Recent research from Denmark’s authoritative Economic Council reveals that density plays a decisive role in securing higher wages. Reduced membership in legitimate bona fide workers’ organisations and the increased prevalence of yellow unions (employer dominated groups) undermine bargaining strength, to the detriment of working families’ purchasing power. A key feature of the Danish model is sector-level agreements complemented by wage-setting at the company level. 

At the heart of the discussion is a striking finding: Membership in representative trade unions fosters solidarity, increases participation in collective actions, and enhances leverage at the bargaining table. In other words, union membership is economically consequential.

The report documents a significant reduction in unionisation in recent years, particularly among collective-bargaining unions. While overall density has fallen moderately over the past decades, membership in unions that negotiate collective agreements fell more sharply (from 72% to 54%).

This development is alarming because only collective-bargaining unions can negotiate at the sectoral level and strike when necessary to put pressure on their counterparts. Their decline shifts the balance of power toward employers.

In labour markets characterised by employer power (monopsony), higher unionisation increases both wages and employment. This occurs because unions counteract companies’ ability to restrict hiring to keep wage expenditure low.

The Danish Economic Council gives four recommendations to the government:

1. Policies should aim to increase unionisation, particularly within unions that negotiate sectoral agreements, as these have the strongest impact on wages and employment.
2. Tax deductions for union membership fees should be reserved for collective-bargaining unions to strengthen effective worker representation.
3. Merger control and competition policy should critically assess labour market concentration and employer dominance.
4. Policies should enhance labour mobility, such as education and training, to stimulate competition between companies and reduce employer power.

IndustriAll Europe’s campaign Together at Work