Labour Relations in the Netherlands: On Flexibility and Human Capital Investments Frank Cörvers Session 4 Resilient Labor Markets: Cases of Germany and the Netherlands

2Labor Relations in the NetherlandsSept. 26, 2011 Overview 1.Some characteristics of the Netherlands 2.Typical Dutch 3.A resilient labour market?: Analysing the decrease in unemployment 4.Flexible contracts and trade-off with firm- specific human capital investments 5.Take-away points for other countries

3Labor Relations in the NetherlandsSept. 26, 2011 Most recent figures for the Netherlands (from the World Bank) Population 16.6 million Life expectancy at birth 81 years GNP per capita $ 50k Exports of GDP 69% Labor force with tertiary education 29% Labor participation rate (15+) 66% Part time work among women 60% Unemployment 3.4% Youth unemployment 6.6%

4Labor Relations in the NetherlandsSept. 26, 2011 Typical Dutch Corporatist system: central level bargaining with moderate unions at the industry level (-> wage moderation, agreements on working conditions and training, pension contributions, etc.) Collective labour agreements (CLA’s) concluded at the industry level are binding for all firms Employers can freely choose from dual dismissal tracks: They can either go to the employment office or file for permission by the civil court. Relative high protection for permanents workers, low protection for flexible workers

5Labor Relations in the NetherlandsSept. 26, 2011 GDP growth ; forecast

6Labor Relations in the NetherlandsSept. 26, 2011 Unemployment shows a structural downward trend since the middle of the 1980s

7Labor Relations in the NetherlandsSept. 26, 2011 Why unemployment went down since the middle of the 1980s? Agreement of Wassenaar (1982) between government, employment associations and labour unions: wage moderation for shorter working weeks; government promised not to intervene in wage negotiations Cuts in government spending and social security without much opposition of labour unions; decrease in taxes and social security contributions -> lower wage costs Stricter eligibility criteria for social security benefits (disability), more financial responsibility for municipalities (welfare)

8Labor Relations in the NetherlandsSept. 26, 2011 Recent moderate increase in unemployment was a surprise Official forecasts in 2009: unemployment would rise to about 7% (doubling) or more... In fact we are still a bit puzzled why it didn’t….

9Labor Relations in the NetherlandsSept. 26, 2011 Possible reasons for moderate increase in unemployment, despite large fall in GDP Very short period of negative growth Many vacancies before turndown Anticipation on new labour market shortages after crisis: employers were reluctant to fire highly- qualified personnel Many retirees and less young people than before Short-time working (in Germany: Kurzarbeit), both officially and voluntary (without wage compensation) Higher % of flexible workers, incl. self-employed, than before (SAB: more discouraged workers and young people in education, less immigrants, ALMP

10Labor Relations in the NetherlandsSept. 26, 2011 Five contract types in the Dutch labour force Permanent contracts Fixed-term contracts (direct hire temporary) Temporary work agency contracts On-call contracts Self-employment without personnel

11Labor Relations in the NetherlandsSept. 26, 2011 Shares on the labour market

12Labor Relations in the NetherlandsSept. 26, 2011 Regulation since 1999: Flexibility and Security Act With implications for fixed-term contracts, temporary agency contracts and on-call work F&S Act was prepared by social partners and made into law. Aim: increase flexibility for firms and security for workers. More flexibility in ftc, less in on-call work More security in twa and on-call Deviations are always possible by collective labour agreements

13Labor Relations in the NetherlandsSept. 26, 2011 Temporary employment as % of dependent employment

14Labor Relations in the NetherlandsSept. 26, 2011 Self-employment as % of total employment

15Labor Relations in the NetherlandsSept. 26, 2011 Warning: Trade-off between flexibility and firm-specific training

16Labor Relations in the NetherlandsSept. 26, 2011 Wage penalties on temporary contracts

17Labor Relations in the NetherlandsSept. 26, 2011 The flip side of flexibility Some specific groups mainly bear the costs of labour market flexibility: low-skilled & young people incl. recent graduates (‘dual labour market’ problem) Those groups are faced with job insecurity, repeated spells of unemployment, wage penalties, worse job match, poor working conditions and less training investments Differences in protection between permanent and temporary workers are rather large in the Netherlands

18Labor Relations in the NetherlandsSept. 26, 2011 Take-away points for other countries Corporatist system of labour relations may offer good elements for other countries More labour market flexibility may decrease unemployment But comes at the cost of poor working conditions and job match for those workers Relatively small group of flexible workers is hit in the Netherlands, which may be prevented by closing the gap of employment protection between permanent and temporary contracts