Employers push for fundamentally new social security system

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In anticipation of a debate scheduled for the end of June 1999 in the Lower House of the Dutch Parliament, the Netherlands' largest employers' association, VNO/NCW, is pushing for fundamental change in the social security structure. It believes that the new system should offer a flat-rate benefit at subsistence level as a safety net. In addition, employees should be assigned "personal responsibility" and have the option of taking out additional insurance against loss of income.

VNO/NCW, the largest employers' association in the Netherlands, has recently been airing its views on the future of social security, in advance of a debate scheduled for the end of June 1999 in the Lower House of the Dutch Parliament. While the Lower House planned to discuss more efficient implementation of social security, VNO/NCW now wants to tackle several fundamental issues. The current favourable economic climate provides the ideal backdrop for reviewing the whole system, it believes. In times of recession, the preference for ad hoc solutions is understandable and usually involves tightening the criteria for potential benefit recipients and cutting back on the amounts paid.

Old fashioned system

According to VNO/NCW, the existing social security system is "old fashioned", having come into existence after the Second World War and undergone expansion along the same lines over the years thereafter. The system, it is claimed, fails to take account of the social changes that have affected Dutch society since the 1960s. Three examples of fundamental change cited by the employers in order to provoke debate on overhauling the social security system are that:

  • the traditional "breadwinner" family model, where division of labour dictates that men earn the family's income and women take care of domestic matters, is eroding in the Netherlands despite serving as the foundation for the entire social security system. Nowadays, the majority of households with more than one person comprise two working partners, including parents with children. Households with "one and a half incomes" are in the majority and should serve as the norm for a new system;
  • in the 1950s, male employees in paid employment were the norm, and a separate category existed to classify the "self-employed". Lifetime employment with the same employer was also more prevalent. In today's work environment, however, the picture is far more diversified and changeable. Entrepreneurs starting their own businesses are on the rise. The ranks of self-employed individuals without staff (denoted using the Dutch acronym ZZP, for zelfstandigen zonder personeel) are increasing in the construction, transportation, healthcare and service sectors. According to the Central Bureau of Statistics (CBS), the number of ZZPs increased between 1990 and 1997 by 100,000 to a little under 1 million (though in relative terms the picture is somewhat different, as shown below.) Some small businesses expand and hire employees, whilst some ZZPs choose to alternate between periods of self-employment and salaried employment. VNO/NCW concludes that this development decreases the ratio of differentiation between national insurance and employee insurance; and
  • there is increasing mobility in the job market. The "job for life" concept is now defunct. Flexi-workers, including temporary employees, have become an integral part of modern day economic activity. For employees, this means continuously honing professional competences. Interpersonal skills are becoming increasingly important now that employees can no longer lean on the security of one job. VNO/NCW also holds employers accountable for supporting the "employability" of their staff. If employees no longer fit into the company, then they must be able to move on using their own accumulated "capital".

As far as developments in family life are concerned, the changes sketched by the NCW/VNO can be confirmed (NL9902126N). However, the increasing number of ZZPs in the workforce must be put into perspective, since recent survey data contradicts the changes described within the labour market. Based on CBS figures for employment, research indicates that the percentage of self-employed individuals in the workforce decreased from 16% to 13% between 1970 and 1997 ("De arbeidsmarkt van de toekomst", P De Beer, in ESB-Dossier "Zoeken is vinden", 84/4201 (1999)). Many self-employed people in traditional sectors, such as milk-delivery workers or small grocery shop owners, have long since been forced out of business by competition from large companies. The research raises the question of whether the growing number of today's one-person companies, active in completely different sectors, will surpass the number of individuals being phased out. With regard to increasing flexibility, it can be concluded that the permanent job is by no means on its way out. While it is true that in the total employment "pie" the permanent job "slice" diminished from 80% in 1984 to 77% in 1997, in absolute terms permanent employment has increased by 1 million jobs over the same period, while the number of flexible jobs has increased by only 600,000. A greater portion of the potential workforce, 53% to be specific, now has a permanent job compared with 46% in 1984 (according to the study cited above).

Consequences for the new social security system

VNO/NCW aims not only to stimulate a Lower House debate but also to start addressing several fundamental issues related to the social security system itself. The employers' association is pushing for a social security system that can act as a safety net: anyone suffering exclusion from the job market must at least have the guarantee of a minimum income (like the current old-age pension system and existing benefits for self-employed individuals). In addition, employees must have the opportunity to take out supplementary insurance, as is currently the case with the old-age pension system, building up an additional pension or setting aside "something extra" individually on the basis of single-premium policies.

VNO/NCW emphasises that it does not have a blueprint ready and that it will certainly not be possible to implement the main lines of change overnight. Several years will be needed to analyse the scope of reform. Interim solutions will also have to be found during the transitional period, not forgetting that the rights of employees accrued under the old system must remain intact. VNO/NCW advocates a generation-linked introduction, comparable with the 1990 measure which established that children (in effect, "young women") who turned 18 in 1990 would be subject to an individualised system of social security. This means that women (and men) born after 1972, regardless of whether they choose to have children and raise them, can accrue social security rights only on the basis of paid employment.

Commentary

VNO/NCW has made noticeable headway in the often heated and obscure debate that takes place in the Netherlands on the future shape of the social security system (NL9902124F). Three issues frequently conflict and cloud the discussion: the pros and cons of privatisation as a means of implementing an efficient, non-bureaucratic social security system; the autonomy of the agencies responsible for allocating benefits; and the more modest role that the social partners must play as an interested party in the bodies supervising the system. VNO/NCW's new vision appears to brush past or circumvent the often predictable opinions of the social partners, which itself also clearly echoes an institutional interest. The outcome of the debate remains to be seen.

In any event, the employers' new vision is based on the profile of "the new employee". This in itself will stimulate the debate. The new employee must be able to count on a safety net, which is at the subsistence level and thus independent from the level of previous income. In addition, new employees will have to assume greater responsibility and take care of any amounts in excess of the safety net level. In the Netherlands, the welfare state - as is stated more often - is undergoing a slow metamorphosis into an insurance state. VNO/NCW's vision of "insurance" behaviour fits perfectly into the new "national ideology". However, mathematical genius is not required to calculate which employees will be able to handle the responsibility of taking out extra insurance to cover personal social security. (Marianne Grünell, HSI)

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