two dogs working out place in pack

Question
QUESTION: Two dog household- 7 yr old male neutered border mix and 8 month old female spayed sheltie mix.

Border has always been calm, smart submissive, loved all dogs and people. Sheltie is puppy crazy at times, aloof, fearless, but at times very sweet.
Fights are getting more serious and I understand they are working out their place in the pack but it confuses me. At times border wants to be boss at other times he lets sheltie walk all over him. Border has gotten to point where he whines or barks every time puppy comes near him. If he is on couch (allowed by us) and she jumps up he barks and jumps down. Isn't that giving her a win? Other times he rolls her in a wrestly match and won't let her up when all she did was walk by him. Is the puppy just a slow learner? Should we back off and let it happen even if it takes weeks?
Worried about them being alone all day in house. Puppy needs rawhide to chew as it is an issue right now. Finding that border is taking them away and won't let her get to them.
They eat and walk side by side everyday with no issue. Both live under our rules of nothing is free. You want something you have to polite and do as we ask first. Normally a sit or down. Border is always greeted first when we come home. Puppy waits behind him and has from the beginning.
Wondering if what is happening during the day is making the puppy crazy by the time we get home. She can be calm on days we are home, but work days she is sometimes out of control behavior wise when we get home. Tried to leave puppy in kitchen today to see if that helps, but that feels like I'm getting in the way of the natural course of things. Will separting them make it take or longer or get worse?
Both get at least 2 hours of exercise daily - walking, fetch, general rough housing with us.
How long could it take for them to work it out? It has been about 2 months of this already.

ANSWER: Unfortunately, nobody can really work this out except them. Doggie politics is surprisingly complex and often involves things humans can't even fathom as important. However, I would separate them during the day when they can't be supervised. If you crate train them, or at least the pup, you can do this easily. We crate our papillion and just close our cocker in the same room, partly because he will take her bones if he gets a chance and also because they get so hyper together they tend to knock things over in play (he's a big clutz and she can jump 8 feet straight up) and it would be awful if it was say, our pet lizard's lighting system (which could start a fire with nobody around) or something breakable that could leave bits of glass for them to hurt themselves on in the time between when it happens and we get home and if someone accidentally tore an ear or scratched an eye while we weren't around a minor wound could turn into a serious infection (not to mention a bloody mess all over the carpet).

You should also realize that they will have their periodic squabbles probably forever or until one of them is old enough not to care anymore.

---------- FOLLOW-UP ----------

QUESTION: Thanks for the response. It is as I thought- the humans need to let them work it out. I just didn't want to prolong the process. On a slightly different but related (I think) issue, the puppy will pace for long periods of time. It does seem to be a forerunner to upsetting the older dog. It's almost like he can't take it after her 5th lap around the living room. I bet you are going to recommend more activity or putting her in a down stay, but neither seems to work. More activity means she wants more and more every day. The down stay is a struggle (maybe that means it is the solution).
what do you suggest for constant pacing?

Answer
More activity, but stimulating activity. Like a Kong (and if that's too easy, suspend it from a string and enjoy the show) or smear some peanut butter on the bottom of a bowl and put the bowl upside down on a tile floor, or try putting her kibble inside an empty water bottle with no cap on it so she can work at getting it out. You'll want to distract your older dog with similar things or he'll just take her stuff away. Your dogs are herding breeds. They were bred to be independent thinkers and problem solvers so present some puzzles and problems to solve and I think that'll help with the pacing. Other toys worth looking into are the twist N treat, the tug a jug and just wrap up a treat like a present.
Remember to reduce the amount of food you give them at feeding time in proportion to the amount of food they are getting during playtime.