Record increase in collective labor agreement wages has a mourning edge

It’s a record with a mourning edge. The increase in collectively agreed wages in the last quarter of last year, 3.6 percent, was the strongest in twenty years. Measured over the whole of 2022, collectively agreed wages in the Netherlands were 3.2 percent higher, the Central Bureau of Statistics (CBS) announced on Thursday.

But the employees notice very little of this increase. The cost of living has risen even more. Adjusted for inflation, collectively negotiated wages fell by about 6 percent.

“Since the publication of these annual figures began in 1973, such a large difference between collectively agreed wage increases and inflation development has not yet occurred,” according to Statistics Netherlands. That year there was also a big difference, but the relationship was reversed: wages rose faster than prices.

Teachers received the largest salary increase last year, an average of 5.2 percent, according to the figures. According to Statistics Netherlands, this increase is continuing; wage development rose to 7 percent in the fourth quarter. The fact that the education sector is now at the forefront is partly because an agreement was concluded in the spring of 2022 whereby the salaries for teachers and other staff in primary education have been brought into line with those in secondary education at job level. The salary increases, in combination with measures to reduce the workload, should make education attractive again.

Government more generous

The government has also been more generous than the business community in other collective labor agreement negotiations, although the wage increase for civil servants was actually lower the year before. The government led the way in 2022 with an average wage increase of 4.1 percent. For private companies, the increase was limited to 3 percent. The last ones are agriculture, forestry and fishing, where collectively agreed wages rose by 2 percent.

In the Netherlands, about 80 percent of employees are covered by a collective labor agreement. In addition to the wage increase due to new collective agreements, their salary can further increase due to individual steps in their pay scale.

In other years, the trade union movement could be very satisfied with an average of 3.2 percent more wages. The FNV, for example, entered the collective labor agreement season at the end of 2021 with a wage demand of 3.3 percent plus 100 euros per month. But the unprecedented high inflation and especially the increased energy costs mean that nothing remains of those extra euros. For next year, trade unions such as FNV and CNV are therefore setting a considerably higher target. FNV now demands 14.3 percent – ​​the October inflation rate. The CNV union, traditionally a little more cautious, enters the consultation with a “historically high” wage demand of 5 to 10 percent.

Living more expensive

In recent years, both trade unions have focused somewhat more often than before on a percentage wage increase in combination with a fixed amount per month or a lump sum payment. For example, civil servants of the central government received 2.5 percent plus 75 euros per month and an amount of 450 euros in December. The employees of the Dutch Railways will receive two times 1,000 euros, in addition to an increase of 8.45 percent. In this way, employees in lower pay scales receive relatively more pay rises than colleagues who already earn better.

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The unions are asking for higher wages because life is getting more and more expensive. Over the first eleven months of 2022, consumer prices rose by an average of 10 percent. Statistics Netherlands will announce the exact inflation figures for the full year next week.

In the tight labor market, employers are more inclined to accept wage increases, for fear of losing staff to other organisations. The risk of this is that the prices that companies subsequently charge consumers will also rise, just as they did in the 1970s. As a result, wages have to rise again to compensate for the decline in purchasing power.

FNV vice-chairman and collective labor agreement coordinator Zakaria Boufangacha ignores the accusation that he is to blame for this, he said last month in NRC. “It is very easy to say that we ensure a wage-price spiral. The fact that inflation is now so high is due to increased energy costs, not wages.”