Can industry-wide pay rises plug the real wage gap?

But in the process, will Denmark become vulnerable to a wage-price spiral?

Thousands of Danes are struggling financially (photo: Pixabay)
January 5th, 2023 1:22 pm| by Loïc Padovani
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Negotiations are ongoing between employers and trade unions that could seriously impact the spending power of the 230,000 people in Denmark employed in heavy industry, such as manufacturing jobs.

A further 370,000 private sector workers – in retail, construction, transport, financial services etc – will be impacted by the results, which are expected to be announced with a new collective agreement from March 1.

Can the employers and trade unions fairly bridge the gap caused by a 10 percent rise in inflation! The increase has meant wages will need to be increased to ensure there isn’t a fall in real wages, but is this feasible given the current economic situation?

Risky months ahead
“The risk of conflict is really high and is perhaps the highest we have seen in many, many years,” Laust Høgedahl, an associate professor and labour market researcher at Aalborg University, told DR.

The Faos research centre at the University of Copenhagen worries that a large increase in wages could be detrimental.

“There is a socio-economic concern that you end up in a wage-price spiral. In other words, you set the salary so high that it will contribute to companies keeping prices high or actually pushing them up further,” warns Faos representative Nana Wesley Hansen.

Danish homeowners at risk too
Additionally, many people in Denmark risk facing higher property tax demands – 1.5 million homes will receive a new property valuation this year – if their information on the BBR (Bygnings og Boligregistret) is incorrect.

Homeowners are obliged to make sure the information is correct, but many don’t trust the BBR, according to a DR survey: 58 percent say they can’t count on the information on the BBR register to be correct.

“If the quality of the data you put in is not good, then any calculation cannot correct it. Then the result will not be good either,” Professor Jan Pries-Heje from Roskilde University told DR.

The BBR tries to take everything into account: from the year of construction and dates of any redevelopments or extensions, to the heating and plumbing situation.

In 2022, the Valuation Agency under the Ministry of Taxation sent out around 146,000 property assessments. This year, 1.5 million homes will need a new evaluation.