Flexibility and Security: Industrial Relations and Collective Bargaining in the Netherlands

March 1 st 1998

Dutch labour relations have been characterized by a close-knit network of advisory and consultation institutions at a central level, in which trade union federations and employers' organizations can consult with each other and with the government. The most important institutions are the Social Economic Council (SER); an advisory body comprising representatives of the trade union movement and employers' organizations, as well as "independent members" appointed by the Crown; and the Labour Foundation, the central discussion organ of the trade union movement and employers.

The government determines which trade unions and employers' organizations are considered as such and may therefore participate in organized consultation. Participants in this consultation on the employees' side include the three Dutch trade union confederations, the Federatie Nederlandse Vakbeweging (FNV), the Christelijk Nationaal Vakverbond (CNV), and the Vakcentrale voor Middelbaar en Hoger Personeel (MHP). On the employers side, the most important central employers' association is VNO/NCW.

Facilitating flexibility

The result of this high level consultation is that more than 85 per cent of employees are covered by a nation-wide collective agreement while only 30 per cent are union members. This is one of the unique features of the Dutch and European labour relations situation.

For most companies, the primary conditions of employment are laid down in this collective agreement, but the employer may negotiate some additional collective agreement provisions with the works council, a body elected by the workers. Usually works council members are made up of members of one or more trade unions. It should be kept in mind that workers join a trade union voluntarily in the Netherlands, irrespective of where they work. Consequently, a workforce can be made up of members of several trade unions and workers who have not joined a union.

The system of collective bargaining has acquired an established place in socio-economic policy in the Netherlands, where the conditions of employment of almost five million employees are regulated by more than 700 collective agreements. Through collective bargaining, the parties are forced to regularly meet and arrive at a flexible response to external changes. What has been adopted is a process of ongoing negotiations during the life of the collective agreement. The collective definition of conditions of employment is helping to make the labour market more adaptable. Hence an institution often associated with rigidity is actually facilitating flexibility.

The absence of any major external pressures in recent years makes it possible to gain an "uncomplicated" view of what happens at the negotiating table. This is important for two reasons. First, the achievements of the Dutch "polder model" are currently attracting great international interest, including the central role that collective bargaining plays.

Second, a summary of the present collective bargaining system makes it possible to evaluate the opportunities and limitations of collective bargaining as a tool. This positive outside interest does not change the fact that critical questions can be asked about the effectiveness and durability of the Dutch collective bargaining system.

Organized decentralization

From the Second World War until the signing of the Wassenaar Agreement in 1982, the Dutch government had a strong history of intervention in wage settlements. The Agreement restricted the role of government and established the primacy of decentralized consultation. This gave the two parties immediately affected more responsibility to determine their own affairs within a framework of mutual objectives. Another important feature was the inclusion of social objectives, such as combating unemployment, in the agenda for decentralized consultation.

Since 1982, there has been an unbroken period of semi-annual tripartite central consultation on collective bargaining in the Netherlands in which the three parties exchange views on the socio-economic situation and also discuss more specific items.

Labour relations has continued on a path of decentralization since the 1980s, from the central to the sectoral level and, now in the 1990s, to the company level. Much time and energy was spent in the ensuing years discussing whether the works council will play a larger role in the area of work conditions. It was assumed that employers would rather negotiate with a local works council than with the trade union movement. At the same time, trade unions ask themselves whether workers' general interests would be in safe hands in bodies that are so closely connected to companies.

Wage restraint

During the 1980s, wage restraint was still a negotiating chip used by the trade union side in central bargaining. In exchange for shorter working hours or, later, other types of agreement influencing jobs, the unions were prepared to give up pay increases (in real terms). Today, the trade union movement and employer associations realize the importance of wage restraint as it reflects their social responsibility for unemployment in the country.

The emergence of wage restraint in the early 1980s coincided with the need to strengthen the profitability of Dutch industry. Between 1982 and 1993, labour costs per product unit in the Netherlands were a total of 34 per cent lower than its competitors.

Due to the strong performance of the Dutch currency, the guilder, there has been ongoing concern about wage restraint in relation to international competitiveness. This disadvantage, however, will disappear with the scheduled introduction of a single European currency in 1999.

Labour market policy

National labour market policy focuses primarily on helping those people who are unable to find a job on their own. Since the late 1980s, a tripartite approach has been used to develop specific policies to address the problems of the long-term unemployed, youth unemployment, and minority workers. For example, "Work experience jobs" were developed to reintroduce the long-term unemployed to the work world. Sixty per cent of collective agreements now contain provisions aimed at getting the long-term unemployed back to work.

Wage restraint, in conjunction with cuts in hours of work, has helped to preserve and create jobs. But additional provisions are needed, partly to make the exchange between wages and greater employment visible to the trade union rank and file. In the first few years after 1982, the average work week was cut from 40 to 38 hours. Although the trade unions were aiming for a 36-hour or even a 32-hour working week, this process stalled in many sectors.

In 1993, reductions in working time once again returned. The impetus now, however, was not to create jobs but to meet company and sector needs for greater work time flexibility. Win-win combinations came into existence under which the limits of daily and weekly hours of work were stretched. Between 1993 and 1996, the number of workers covered by a collective agreement with an average 36-hour work week increased from one to two million.

Beginning in the late 1980s, part-time work became a tool for redistributing work. Individual reductions in work time became an alternative to collective reductions in work time, to which opposition was growing. Between 1983 and 1993, the share of workers with a part-time job (less than 35 hours per week) increased from 21 to 35 percent, by far the highest percentage in Europe. This is largely an autonomous development. Voluntary part-time work meets a strong need for some workers, for example, married women, who may prefer to work a limited number of hours per week outside the home. The majority of collective agreements now include the right to work part rather than full time.

Social security

The social security system in the Netherlands features considerable employer and worker involvement in its administration. The amount and duration of benefits are established by law. However, it was only around 1989 that a shared realization developed regarding the volume problem in social security. The number of people receiving a labour disability benefit threatened to reach one million. Joint declarations and recommendations reached within the Labour Foundation on social security volume (1990) and sick leave (1991) were, however, insufficient to keep the government from considering radical policy intervention. The social partners unsuccessfully opposed such intervention.

When Cabinet introduced the Law on Work Disability Insurance in 1991, the trade union movement mounted fierce protests, including the largest post-war trade union demonstration in The Hague. The strict division of responsibility between the government and social partners and insufficient joint acknowledgment of the problem stood in the way of a tripartite consensus. Just recently, after a number of government interventions, which strongly limited benefit amounts as well as the number of recipients eligible for social security, has there come a willingness among both the employers' and workers' central organizations to issue joint opinions on social security.

The Dutch industrial relations system has been significantly improved over the last 15 years, but good results are not guaranteed. In the future, social partners will have to cope with a greater diversity of opinions among themselves. New challenges, such as growing shortages in some sectors of the labour market, and old ones, such as long-term unemployment, will continue to put pressure on the nation's collective bargaining system. While the Dutch have successfully developed a system of joint consultation and social policy development and implementation, they need to continue to refine the process so that it can meet both the objective of flexibility as demanded by its relative position in the world economy and its long-standing practice of building security for its citizens.

 

Prof. Dr. J. P. van den Toren is head of the Research and Development Department of the National Federation of Christian Trade Unions (CNV) in the Netherlands, and part-time professor at the University of Amsterdam.

Bio