The three largest Dutch trade unions will be putting higher wage demands on the agenda in the negotiations of autumn of 2006 as recent economic growth now offers scope for such a move. The Prime Minister, on the other hand, sees this growth as a confirmation of the success of his moderation policy and is urging for continued wage moderation. The Central Planning Office forecasts economic growth in the coming years and a further fall in unemployment. The Central Bureau of Statistics demonstrates that real expendable income has fallen in the past few years, while at the same time labour costs have increased. As a result, the Confederation of Netherlands Industry and Employers wants to abolish structured wage increases; the association is putting one-off increases and performance-related remuneration on the agenda for 2007.
Higher wage demands likely
The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV) and the Federation of Managerial and Professional Staff Unions (Middelbaar en Hoger Personeel, MHP) believe that the recovering Dutch economy makes higher wage demands possible – in the region of a minimum 2% increase.
After adjustment for inflation, CNV estimates that the pay increase demands will be between 1.5% and 2.5%. CNV believes that it cannot sell its members a scenario in which employees will have no gains, while the salaries of senior managers increase substantially year after year. FNV has not yet mentioned a final wage demand, but it is clear to the trade union that there is more room for manoeuvre in 2006 than in previous years. The union plans to wait until after the national budget day before reaching firm agreement on a fixed wage increase.
Meanwhile, MHP – which states that the era of wage moderation is over – is demanding a wage increase of 4.5% to 5% for next year, on the basis of a 2% inflation rate. The trade union believes that if companies are doing better financially, employees should also be rewarded. Moreover, the union also feels that, in recent years, middle-income groups have suffered disproportionately as a result of Dutch government policy.
Previous cooperation on wage moderation
Since 2003, the trade unions have kept to their agreement with the Dutch cabinet on wage moderation. In 2004, FNV and CNV both set a maximum wage demand of a 1.25% increase – an exact reflection of the increase in consumer prices. In 2005, the maximum wage demand was fixed at 2%, only 0.3% higher than the inflation rate. The Central Bureau of Statistics (Centraal Bureau voor de Statistiek, CBS) has revealed that, for four consecutive years, the real available income in household budgets has fallen; in 2005, income fell by 0.7%.
Growth and competitiveness
The Dutch Prime Minister, Jan Peter Balkenende, has called for responsible wage development and wage moderation in the future. He wants to see a consolidation of the results that have been achieved up to now. Moreover, he considers that excessively high wage demands would undermine the overall competitive position of the Netherlands.
The Central Planning Office (Centraal Planbureau, CPB) could support the view of Prime Minister Balkenende with new growth expectations. The forecast for 2006 and 2007 has been raised by a quarter of a percentage point to 3.25% for the current year and 3% for 2007. Unemployment is also expected to fall substantially in 2007, from 400,000 to 340,000 registered unemployed people.
For the first time, these economic growth figures include higher consumer spending as well as a reduction in the tax burden of €1.2 billion, which the cabinet has promised for 2007. Moreover, the budget deficit is falling further: a slight surplus is expected in 2007. Prime Minister Balkenende believes that these figures confirm the success of his reform policy of the past few years.
Rising labour costs
In an overview published in September 2006, the CBS also showed that, since 2000, labour costs have risen more in the financial services sector than in any other area. Between 2000 and 2004, labour costs in financial services increased by 35%: the costs per hour worked currently stand at €44. This figure is exceeded slightly by the mineral extraction sector, which shows hourly labour costs of €48.
In 2004, labour costs per hour averaged around €28 – an increase of more than 20% since 2001. Up to 75% of labour costs consist of wage costs; the expenditure in social security premiums rose by 1% to over 21% in the 2000–2004 period, while the employer’s contribution to pensions doubled to 8% of labour costs. However, the cost of other social security premiums, such as unemployment and disability insurance premiums, have fallen.
Employers propose new wage model
The Confederation of Netherlands Industry and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW), which always supported the government’s wage moderation policy, devised a new remuneration tool in 2006. The employer organisation aims to move away from the trend of structured wage increases and, in response to the demands of the trade unions, to call for wage moderation. The organisation believes that the emphasis should be on one-off wage increases and performance-based bonuses.
Moreover, VNO-NCW believes that the CPB forecasts and the ensuing actions of the FNV excessively determine wage formation. This gives wage increases a mechanical character; they appear to pre-programmed – not least because a forecast from the CPB is regarded as an indication for wage increases. VNO-NCW proposes that wage increases in the future should be permanent up to a maximum of 50% of their value. The remainder would be reserved for one-off benefits and performance-related bonuses. Negotiations to agree the value of the compensation would take place each year.
Such an approach complements the policy of the Dutch government to ensure that the economy becomes more competitive. According to the VNO-NCW proposal, if the Dutch economy is to excel in the future, the government must also differentiate among companies and among individuals.
With regard to the link between wage increases, benefits and pensions, it is clear that problems exist in this area (NL0610039I), which VNO-NCW does not seek to avoid. The organisation considers that some mediation will be necessary on this issue. This link is a further reason for the trade unions to set moderate wage demands, as they have done in the past two years.
Marianne Grünell, Hugo Sinzheimer Institute (HSI)