Parties seek support for coalition agreement

The new Dutch government, a coalition of the liberal People’s Party for Freedom and Democracy and the social democratic Labour Party, is seeking support from social partners for its coalition agreement. The agreement, seen by the coalition as tough yet socially-inclined, will save €16 billion through drastic reform of the Dutch welfare state, and the housing and job markets. Social partners are critical of areas of the agreement, but have adopted a constructive stance.

Main aims of agreement

The Dutch coalition government formed by the liberal People’s Party for Freedom and Democracy (VVD) and the social democratic Dutch Labour Party (PvdA) is seeking support from social partners for its coalition agreement.

The agreement, which seeks to achieve cuts of €16 billion, is widely seen as tough yet socially-inclined since the coalition appears to have adopted the adage that the broadest shoulders must bear the biggest burden – under the proposals, the wealthy will pay proportionately more for care, pensions and their own homes.

Both parties have agreed that compromises have to be made, even in policy areas on which either side would have previously refused to negotiate. For instance, the retirement age will be increased more swiftly and pension accrual will become more expensive for those in higher income brackets.

There are also tough plans to reduce unemployment benefits further, although this is balanced by the more social policy-oriented goal of creating more jobs.

The agreement, reached at the end of October 2012, also seeks to link schemes to incomes and cut taxes for people in lower income brackets. Taxation will be raised for those in higher income brackets and employers will also find themselves facing higher charges.

Social partner involvement

Based on the coalition agreement, the Dutch cabinet immediately began discussions with social partners. The government is aware that it needs to boost the Dutch consultative model. The support of social partners is vital, especially for major issues such as labour market reform. This plan is controversial because, aside from activating the unemployed, it also includes shortening the duration of unemployment benefits and asking employers to share responsibility for finding new positions for former employees.

The unions wish to discuss several interrelated topics during the negotiations, including the labour market, dismissal law, the housing market, the government’s care policy, pensions, and the bottom end of the labour market. They also want discussions on labour market participation on behalf of employees with a disability.

Expectations are that the social partners will have proposals of their own regarding the bottom end of the labour market. These are likely to focus on the issue of the combining of benefits, sheltered employment opportunities, and the provisions under the Disability Insurance (Young Disabled Persons) Act. Initially, the unions were strongly opposed to combining these three aspects of social protection. As a result of the collapse of the previous government’s cabinet, legislative proposals on the issue did not go ahead. Now that this is on the agenda again, unions are determined to have their own proposals discussed because it affects the most vulnerable groups in the labour market.

Employers, meanwhile, have their own objections, including opposition to a proposed quota of 5% occupationally disabled employees in all workforces. They also have concerns over a proposed training budget for dismissed employees.

Criticism of labour reform

The unions are also critical of plans for the labour market concerning flexible employment contracts and dismissal law.

The measures will see the unemployment benefit duration reduced from a maximum of 38 months to 12 months, although it would remain at 70% of the last salary earned. The unemployed would then receive a standard subsistence benefit for a period of 12 months without being means-tested on their assets.

After that, the assets and earnings of a person’s partner will now be taken into account in determining the benefit level. An exception will be made for the unemployed aged 55 and older, whose chances of finding a new job are seen as considerably lower and who will therefore not be means-tested.

Timing of changes wrong say unions

According to the government, the socioeconomic policy embodied in the coalition agreement must be a socially-oriented response to the economic crisis. The government is assuming that the labour market will become more flexible by relaxing dismissal law and shortening the duration of unemployment benefits.

On this point employers’ representatives do not take a particular stance. The unions, however, believe the timing is wrong, and that during an economic crisis there should be no move to reform dismissal law and trim benefits.

Commentary

Changing dismissal law will make it cheaper for employers to fire staff. Lower benefits over a shorter period of time will motivate people to accept alternative employment more quickly. However, jobs must indeed be available for this to work.

Only in the longer term – with an increasingly ageing population – will the opportunity arise in a more relaxed labour market for these measures to prompt people to return to work more quickly. However, there can be room for doubt given the degree of scarcity in today’s labour market.

Marianne Grünell, University of Amsterdam

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