Social partners agree wage increase despite economic crisis

In the latest collective agreements, the social partners agreed on an average wage increase in line with the inflation rate of 1%–1.5%. Meanwhile, the Central Planning Office emphasises that wage moderation could be counterproductive in light of the serious economic downturn facing the Netherlands. Employers in construction, however, demonstrate that they are thinking beyond the recession and want to remain attractive for young workers, by agreeing a wage increase of 2%.

Wage moderation in collective bargaining

The latest collective agreements, which were concluded in the spring of 2009, are more economical than those concluded in the winter of 2008–2009. According to the General Industrial Employers’ Association (Algemene Werkgevers Vereniging Nederland, AWVN), which conducts negotiations for 850 companies and 70 sectoral organisations in collective bargaining, an average wage increase of 2.1% was agreed in March this year. The collective agreements concluded in February 2009 provide for a 2.3% pay increase, while the trade unions demanded an average wage increase of 2.7% in January. Although the trade unions were officially still engaged in negotiations regarding the issue of wage moderation with the Dutch government, developments in practice already mirrored the presence of wage moderation policy in the Netherlands. The trade unions used wage demands as their trump card or key resource in negotiations with the government on the social framework agreement in 2008. In exchange for moderating their wage demands, the trade unions urged the government to set aside its plans for cost-cutting measures, such as raising the official retirement age, to ease the impact of the economic crisis (NL0902049I). Behind the scenes, the trade unions and employer organisations agreed on an average wage increase in line with the inflation rate of 1% to 1.5%.

Trade unions push for significant wage increase

During the collective bargaining rounds in the autumn of 2008, the trade unions warned that they would be pushing for a wage increase of 3.5%. At that time, however, it was impossible to forecast the devastating consequences of the economic crisis on the Dutch economy. The respective bargaining parties then assumed that the economy would continue to growth at a modest rate of 3.25% a year. During the collective bargaining round, employers and workers blamed each other for the lack of progress in the negotiations because wage demands were either too high or too low.

Nonetheless, the trade unions’ wage demands were higher than expected by government, particularly on the basis of the social agreement reached with the social partners in 2008. In the summer of 2009, it was agreed that wage demands would not exceed inflation, even if the government was in fact relying on maintaining the zero line for wages as specified in the social deal of 2008. Current expectations are that inflation will maintain a level of 1% to 1.5%. A wage increase at this rate in the private sector would have an impact on civil servant salaries in the public sector. The salaries of civil servants would thus be higher than expected by government, resulting in a budgetary shortfall. The trade unions, however, do not feel that they have departed from the social agreement reached with the government. They assert that it is a question of customising wage demands to the economic situation. In cases where business is suffering from the crisis and doingless well, the wage demands will be adjusted downwards, while in sectors of the economy or companies in a more favourable situation, regular wage demands will be upheld.

Construction agrees 2% wage increase to attract new workers

A wage increase of 2% has been agreed in the construction sector until 2011. This exceeds the rate of increase agreed in the social deal, which includes provisions on employment opportunities and a wage increase of 1% in line with inflation. Construction workers and employers welcomed the decision of the 2% wage increase, which will be introduced in phases. It is important that construction remains an attractive industry for workers. While short-term expectations are that some 50,000 workers will lose their jobs in the construction sector, members of the largest employer organisation in the sector, the Dutch Construction and Infrastructure Federation (Bouwend Nederland), expect many jobs to be created again in the longer term.

Over the next three years, some 20,000 construction workers are expected to take early retirement; a new inflow of young construction workers is therefore greatly needed. Employers have not succeeded in maintaining an adequate inflow of new workers in recent years. In general, new workers coming to the construction sector quickly left the industry again. For this reason, the construction sector must become more attractive to young workers. Employers feel that the crisis has temporarily overshadowed the provisions of collective agreements in the construction sector, but that the industry will pick up again. In a bid to make the construction sector more attractive, the travel allowance will be raised and trial projects will be carried out allowing for part-time and more flexible working arrangements. Until recently, this would have been inconceivable in the sector. In addition, educational funds are being deployed to provide further vocational training or retraining to manual and office workers. An amount of €10 million has been earmarked to guarantee pension entitlements of older workers in the event that they are made redundant shortly before retirement.

Wage moderation affects economy negatively

The Central Planning Office (Centraal Planbureau, CPB) supports the social partners’ decisions. CPB considers that it would be unwise to pursue a policy of wage moderation, which may have a counterproductive outcome in the longer term. While wage moderation would mean lower labour costs for companies at present, it would not impact on the global overcapacity of industry from which the economy suffers. The risk of deflation – that is, a dip in the general consumer price level – continues to represent a real threat to the Dutch economy. So far, the collective agreements for 2010 provide for a wage increase of 1%; wage demands are thus already severely moderated.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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