Pay moderation key issue in difficult bargaining round

Download article in original language : NL0204103FNL.DOC

The spring 2002 collective bargaining round in the Netherlands has proved difficult, with industrial action in sectors such as construction and public transport. Despite calls for pay moderation, agreed wage increases were generally just under 4% (above predicted inflation) until a markedly lower rise was agreed, following a major strike, at Philips in April. The Philips deal may set the pattern for subsequent bargaining in export-oriented manufacturing, but there are still fears of a wage-price spiral.

The spring of 2002 has witnessed considerable difficulties in concluding new one- or two-year collective agreements in many sectors and companies. Negotiations have not proceeded smoothly at Shell and Dutch Railways (Nederlandse Spoorwegen, NS), or in the temporary employment agency sector and the municipalities. The key issue has been pay increases, with trade unions wanting rises at least at the level of inflation, while employers are insisting on moderation in the light of the economic downturn. A strike took place at the Philips electronics group at the end of March on a scale that had not been seen in 50 years, and disputes have also broken out in construction and public transport.

Philips dispute and agreement

Negotiations over a new collective agreement at Philips began in November 2001, and the main point of contention was pay. The trade unions demanded a 3.5% increase, while the company offered a 2.5% increase, plus a one-off bonus of 0.5%. After the major strike in late March, Philips and the unions finally reached an agreement valid for 16 months. It provides for a wage increase of 2% from 1 July 2002 and 1.25% from 1 January 2003. As Philips employees' wages are based on performance to some extent, it is envisaged that 10% of them will miss out on the wage increase. An agreement reached previously with trade unions representing senior staff has been opened for renegotiation by this new agreement, which applies to all employees.

The Philips negotiations and their outcome have been closely followed by other large industrial companies, especially as Corus, the Anglo-Dutch steel producer, had previously reached a much more costly agreement to avoid industrial unrest. It is expected that other (exporting) companies in the metalworking industry, for which the sectoral collective agreement expires on 1 June, will follow the Philips deal, which lags behind inflation. In 2001, prices increased by 4.5% and the Central Planning Bureau (Centraal Planbureau) has forecast that inflation will reach 3.5% in 2002. Philips has therefore achieved the wage moderation it wanted.

Until the Philips deal was concluded, the average pay increases provided for in 2002's collective agreements came to slightly less than 4% - a notable exception being the KPN telecommunications group, where a pay freeze was agreed in order to preserve jobs (NL0111103N). This level of increase does not seem to be in line with the central understandings reached by employers' organisations and trade unions to moderate wage increases in 2002 in the light of the deteriorating economic situation (NL0112121N). The Philips agreement seems to have brought an end to these relatively high increases. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) has hitherto stuck to a bargaining guideline of a 4% increase, with a lower rise possible in sectors and companies with poor financial results.

Disputes

'Relay strikes' started in April in the construction industry and were continuing towards the end of the month. The issue in the dispute is the way in which the negotiations should take place. The employers first want to negotiate over the issue of travel allowances for workers, which they consider too high, proceeding to discuss wage increases and the rest of the sectoral agreement's provisions only once this issue has been resolved. The trade unions – FNV Bouw, the construction workers' union affiliated to FNV, Bouw- en Houtbond CNV, affiliated to the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV), and the independent Zwarte Corps– want to talk about the entire package of pay and conditions contained in the agreement, which applies to 180,000 employees.

More than 10,000 construction workers have been involved in the construction strikes, which have mainly taken place at high-cost sites such as a new high-speed railway line. The strikes, however, are also affecting consumers, home-buyers and some 10,000 foreign workers in the industry, many of whom are now being sent back to their home country by their employers. FNV union officials have been visiting various construction sites with interpreters to argue to the foreign workers that a good collective agreement is also in their interests. If they work in the Netherlands for longer than a month, such workers are legally covered by the construction industry collective agreement.

In mid-April, bus drivers working in the regional public transport system opted for a novel form of industrial action when negotiations over a new agreement foundered - they offered free transport to customers. The unions demanded a 4% wage increase over a year for the 14,000 employees in the sector. The employers' counter-offer of 3.2% was rejected as being too low and bargaining broke down. Another contentious issue was the unions' demand for drivers of smaller buses to be included in the scope of the regional public transport collective agreement, while the employers wanted to keep them under the cheaper agreement for taxi drivers. The bus drivers' unconventional form of action – free transport – prompted the employers to seek an interim injunction in the courts to prevent the action. The courts, however. found that the action was legitimate. The parties subsequently reached an agreement within a few days, providing for a wage increase of 3.75% backdated to 1 January 2002 and a one-off year-end payment of 0.25%.

Pay is also causing problems in the information technology (IT) sector, where operating results have declined dramatically and many companies are struggling with large debts and superfluous personnel, ending their former growth. This means that the major employers in the sector do not want to offer wage increases or bonuses in 2002, despite the provisions of an existing collective agreement. The only exception is the US-based computer company EDS, which is adhering to the collective agreement by offering a 5% wage increase for 2002. Other companies, however, state that they cannot afford to offer the 4% wage increase promised for 2002. The trade unions have announced that they will be taking the matter to court.

Commentary

Employers and unions appear to be keeping one another trapped in a 'wage-price spiral'. Although the social partners have reached central agreements on wage moderation, they cannot control the context of inflation and labour shortages (NL0107137F). They are now being blamed for the fact that they failed to prepare for this in the past by, for example, investing in training. The declining competitive position of the Dutch economy is another aspect being pointed out by the employers and used as an argument in the debate, even though they failed to prepare for this by achieving economies of scale and implementing other commercial measures in recent years. Economists state that the government, despite its intentions to the contrary, should arrange a spring meeting with the social partners so that it can be clarified why the trade unions should now accept collective agreements that provide for pay increases lagging behind inflation. Others are calling for a new 'Wassenaar accord', the 1982 deal in which the government, employers and employees reached agreement on how to safeguard the Netherlands' competitive position (NL9710137F). In 1982, wage moderation was 'traded' for the creation of jobs, whereas now agreements on wage moderation should be made that are compensated by serious attempts on the part of employers to return (partially) occupationally disabled people to work (NL0204101N) and on the part of the government to invest in education and care, and increase minimum social benefits. (Marianne Grünell, HSI)