Tight labour market challenges Dutch consultation system

Download article in original language : NL9806183FNL.DOC

In the spring of 1998, the tripartite advisory Social and Economic Council submitted a report to the Dutch Government about medium- to long-term socio-economic policy. It warned that increasing pressure on the labour market may constitute the most important challenge to the Dutch consultation system over the next five years. However, the Council was unable to reach consensus on budgetary policy or on a strategy to fight poverty.

In April 1998, the Social and Economic Council (Sociaal Economische Raad, SER) issued a report ("Advies Sociaal-economisch beleid 1998-2002" [Advice regarding Socio-economic policy 1998-2002], Sociaal-Economische Raad, The Hague (1998)) advising the Government about socio-economic policy over the next five years. The SER is a tripartite government advisory body comprised of representatives of the social partners and independent members appointed by government.

In its new report, the SER views the tighter labour market as the most significant challenge now facing the Dutch consultation system. The labour shortage offers new opportunities, but could also conceal new risks. The Council sees potential for continued growth in labour activity rates, thereby strengthening the basis for high-quality collective social security and a fair distribution of incomes. However, an imbalance of supply and demand in the labour market could lead to cases where vacancies simply cannot be filled. The Council therefore argues for a solid "through-put" or "redeployment" (doorstroming) policy to allow unemployed people and other "inactive persons" to enter the labour market. To achieve this, the employability of both employees and the unemployed should be improved through training and education. The Council wishes to increase spending not only on education and training, but also on childcare facilities, the reduction of healthcare waiting lists, and a tax reform. These good intentions aside, the Council did not reach consensus on budgetary policy or on how to combat poverty.

A policy mix for success

The SER attributes the improved socio-economic situation in the Netherlands in part to the faithful application of long-term monetary and budgetary policies over the last 15 years, and in part to the reform of employment conditions. The policy focus has shifted in timely fashion to strengthening the socio-economic structure. The Council rejects the popular term "Polder Model" for the Dutch system (NL9710137F), preferring to label this process as step-by-step "institutional learning". This process will allow mutual trust to develop and coherence in policy to grow.

The Council was asked by the Government to address four issues:

  1. how to create healthy public finances in relation to necessary and desired investments in, for example, sustainable economic development and social infrastructure;
  2. how to promote higher labour activity rates particularly among less-educated and older people;
  3. the way in which training and education systems can best contribute to employability; and
  4. how to encourage the establishment and growth of new enterprises.

With respect to budgetary policy, the Council endorses the Government's preference for a "trend-based budgetary policy". This policy sets a margin for public spending on the basis of a cautious estimate of 2% annual economic growth. The Council recommends continuing this successful policy, but with extra emphasis being placed on keeping spending in check. Some members of the Council assert that, if economic growth and public income were to exceed the 2% level, a comprehensive weighting for extra spending should take place halfway through the government's term. Moreover, no consensus was reached over the aspirations for a balanced budget (primarily of interest to the employers' representatives and the independent members) or the acceptance of a 1.5% maximum deficit, as favoured by the employees' representatives.

The Council sets several priorities for extra investment. For example, it feels that it is necessary to invest more in education and training, especially within the context of "lifelong learning". More investments are also needed in healthcare and childcare facilities. With regard to public spending, the Council recommends continuing to narrow the gap between the gross and net incomes of employers and employees. However, the policy should concentrate on making it financially attractive for people to find a job and to stay employed. On the other hand, the SER could not unanimously agree to allocate extra funds to fight poverty; only some members - notably employee representatives - support this as a priority.

Labour market

The Council makes several recommendations with regard to the labour market. These mainly concern achieving a better balance between supply and demand, in which issues of "through-put", and thus the influx of labour, are considered crucial. While the Government is advised to carry on with its current successful policy mix regarding responsible and differentiated wage-cost development, the social partners are advised to carry on with their efforts regarding negotiations on pay and conditions (NL9711148N). Moreover, the Council feels that a more motivating incentive policy would be a useful instrument to promote redeployment. At the same time, it wishes to achieve greater flexibility to avoid unacceptable disparities in income in the future. The new "flexibility and security" legislation provides a good framework by which to introduce this flexibility more evenly (NL9805178N).

The Council concludes that investments in employability are becoming increasingly important for employees and employers alike (NL9802160F). The government has made a great stride forward with its "lifelong learning" national action programme. However, employability also places demands on employment conditions and social policy. Furthermore, because of the large differences in company structure, it has proved difficult to translate employability into actual practice. For example, companies differ in the extent to which they depend on internal and external labour markets and on numerical and functional flexibility, as well as in size. Small and medium-sized companies in particular fear that there will be no return on their investment in training, as employees will later on move to other companies. In response, the Council offers several suggestions by outlining "best practice" at sector or company level.

The Council puts forward a few supplementary recommendations on how to increase labour activity rates amongst older employees and to avoid premature retirement (NL9709131F). The Council views flexibility in working conditions, intended to adjust the workload to the capability of the employee, as a general rule of conduct. Flexibility can be found in individualised working schedules and duties, as well as in opportunities for education and training leave (NL9705115N). Finally, it wishes specifically to redeploy those employees who work in subsidised sectors of the labour market (NL9801156N) - in this context, the Council points out that stress should be placed on successfully implementing policies that have been introduced in recent years (NL9705113N). Both the Government and the social partners are urged to investigate how those working in the subsidised sector can be redeployed.

Commentary

Although it may distance itself from the term "Polder Model", it is clear that the Council, if not being actually a co-author, at least endorses the ideas behind the concept. Making long-term decisions with regard to monetary and budgetary policy and employment conditions is an essential component of this model. The same holds true for the mutual trust among the parties concerned and consistency in policy. For the actual realisation of structural adjustments, however, the policy should be part of a broader strategy. Following the OECD, the Council states that this broader strategy should take into account the international policy dimension as well as issues such as a broad base of support in society, and fairness with regard to work and incomes. The Council chose to express its advice in this framework, and both the Government and the social partners are explicitly reminded of the efforts accordingly required. From this standpoint, we can conclude that consensus between employers and employees rests on finding a balance between economic and social interests and translating these into a consistent long-term policy, and on keeping one's promises. (Marianne Grünell, HSI)

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