Social Dumping: The Danish Labor Market Model's Compatibility with EU Law

Ida Marie Juel Hansen & Nete Schmidt Pilsgaard

Student thesis: Master thesis


The main objective of this master thesis is to examine how the regulation opens for social dumping in relation to posting of workers and how economic theory and incentives affect the existence of social dumping. The subject is of great relevance because social dumping represents a significant problem when resulted in downward wage pressure and displacement of national workers. The analysis shows that there are several elements in the regulation that makes social dumping possible, respectively the posting of workers directive 96/71/EC, the provisions on the free movement of workers and freedom of establishment and the Danish labor market model. The foreign service providers has from a perspective of profit maximization incentive to hire the cheapest workers and the workers have, from a perspective of utility maximization, an incentive to accept relatively low wages in the host state because it exceeds the pay they are offered in their home state including both actual and social costs associated with moving. Foreign service providers can legally pay posted workers less than the average of national workers, partly because of the ruling of the European Court of Justice in C-341/05 Laval, establishing the posted workers directive as a maximum directive. This wage gap can become bigger due to uncertainty in regards to what elements of pay can fall under the definition of minimum wage in the directive. In Denmark the RUT-register helps authorities and unions to control working conditions for posted workers, in order to secure fair competition. There are, however, great uncertainty attached to the registered companies and workers, which make the data less applicable. A proposal for revision of the posted workers directive has been published by the European Commission in an effort to achieve higher protection of workers as well as to clarify the elements of the required wage to posted workers by changing the term “minimum wage” to “remuneration”. This master thesis will, in conclusion examine, whether the proposed changes to the posted workers directive sufficiently will reduce the risk of social dumping in Denmark

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages131
SupervisorsRuth Nielsen