their efforts against it are very much about surveillance and enforcement by the responsible authorities. This is probably at least partly a result of the desire of the social partners to keep intact the model of autonomous collective bargaining (Cevea, 2017; Ahlberg, 2010).

The efforts to combat social dumping in Sweden and Denmark take place in an interplay between the tax authority, the work environment authority and the social partners – the role of trade unions is particularly crucial as they use their knowledge of worksites to report suspicions to authorities who then follow up on these tips (Interview 4; Interview 9). Additionally, trade unions in Sweden and Denmark have followed a strategy by which they attempt to recruit migrant workers to their organizations as a way to integrate these groups completely in the national employment relations (Cevea, 2017; Interview 2; Interview 4; Interview 9; Interview 3).

Unlike many European countries, the Nordic systems of industrial relations are based on self-regulation of the labor market by the social partners. Whereas many countries rely on legislation and the judicial system, the Nordic models are all characterized by a strong non-legal tradition (Refslund & Thörnqvist, 2016; Andersen et al., 2014). However, there are independent labor market courts which solve disputes on e.g. the interpretation of the collective agreement or other matters of labor law (Kristiansen, 2013).

Minimum wages in the Scandinavian countries

As has been stated, the Scandinavian countries rely on the social partners to regulate the labor market. There are no statutory minimum wages in Denmark or Sweden, and laws concerning labor market regulation function as framework laws which allow the social partners flexibility in ensuring

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10 compatibility between these framework laws and practices in the work place (Kristiansen, 2013). It is also common to have regulation which is waived in case it is covered in a collective agreement (Høgedahl & Jørgensen, 2017, p. 7). The skepticism towards statutory minimum wages that is characteristic of Denmark and Sweden must be understood in light of the relatively high trade union density and collective agreement coverage. Over the course of the interviews conducted for this thesis, the social partners all remarked how legislatively mandated minimum wages would remove the incentive to join their organizations while also harming the flexibility of the current system (Interview 6; Interview 2; Interview 3; Interview 7).

Another reason for the skepticism should be seen in the light of the purpose of minimum rates of pay in the collective agreements. Again due to a preference for flexibility in the wage formation, salaries are to a high extent locally determined (Andersen et al., 2014). Thus, the minimum rates of pay in the collective agreements are merely a starting point for a local wage determination that takes into account factors such as the productivity of the worker and the working hours at the individual work site. This process, which is known as “organized decentralization” (Arnholtz & Andersen, 2018, p. 402), provides flexibility for employers but is also considered to be crucial for the

continuous mobilization of the work force in the sector (Arnholtz & Andersen, 2018). Thus, in spite of relatively low minimum rates of pay in the collective agreements, workers are able to raise wages by on average 40-50 percent of the minimum level, and only very few native workers actually receive the minimum wage. For working hours, the same principles hold, and each work place has a degree of flexibility in designing the weekly working hours assuming a local agreement can be made (Arnholtz & Andersen, 2018; see also Kristiansen, 2013).

Without instruments to extend collective agreements or a minimum wage, it is entirely up to the sectoral trade unions to seek and find the work places where no collective agreement has been signed. In industries where the work is geographically dispersed, and work sites are small – and perhaps mobile, this can be challenging for trade unions and makes it particularly hard for trade unions in some industries to ensure a high degree of collective agreement coverage in that industry (Refslund & Thörnkvist, 2016).

Relying on the social partners to determine wages is done in all the Nordic countries. However, only Sweden and Denmark rely on the social partners to such a high degree. Finland, Iceland and Norway all have so-called “erga omnes” provisions allowing for the universal application of collective agreements under certain conditions (Eldring & Alsos, 2012, p. 69). Collective

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11 agreements are only binding for the signing parties; however, employers are not allowed to

discriminate against non-unionized employees (Eldring & Alsos, 2012; Høgedahl & Jørgensen, 2017). While the Nordic countries have not been immune to declining membership of trade unions, 88 percent of the workforce in the Danish construction sector is estimated to be covered by a collective agreement (Arnholtz & Andersen, 2016). In Sweden, the unionization rate in the construction sector is approximately 65 percent but collective agreement coverage in the private sector is around 85 percent (Medlingsinstitutet, 2017, p. 230). No recent numbers exist for the unionization rate of construction sector workers in Denmark. In 2008, however, it was around 73 percent but has been declining like in most European countries (Due et al., 2010). In 2014, it was estimated that around 45 % of foreign construction workers in Denmark were covered by collective agreements (Mulvad, 2014).

The main collective agreement in the Swedish construction industry is negotiated between employer organization Sveriges Byggindustrier (BI) and the trade union Svenska Byggnadsarbetareförbundet (Byggnads). In Denmark, the main agreement is made between Dansk Byggeri (Danish

Construction Association – DCA) and the construction branch of the United Federation of Danish Workers (3F).

Literature review

As was mentioned above, the literature on the effects of European integration on national

employment relations can be subdivided into two types of pressures. Pressures from above refer to how jurisprudence of the CJEU necessitates adjustment of the national institutions governing employment relations. Pressures from below refers to the ways in which the posting of workers and companies can contribute to deteriorating employment conditions in the host country. This review will follow Arnholtz and Andersen (2018) in the distinction between these two types of

liberalization pressures to the extent that it is possible. After all, much CJEU jurisprudence is a direct result of the presence of posting companies and workers making the distinction blurry. The review will mainly focus on the effects of European integration on Danish and Swedish

employment relations but will also describe contributions which do not specifically treat the effects of pressures from above and below on Danish and Swedish employment relations. The review also reserves a special section to discuss the Laval ruling and its consequences for Swedish and Danish employment relations.

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Pressures from above

Woolfson et al. (2010) examine the ruling of the CJEU in the Laval case and discuss its

implications for the Swedish model of labor market regulation and conclude that the judgement will have profound implications for the Swedish model and those countries in which the labor market is mainly regulated by the social partners. The authors follow other contributions in arguing that the judgement prioritizes treaty provisions on the freedom of movement for services and labor above a “social dimension” (Woolfson et al., 2010, p. 334). Thus, the judgement is seen an example of how EU jurisprudence can contribute to destabilize nationally embedded institutions such as the model of autonomous collective bargaining as seen in the Scandinavian countries which relies on the ability of trade unions to take collective action against companies without collective agreements (Woolfson et al., 2010).

Similarly, Dølvik and Visser (2009) have argued that the free movement of services and labor combined with the principles of non-discrimination and equal treatment contribute to the demise of national employment relations and place downward pressure on wages and employment conditions. This is considered to be a consequence of the political effort to integrate the European economies in the Single market (Dølvik & Visser, 2009). Cremers et al. (2007) also discuss how national efforts to re-regulate labor market are limited by EU regulations. The PWD has to balance not only the interests of sending and hosting countries but also take into account the divergence between

industrial relations systems across the Union. When you then factor in conflicting principles such as a right to collective action and the free movement of labor and services, the balancing act becomes very complicated. The authors consider national attempts to re-regulate foreign labor, note the ongoing disagreement among member states and EU institutions over the issue and anticipate the Laval ruling by speculating that the jurisprudence of the Court may soon become crucial to the issue of posting of workers (Cremers et al., 2007).

Kerstin Ahlberg (2010) has described how after the Laval ruling the surveillance of foreign companies in Sweden would suffer due to the weakened ability of the trade unions to conduct collective action against foreign service providers. The monitoring of compliance with labor laws and collective agreements has traditionally been the job of the social partners in a self-regulatory system absent public interventions or administrative controls. Without administrative measures to compensate for this gap (or “space of exception” (Lillie, 2010), it is likely the rights of posted workers would suffer (Ahlberg, 2010).

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13 Other contributions have argued that it has in fact been possible for some countries to maintain national industrial relations institutions by making minor adaptations in response to pressures from posting. Blauberger (2012) argues that by forging broad coalitions with stakeholders and potential litigants, it is possible for member states to maintain vast parts of the original legislation in areas where the Court has made judgements. According to Blauberger (2012), the difference in regulatory outcomes between Denmark and Sweden following Laval can be attributed to differing levels of agreement among the social partners and politicians. Whereas Swedish employers and trade unions “(…) had taken rather uncompromising positions (…) the Danish response was essentially based on a consensus among social partners to proactively protect autonomous collective bargaining”

(Blauberger, 2012, p. 117). This consensus among the social partners allowed the Danish legislation following Laval to explore the limits of the PWD by defining the concept of minimum pay much wider than in the Swedish post Laval legislative outcome (Blauberger, 2012, p. 118). This highlights, according to Blauberger (2012), that there is still room for maneuvering for member states even in the face of EU jurisprudence.

Pressures from below

The most thorough examination of the extent of the presence of foreign labor and their working conditions in the Danish construction industry comes from Jens Arnholtz and Søren Kaj Andersen (2016) of the Employment Relations Research Centre at Copenhagen University. As posted and foreign workers are not registered anywhere, there is generally a lack of information about this group. The research takes advantage of the compulsory registration of foreign companies in the so-called RUT-register. Furthermore, interviews were conducted with posted workers or foreign workers working in Danish companies in addition to a survey of 200 posted workers in the Danish construction sector (149 from Poland and 51 from Germany). It is, thus, the biggest study on the working conditions of posted workers conducted in Europe (Arnholtz & Andersen, 2016).

The authors confirm that the share of foreign labor has increased since the 2004 EU accession of 10 countries – 7 of which were part of the former Eastern bloc. According to their results, posted workers make up about 8 % of the workforce in the Danish construction sector – slightly more than the average for the entire workforce – but could be anywhere between 5 and 11 % (Arnholtz & Andersen, 2016). Generally, the Polish workers can be employed in two different ways. They either work on larger construction sites or for private households working for small construction

companies or even for the property owner directly. On the large construction sites, the Polish workers typically receive a wage close to the minimum salary as stipulated in the collective

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14 agreement – 16 euros – well below the 24 euros a Danish construction worker can easily take home (Arnholtz & Andersen, 2016). However, working directly for private households pays less –

generally around 11 euros per hour – far below the minimum stipulated in the collective agreement.

For the German workers, employment conditions were generally less precarious – salaries were typically higher, work days shorter and the German posted workers were more likely to receive extra pay when working overtime (Arnholtz & Andersen, 2016). As the authors note, the

differences in working conditions between Polish and German workers imply that the downward pressure on wages and working conditions the posting of workers is alleged to create is not merely an issue of posting but posting and differences in living standards between countries (Arnholtz & Andersen, 2016).

Typically, posting companies working on larger construction sites become members of the

employer association DCA thanks to the efforts of the construction worker’s trade union 3F and the media attention given to the issue of social dumping (again in no small part a result of 3F’s efforts) (Arnholtz & Andersen, 2016). Membership of an employer’s association also entails a mandatory application of the collective agreement so in this sense, downward pressures on wages is contained on bigger construction sites when foreign companies join the DCA. However, this usage of “the full scope” [my translation] (Interview 3, p. 44) of the collective agreement leads to disagreement between the DCA and 3F as the trade union contends that this usage of the collective agreement in which the local negotiation of the wage above the minima stipulated in the agreement effectively is bypassed (Arnholtz & Andersen, 2016; Refslund & Sørensen, 2016).

The authors also found that both posted workers and posting companies had incomplete knowledge respectively of whether they were covered by the collective agreement and what that coverage actually entails (Arnholtz & Andersen, 2016). A frequent complaint by posting companies is that the rules are too complicated whereas the trade unions contend that posting companies deliberately are violating the agreement. However, these are conflicts of a sort that can be dealt with in the collective bargaining system since they deal with conflicts over how to interpret the collective agreement (Arnholtz & Andersen, 2016). The presence of foreign labor on private properties, however, is much harder for trade unions to detect and so, collective agreement coverage is very low (Arnholtz & Andersen, 2016).

This points to the development of a secondary labor market which is characterized by Lillie’s (2010) “spaces of exception”. Bengtsson (2016) has discussed this in a Swedish context and states

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15 that, though there is no evidence the Swedish model is eroding, segmentation of the labor market appears to be increasing through, among other things, an increased usage of bogus

self-employment. Bogus self-employment was also an issue that came up repeatedly in the interviews conducted with the Swedish social partners for this thesis (see for instance Interview 7). Woolfson et al. (2014) have similarly argued that segmentation is increasing in the Swedish labor market due to the diminished ability of trade unions to make demands for better working conditions through industrial actions – chiefly due to the Laval ruling but also because of declining trade union density, the liberalization of the Swedish migration regime and the limited mandate and resources of

enforcement authorities. The authors note that the effects of the Laval judgement can be seen in the rapid decline of collective agreements enacted with foreign companies (Woolfson et al., 2014, p. 709).

Refslund and Thörnkvist (2016) compare Danish and Swedish labor market outcomes in different sectors and suggest that research should not only focus on variations between countries but also variations between different industries within countries. They find that in sectors with smaller and more mobile worksites without union representation, migrant labor is more likely to exert

downward pressure on wages. Accordingly, certain industries are much more vulnerable to these sorts of pressures which has already been borne out in increasing gaps between industries. The authors argue this dynamic leads to Lillie’s (2010) “spaces of exception” within the Nordic labor markets in industries with large shares of migrant workers and relatively low trade union

organization of the workforce. They posit that this might be an “Achilles’ heel” for these systems of industrial relations because the Swedish and Danish trade unions are skeptical of legislation and collective agreement extension mechanisms (Refslund & Thörnkvist, 2016, p. 74).

In a study about the experiences of Polish posted workers in Sweden in the construction industry, Thörnqvist and Bernhardsson (2015) interviewed nine posted workers about their experiences being employed in a foreign country. The study concluded that the wages of Polish posted workers would usually be lower than Swedish construction workers because they would be asked to work much longer hours than their contracts stipulated. The study also found that while the Polish workers would often have an incomplete understanding of their rights, this was also a function of an attitude of resignation in response to fraudulent employers (Thörnkvist & Bernhardsson, 2015).

The Swedish LO (the Swedish Trade Union Confederation) conducted a study of the extent of posted workers within the industries covered by its member organizations. The study concluded that

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16 construction by far was the industry with the most posted workers. Their estimates suggest as many as 15,000 posted workers may be working in the Swedish construction industry. 542 posting

companies are estimated to be working in the Swedish construction sector (Jonsson & Larsson, 2013, p. 11). The workers come from the eastern part of the EU and the Baltic states but also

Germany and Ireland. The duration of posting has a wide variance between short and extended stays and is hard to say anything with certainty about due to the paucity of data on posted workers and the very deliberate bypassing of the authorities that some companies practice (registration of foreign service providers was not compulsory until 2013 in Sweden) (Jonsson & Larsson, 2013).

Lillie (2010) has written about how the posting of workers creates what he calls “spaces of

exception”. In these spaces, the national regulations no longer apply, and capital takes advantage of this by hiring workers in this space. According to the author, European integration has provided capital with the opportunity to create spaces where the national social contract or class compromise is circumvented. In the European construction industry, this is made possible by the free movement of services and labor and the differences in living standards between member states: “Transnational subcontractors win bids by offering to work at rates that domestic subcontractors cannot match; their low rates depend on national differences in wage expectations, which can be maintained by creating a ‘space of exception’ around a particular worksite or employment relationship” (Lillie, 2010, p. 694).

Bosch and Weinkopf (2013) examine the pressures to national employment relations from both above and below and find that countries have had to adapt their national systems due to EU jurisprudence and the presence of posted workers. While the authors believe transnational

agreements between similar countries are a useful strategy to re-regulate employment conditions, its benefits are limited as only countries with relatively similar industrial relations systems and living standards can effectively make such agreements. Finally, they speculate that while the effects of posting of workers is always mediated by national institutions and therefore its effects will vary, continued “negative integration” in the EU may lead to a downwards spiral by which the European social models erode (Bosch & Weinkopf, 2013).

Hassel et al. (2016) also use Denmark as an example to argue that national institutions can be maintained despite of pressures from European integration and specifically posting. They examine governmental responses to liberalization pressures as a result of European integration in a case study of the meat processing sectors in Denmark and Germany. The strong Danish trade unions

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17 along with the policy goal of full employment and active labor market policies are argued to have maintained the industrial relations in the meat processing sector and to have allowed the sector to avoid dualization as seen in Germany where the PWD has been used to lower wage costs for companies in the industry (Hassel et al., 2016).

Finally, Arnholtz and Andersen (2018) have studied how the institution of collective bargaining in the Danish construction sector has changed in response to the posting of workers. They argue that institutions have undergone little formal change; however, the issue has led to informal changes to the institution. The increased usage of posting has, thus, led to changing strategies of the social partners, change in the arenas in which regulation of the industry is produced and the appearance of new actors who contribute to produce and/or challenge regulation. The authors term this type of change “extra-institutional” in order to capture the institutional stability and the actual changes in the functioning of the system (Arnholtz & Andersen, 2018).

Laval and its consequences

As has been discussed, the Nordic models have been developed and adapted in an increasingly internationalized context. That is simply a natural consequence of the small and open nature of these economies. Following accession to the EU - Denmark joined in 1972, Sweden in 1995 while Norway is a member of the European Economic Area - questions about the compatibility of the Nordic models with an increasingly globalized economy have only become more prevalent (Andersen et al., 2014; Evju, 2010). Fears about their imminent decline have been sounded repeatedly, but the Nordic models still stand. As will be discussed in the following, the Nordic models have never become stale but have had to adapt to ever changing circumstances.

European integration is one of the surrounding circumstances that has necessitated adaptation of the Nordic models. Perhaps the biggest scare resulting from EU membership for the Nordic labor movements came when the European Court of Justice (ECJ) decided that the blockade made by the Swedish construction workers union, Byggnads, against the Latvian construction company, Laval un Partneri, was illegal (Kristensen, 2013). Byggnads had taken collective action against the company in an attempt to get it to sign a collective agreement with the company. When the parties could not come to an agreement, and Laval instead signed an agreement with a Latvian trade union, Byggnads responded by taking collective action against the company and blocking the construction site. Laval’s complaint to the Swedish Labour Court (Arbetsdomstolen) was referred by the court to the ECJ in 2005 (Seikel, 2015).

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18 The highly anticipated ruling confirmed the fundamental right of unions to strike but the Court nevertheless concluded that the blockade constituted an obstruction of the free movement of services within the EU (Seikel, 2015). The Court had come to the conclusion that the Posted Workers Directive was a “maximum” rather than “minimum” directive, meaning that the directive constituted a maximum for what could be demanded in relation to the posting company (Seikel, 2015, p. 1172). For a discussion of the ruling and its consequences, see (Evju, 2010; Blauberger, 2014; Woolfson et al., 2010; Swedish Government, 2008; Malmberg, 2010).

As the Nordic countries constitute a family of industrial relations regimes, it might be considered odd that the regulatory outcomes between Sweden and Denmark following Laval were so divergent (Seikel, 2015). Much trepidation was expressed in regards to what consequences the ruling might have for the future of the Nordic models. After all, the strength of the labor movements is to a large extent based on a credible threat of strikes and subsequent damages for employers. But if the ruling meant that it would be nigh on impossible to take collective action against foreign companies, might the Scandinavian countries see a significant increase in low-salaried labor in industries like

construction that attract relatively many foreign companies and labor? Thus, the judgement motivated fears of an imminent race to the bottom that would drastically affect the Nordic labor markets (FAOS, 2008).

When the judgement came down against Byggnads, the Danish government deemed it necessary to adapt Danish legislation to avoid a similar legal challenge as had happened in Sweden due to the similarity of Danish and Swedish industrial relations. This came in the form of a tripartite working group which was tasked with keeping as much of the system intact as possible - including the practice of leaving the regulation of the labor market to the social partners (Seikel, 2015, Refslund, 2015). After six months, the committee suggested a solution which would not significantly weaken unions’ abilities to take collective action against foreign companies in order to make them sign collective agreements (Seikel, 2015, Refslund, 2015). “Laval-udvalget” (the Laval committee) suggested a system in which non-monetary benefits like leave and holidays were converted into a “fictitious” wage to be added on top of the minimum wages stipulated in the collective agreements (Seikel, 2015). Due to a system of strongly “local” wage determination, the minimum rate of pay stipulated in the sector’s collective agreement is not a wage at which a Danish construction worker would actually be employed. In each workplace, the worker’s wage is negotiated according to the productivity of the worker and a host of other factors (Kristiansen, 2013). Thus, if a worker were employed at the minimum wage stipulated in the collective agreement, he would be employed at an

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19 hourly wage between 16 and 17 euros - well below Danish construction workers who could take home around 23,5 euros or more per hour (Arnholtz & Andersen, 2016).

The solution led to a system which would have two types of collective agreements: One asked for by the unions against foreign companies posting workers in Denmark – so-called Laval collective agreements including the fictitious minimum wages – and the regular collective agreements which functioned as before (Interview 2). Interviews conducted for this research have all confirmed that this solution has ensured that the Danish system of collective bargaining functions more or less as before, and that the Laval judgement did not lead to the race to the bottom some had initially feared (Interview 2; Interview 3; Interview 6).

In Sweden - the country that the Laval judgement had originally concerned - a committee was also formed to suggest a legislative amendment to bring the Swedish legislation back in line with the established EU case law (Swedish Government, 2008). Not only did the frequent collective actions against foreign companies necessitate a revision following the ruling (Seikel, 2015; Blauberger, 2014); the decision of the Court had also shown a certain element of Swedish labor market regulation, the lex Brittania, to be in violation of EU law due to it being discriminatory towards foreign companies (Seikel, 2015; Blauberger, 2014; Ahlberg, 2010). Unlike in Denmark, the

Swedish social partners only served as a reference group to the committee. The recommendations of the committee would severely curtail the ability of trade unions to induce foreign companies to sign Swedish collective agreements. In fact, as shown by Seikel (2015), the number of collective

agreements signed by foreign companies dwindled from 107 in 2007 to 27 in 2010 (pp. 1175-1176). The revised legislation ended lex Brittania, and trade unions would now only be allowed to take collective action against foreign companies if these are not able to prove that they pay salaries in line with the minima stipulated in Swedish collective agreements (Seikel, 2015).

On the surface, such a strong regulatory divergence in two similar systems of industrial relations is a puzzle. After all, if the two countries belong to the same family of systems of industrial relations, one would expect the ruling to have somewhat similar consequences in the two countries.

Seikel (2015) investigated the divergent regulatory outcomes by interviewing representatives of the social partners and found that the divergence could be explained by the differing preferences of employers in Sweden and Denmark as posited by employer preference theory (Afonso, 2012). These divergent preferences have their roots in the different structure of the construction sectors in Denmark and Sweden. Whereas the Danish construction sector’s main employer organization,

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20 DCA, is dominated by small companies as around 62 % of companies employ between 0-4

employees, only approximately 30 % of the members of BI are very small companies employing between 0-4 (Seikel, 2015, p. 1176). This means that BI’s members are better positioned to take advantage of a weakening of trade union’s rights to take collective action against foreign companies by hiring these as subcontractors to perform certain tasks. Whereas for the DCA, its members are the subcontractors. In other words, the reason for the regulatory divergence is that peak employer associations in the construction industry in Denmark and Sweden are made up of companies with vastly differing abilities to take advantage of an influx of cheap labor.

Theory

To analyze the adjustments and changes to national employment relations, this thesis will apply Wolfgang Streeck and Kathleen Thelen’s (2005) contribution to the debate on institutional change in advanced political economies. It will also apply the theory on employer preferences as proposed by Afonso (2012) to formulate expectations about the strategies of Swedish and Danish employers in regards to their preferences as to the regulation of posted workers and posting companies.

Theory of institutional change

Streeck and Thelen’s approach has been chosen because it provides tools to explain minor, gradual change of the kind seen in national employment relations in response to liberalization pressures from European integration. This is in contrast to frameworks that rely on punctuated equilibrium-style models in which long periods of stability and little change are interrupted by brief moments in which radical change takes place – mostly as a result of some exogenous shock (Streeck & Thelen, 2005). In other words, whereas many approaches favor and explain continuity and stability over change, this approach has the advantage of conceptualizing how institutions change over time. Like Streeck and Thelen, this thesis is concerned with analyzing the gradual changes to national

employment relations as a result of the posting of workers. This is different from analyses such as Seikel’s (2015) and Blauberger’s (2014) where change is viewed through the prism of the

legislative fallout from the Laval judgement.

Streeck and Thelen (2005) have a “Polanyian” (2001) approach to liberalization pressures arguing that its eventual impact in a given context is determined by among other things the institutional context which mediates the liberalization pressures. Liberalization pressures through the posting of workers may then lead to vastly differing outcomes depending on national institutions. This should not be taken to mean that liberalization cannot endanger certain national institutions but rather that

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21 liberalization is shaped by local institutions and contexts. Hence, it will not lead to the same

outcomes everywhere.

The authors define institutions as formalized institutions in that rules and sanctions have become formalized (Streeck & Thelen, 2005, p. 10). Similarly, this thesis will take as its object of study the national employment relations of Denmark and Sweden in the construction sectors. These relations are in both countries governed by institutions which have been formalized to the extent that there are labor courts in place to settle disputes over the content of the collective agreements – just like Streeck and Thelen (2005) conceptualize institutions as rules that may be enforced by calling upon a third party to enforce or interpret them: “With an institution we are dealing only if and to the extent that third parties predictably and reliably come to the support of actors whose

institutionalized, and therefore legitimate, normative expectations have been disappointed” (p. 11).

Since institutions are defined as rules which can be enforced by legitimate third party actors,

Streeck and Thelen (2005) argue that the rules that define institutions are best conceived of as “(…) embedded in a regime of rule-makers, rule-takers and system-legitimizing third parties that

constantly negotiate the meaning and usage of these rules” (Arnholtz & Andersen, 2018, p. 398). For the purposes of this study, I follow Arnholtz and Andersen (2018) in considering trade unions and employer associations as rule-makers, companies, workers and local trade unions and employer organizations as rule-takers and the political systems and the labor courts as legitimizing third-party actors.

Conceiving of institutions as regimes has the added advantage of clearly specifying the social actors which we are interested in studying. The constant negotiations of the rules the social partners have themselves contributed to designing leads to a multitude of constant but typically minor changes. However, nothing stands to reason that these minor changes could not eventually accumulate to transformative, radical changes to the institution (Arnholtz & Andersen, 2018). As the meaning of rules are never self-evident and therefore in constant need of interpretation (Streeck & Thelen, 2005, p. 14), the strategies and perceptions of social actors will also influence the regimes underpinning an institution and therefore has the potential to change the functioning of the institution without the rules, as they are written, actually changing. Rule-takers are constantly forced to interpret rules and may even deliberately challenge their meaning to bend them to their preferences as a deliberate strategy. In fact, this challenging of the rules may in fact lead to the true meaning of the rule being clarified (Streeck & Thelen, 2005). In our case, we may think of a posting

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22 company challenging a national regulation to determine whether a rule is in breach of EU treaties. However, challenges to, interpretations and re-interpretations of rules are not necessarily sinister acts meant to delegitimize institutions or to further the interests of certain actors; any institution will encounter challenges to the rules underpinning it and will be constantly re-interpreted by both rule-takers and rule-makers:

The real meaning of an institution, that is to say, is inevitably and because of the very nature of social order subject to evolution driven, if by nothing else, by its necessarily imperfect enactment on the ground, in directions that are often unpredictable. Indeed the more sophisticated the makers of a regime are, the more they recognize that a good part of institutional and political life consists of

unanticipated consequences of their ‘institutional design’ decisions, requiring that these are continuously adjusted and revised if they are to be made to stick (Streeck & Thelen, 2005, p. 16).

Before proceeding to describing the types of change institutions can undergo according to the authors, it is necessary to briefly state why institutions can undergo major change in the absence of exogenous shocks or change to the formal framework of an institution:

(…) analytical frameworks that take the absence of disruption as sufficient evidence of institutional continuity miss the point, given that the practical enactment of an institution is as much part of its

reality as its formal structure (…) Fundamental change, then, ensues when a multitude of actors

switch from one logic of action to another (Streeck & Thelen, 2005, p. 18).

Thus, we return to the conception of institutions as in need of constant interpretation and

re-interpretation which is in fact the exact mechanism through which gradual, minor change may lead to larger transformative changes of said institutions.

Types of change

Streeck and Thelen (2005) operate with five different modes of gradual but transformative change: displacement, layering, drift, conversion, and exhaustion (p. 19).

Displacement refers to when new rules appear that challenge existing norms and practices (Streeck & Thelen, 2005). Institutions will always tend to prescribe certain behaviors but some behaviors may be neither rewarded not condoned in a given institution, and these may gradually begin to creep into the institution leading to old practices being replaced as actors’ loyalties switch to the newer logics of appropriate behavior. This tends to occur “(…) through the rediscovery or activation— and, always, the cultivation— of alternative institutional forms” (Streeck & Thelen,

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23 2005, p. 20). As more and more actors gravitate towards the alternative institutional form, its logic of behavior will gradually displace the old one. The alternative institutional forms are either endogenous as old approaches are rediscovered or exogenous by “invasion” in which foreign practices are imported or imposed (Streeck & Thelen, 2005).

When new regulations are introduced alongside or on top of existing ones influencing the latter, this is referred to by the authors as layering (Streeck & Thelen, 2005, p. 23). Here, a commonly used example is the introduction of a voluntary private pension system next to the existing public pensions system. The introduction of the new, private system may lead to different dynamics – for instance a decline in support for the public pensions system as more and more citizens manage to build up a sizable private pension portfolio. Thus, layering can introduce a new logic in an institution and fundamentally alter its dynamics without directly undermining it but via the mechanism of differential growth may eventually crowd out the old norm(s) (Streeck & Thelen, 2005).

Drift occurs when existing rules and regulations are not adapted to changing circumstances meaning that they become unable to perform the tasks they were put in place to perform. Streeck and Thelen (2005) write that institutions require constant active maintenance; whereas institutions are often perceived as static, predictable and guarantors of continuity, the survival of an institution is dependent upon it managing to constantly adapt to its surroundings: “Analyses that focus only on the continuity of existing rules miss the potential slippage between these and the real world to which they are supposed to apply” (p. 25). When the match (or lack thereof) between rules and the purpose they are intended to serve worsens, institutions risk falling victim to drift. In our case, an instance of drift could be non-adaptation of the institution of collective bargaining to the presence of posting companies and posted workers. Thus, not adapting to changing political and economic surroundings may cause an institution to wither away (Streeck & Thelen, 2005).

Conversion refers to when “(…) existing institutions are adapted to serve new goals or fit the interests of new actors” (Streeck & Thelen, 2005, p. 26). Conversion may take place as a result of adaptation to changed surroundings or as a result of a changed balance of power in the coalition underpinning the institution. Actors with aspirations to redirect the institutions to serve new goals can adapt it to their liking in the event that power relations have changed. This may happen through a process of political contestation. The room for political contestation has appeared due to gaps between rules and their actual enactment. There are mainly four sources of such gaps according to

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24 the authors (Streeck & Thelen, 2005). Unintended consequences are one source of this gap.

Unintended consequences of institutions provide opportunities for actors with an interest in doing so to try and redirect the institutions towards other goals.

The second source of such gaps is that institutions often are created as compromises (Streeck & Thelen, 2005). These compromises are built on agreement between actors with varying preferences and reasons to support the institution. For these sorts of coalitions to work, it is necessary for compromises to be made. These compromises inevitably lead to some ambiguity of rules because this allows different actors to interpret these rules to their own liking. However, this also leads to political contestation as a given institution can only handle so much ambiguity about its rules before the coalition may fall apart (Streeck & Thelen, 2005). The third reason these gaps may arise is that actors including those who did not contribute to the creation of an institution or the coalition behind it are strategic and therefore will interpret rules and try to influence the institution in ways that leads to redirection of the institution’s purposes (Streeck & Thelen, 2005). The fourth reason for these gaps which may lead to conversion is that – echoing Paul Pierson (2004) – time matters. Many institutions survive long enough that its original founders are long gone and the surrounding circumstances have changed immensely. Thus, time itself can lead to conversion as these

surrounding circumstances inevitably change leading the institutions original purpose to be outdated (Streeck & Thelen, 2005).

The fifth and final type of change dealt with by Streeck and Thelen (2005) is exhaustion.

Exhaustion describes a process by which an institution gradually collapses. This happens when an institution condones behavior which actually contributes to the demise of the institution itself: “Different from institutional drift, in which institutions may retain their formal integrity even as they increasingly lose their grip on social reality, institutional exhaustion is a process in which behaviors invoked or allowed under existing rules operate to undermine these” (Streeck & Thelen, 2005, p. 29).

Employer preference theory

In line with contributions like Seikel (2015), Afonso (2012) and Paster (2014), this thesis argues that divergent regulatory outcomes in similar systems could be due to the divergent preferences of employers. According to this approach, employers in non-tradeable sectors faced with strong unions may well oppose liberalizations and support maintenance of wage standards (Afonso, 2012). For instance, due to the free movement of services within the EU, Danish construction companies could

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25 support a re-regulation of posted work because a construction company from the former Eastern bloc would be able to perform the same job for less money due to its lower wage costs. This is the argument put forward by Seikel (2015) who argues that the DCA – due to the composition of its membership (most Danish construction companies are small) – were in favor of a continued re-regulation of posted workers so that its smaller members would still be able to compete on relatively equal terms. Size of the company is crucial here because larger construction companies would be able to take advantage of a liberalization by hiring cheaper subcontractors (Seikel, 2015; Afonso, 2012).

The approach draws inspiration from works such as Swenson (1991) and Korpi (2006) who both offer insights into when employers in opposition to what is commonly assumed may oppose

liberalizations. Swenson (1991) shows that focusing on conflicts within capital can reveal that some employers may not benefit from race to the bottom style wage competition and deregulation. Thus, employers in Denmark and Sweden were instrumental in institutionalizing centralized wage

bargaining (Swenson, 1991). This centralization was supported by employers in internationally exposed industries because the centralization promised to keep in check wage increases in sheltered industries such as construction. By keeping costs down in sheltered industries, employees in

tradeables had less leverage to demand wage increases contributing to keep wage inflation down while costs of housing would be kept under control (Swenson, 1991).

While loosening the restrictions on flows of labor migrants across the EU ceteris paribus should be in the interest of all employers, the free movement of services opens up national markets to

competitors from countries with lower wage levels. This opening may be met by some businesses with calls for re-regulation under certain circumstances (Afonso, 2012). Afonso (2012) applies Korpi’s (2006) distinction between employers as protagonists, antagonists and consenters.

Protagonists support market regulation if they perceive it to be economically beneficial. Antagonists oppose market regulation, and consenters consent to market regulation – typically as a result of a political bargain (Afonso, 2012). Which role the employer plays is determined by three factors: “(…) the power relationship between pro-liberalization and pro-regulation firms within peak employer associations, the power relationship with trade unions, and political salience linked to the threat of unilateral public intervention” (Afonso, 2012, p. 711).

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Balance of power within peak employer associations

The balance of power between pro-liberalization and pro-regulations firms in peak employer

associations is what determines the stance of the association. Ultimately, an association must pursue the interests of its members or risk them leaving. The struggle between liberalization and pro-regulation firms is a result of divergent economic interests. Pro-pro-regulation firms work in sheltered sectors, face strong trade unions and want to avoid liberalizations as liberalizations risk leaving them facing cheaper competitors (Afonso, 2012). Due to the presence of strong trade unions, these firms are not able to lower wage costs for themselves. Pro-liberalization firms on the other hand deal in tradables and figure to want to keep wages as low as possible to stay competitive and therefore favor liberalizations (Afonso, 2012). As the construction industry is highly labor intensive, man hours serve as the main cost which makes the industry particularly vulnerable to wage competition (Seikel, 2015).

This regulation could take different forms which in any case would ensure or at least attempt to ensure a level playing field between pro-regulation firms and outsiders. Some of the possible measures have been discussed already – such as a statutory minimum wage or universal application of collective bargaining agreements.

Macroeconomic conditions also matter. In a context of high growth and labor shortages, all employers may be in favor of liberalizations while an economic downturn makes firms of both kinds more defensive and in favor of protectionist policies (Afonso, 2012, p. 712). In a context where the more protectionist and pro-regulation employers outnumber pro-liberalization firms “(…) there is no real antagonism with trade unions over the regulation of labour mobility, and measures of labour market protection should be relatively consensual, at least as far as service provision is concerned” (Afonso, 2012, p. 712). Employers in that case are considered protagonists.

Power resources of trade unions

If pro-liberalization firms dominate an employer association, conflict with labor is more intense, and employers can be characterized as consenters or antagonists depending on the “power resources” (Korpi, 2006) of organized labor and the likelihood of unilateral public intervention (Afonso, 2012). The power resources of trade unions are what determine whether an employer association dominated by pro-liberalization firms will be a consenter or an antagonist. In contexts in which trade unions are able to successfully take collective actions, lobby politicians and/or use the media to sway public opinion, firms are more likely to act as consenters (Afonso, 2012). Firms can also become consenters if labor agrees to wage moderation or gives similar concessions in a

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27 negotiation (Afonso, 2012). Thus, firms must consider the costs of conflict with labor. It is then obvious that countries with strong labor movements should see less confrontational employer associations. In determining the strategies of employers, it is not sufficient to look at traditional measures of the strength of the labor movement like trade union density and collective agreement coverage. As Afonso (2012, p. 713) remarks, due to the declining unionization rates of trade unions everywhere, labor movements have resorted to strategies of politicization and mediatization to offset changes to the balance of power.

Political salience and unilateral public intervention

Whether employers are antagonists or consenters is also determined by the threat of unilateral public intervention. In a situation where employers consider it likely that there will be a unilateral public intervention, the association is likely to act as consenters and take part in negotiations which will at least ensure that it is still able to influence a regulation more than it would be able to without consenting (Afonso, 2012). As noted by Afonso (2012), the issue of labor mobility in the EU has become a highly politically salient issue, and this salience may spur political intervention – for instance by instituting a minimum wage. In a context where the employer expects the public intervention to be against its best interests, it is more likely to act as a consenter than an antagonist (Afonso, 2012).

The theory on employer preferences allows for the formulation of expectations in regards to how the issue of posting influences national employment relations in Denmark and Sweden. Seikel (2015) has shown that the Swedish employer association BI is dominated by larger construction companies meaning BI is likelier to act as an antagonist or a consenter of regulation of posting as its members should be positioned to take advantage of lower labor costs of posting companies by hiring them as subcontractors. Therefore, I expect Swedish employers in the construction sector to act as consenters or antagonists in the regulation of posted workers depending on the power resources of Byggnads and the threat of public unilateral intervention.

Seikel (2015) also argued that due to the prevalence of small employers in the DCA, it was possible in Denmark to create a “cross-class coalition between trade unions and employers” (p. 1174). Due to the overwhelming majority of small employers in the DCA (77 % of all companies employ nine or fewer workers (Seikel, 2015, p. 1176), I expect the DCA to act as a protagonist or consenter of regulation of labor mobility and downward wage pressures.