Tensions over terms and conditions in public sector challenge polder model

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In late 1998 and early 1999, the Dutch education sector and police force have seen bitter pay disputes, while central and local government civil servants have announced pay demands that far exceed what the government feels it can offer in 1999. The differences appear unbridgeable for the time being, and strikes were expected in the police force and education. The Dutch consultation system (the "polder model"), partly as a result of its own success, is now being put to the test.

Following labour unrest in the Dutch care services sector (NL9810103F) in the first half of 1998, in the autumn a dispute - including calls for a strike - erupted in the education sector, immediately after the collective bargaining round had opened (NL9812116N). Then, in January 1999, police trade unions made it known that their members do not feel valued by the Minister of Internal Affairs, whose offer for improvements in terms and conditions is far lower than those demanded by the unions. Meanwhile, civil servants' unions have said that their wage demands far exceed the government's intended offer for 1999. Some commentators have suggested that the disputes may be putting pressure on the Dutch consultation system (the "polder model") - which recent large-scale redundancy programmes in major companies have already called into question in some eyes (NL9811106F).

Pay rises too low in 1999

The Ministers of Education, Healthcare and Internal Affairs have all carried out the promises they made in the government's July 1998 coalition agreement: to offer moderate pay increases of less than 2%, introduce additional flexibility into personnel policies and dismantle early retirement schemes (for the police force). Although these three objectives fit the stated policy, they are not particularly compatible with one another, which makes it difficult to "sell" them to the employees as a single package. Keeping employees within organisations could partially solve the problem of cyclical scarcity on the labour market. However, assisting them to re-enter the workforce, given the current rate of unemployment, represents more of a social responsibility. Finally, the low wage offer is not considered realistic given the level of economic growth over recent years, growth from which public sector employees also wish to benefit.

In response to the government's coalition agreement, the social partners announced as early as the summer of 1998 that the pay increases stated in the Budget were too low and that, if the government were serious about these figures, they could expect a "hot autumn" (NL9809198F). Whilst the ministers and the trade unions discussed their standpoints during the first round of public sector pay negotiations, Prime Minister Wim Kok announced that the levelling out of economic growth called for wage moderation. However, by the end of 1998, no trade-offs for wage moderation had been agreed - though tax changes due in 2001 are intended to reduce the tax burden. The only tangible exchange the Prime Minister could offer came in the form of the inflation figures hurriedly published by the Central Bureau of Statistics (CBS). The CBS predicted inflation of 1%, rather than 1.75%, in 1999, thereby allowing Mr Kok to draw the conclusion that lower pay increases could be offered without a loss of purchasing power. The CBS also adjusted the estimated pay increase for 1999 to 2.5%, while the cabinet had used 2% for its calculations in summer 1998. The traditional autumn national-level consultation round with the social partners which, very exceptionally, was postponed for two months, could then begin working with the new figures in December 1998.

The employers, at any rate, are on the government's side. This was once again evident during the autumn consultation meeting in December. The two most important employers' organisations, VNO/NCW and AWVN, felt that the demand for a 2% pay increase was "more logical" than one of 3% or more. It was "more logical" because the economic growth forecasts for 1999 had been adjusted from 3% to 2.25% and because inflation was expected to decline to 1%. On the other hand, the earnings ratio (the share of wages in gross added value) will rise to well above 80 if the demand for a 3% pay rise is met. The tripartite Social and Economic Council (Sociaal-Economische Raad, SER) has found "80" to be an adequate earnings ratio value.

Sharing economic growth

During the autumn meeting of the social partners, the chair of the FNV trade union confederation, Lodewijk de Waal, was much less vocal than the employers. He explained that he was not allowed to "talk out of turn". It is clear that he was not allowed to interfere with the demands and industrial action of member unions, or jump the gun at a central level by making compromises. Not only were the unions not ready for such compromises, but their wage demands ended up being higher than those which the central FNV had originally recommended: 3% became 3.5%, plus 1% for fringe benefits or end-of-year bonuses, and this was finally given the stamp of approval by the central FNV.

The unions in the public sector have made high pay demands in order finally to taste the fruits of recent economic growth, and the figures are in their favour. This applies not only to statistics from the CBS, but also the findings of the Bureau Berenschot, which in its 34th pay survey showed that the gap between salaries in the public and private sectors is widening. The unions can use these figures to support their claim that the buoyant economic cycle over past years has virtually bypassed the public sector, a sector that employs 3 million people in the Netherlands.

In addition to ostensibly justified pay demands, the unions have also had shortages in their segment of the labour market in their favour. Vacancies in healthcare, education and the police force remain unfilled, causing workloads to increase. School classes are too large and the number of instruction hours has become too much for teachers to handle, while the police feel overburdened by an excessive number of new duties. The poor image of the public sector has already been demonstrated through the drop of interest in it amongst young people. Vocational education programmes are no longer filled, and this has led to attempts to tempt back former teachers and nurses and a proposal to raise the age of retirement in the police force.

Commentary

The media have already pointed out that collective bargaining in the public sector can scar the usually tranquil landscape of the "polder model" - the Netherlands's consultation and consensus-based system. The polder model, based largely on consensus between the social partners on moderate wage increases, is now a victim of its own success. Falling unemployment, economic growth and job creation are all goals which have been reached or seem soon to be attained. Moreover, shortages on the labour market have created a new area of tension whilst rapidly swelling salaries in the private sector have made workers in the public sector want more too. While the current government planned NLG 3 billion in cutbacks on terms and conditions in the public sector (according to the tenets of the polder model), it has now a new-found opponent in the trade unions which wish to cash in on economic growth. Even if the government succeeds in regaining the support of the unions with a public sector-wide "solidarity agreement" and in toning down pay demands, it will still need to find money to improve the fringe benefits required to recruit the people to fill the vacancies and reduce the workloads. (Marianne Grünell, HSI)