It has taken years, but the wage wave seems to have really started. Average wage growth last month reached its highest point since the 2008 financial crisis.
This is apparent from preliminary figures from employers’ organization AWVN. In April, employers and unions agreed on wage increases of an average of 3.3 percent per year in their negotiations on new collective labor agreements (CBAs).
It can take a while before employees see the extra money back on their pay slip. Employers usually only have to implement the agreed wage increases after a few months.
At the end of 2019, the labor shortage also started a wage wave, with wage agreements above 3 percent, but that came to an abrupt halt when the corona virus emerged. In the first months of the pandemic, employers and trade unions hardly concluded new collective agreements, for fear of a severe economic crisis. And in the collective labor agreements that were concluded, wage increases remained low. The lowest point was the average wage increase of 1.7 percent in November 2020 and March 2021.
The economy recovered quickly, but wages lagged. This is not unusual according to the AWVN, which advises employers in collective labor agreements. “The wage agreements follow the developments in the economy with some delay,” says spokesman Jannes van der Velde.
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Outlier for parquet floors
In April, the AWVN counted 21 new collective labor agreements. This is not yet a definitive figure: due to the May holiday there may be some delay in the registration. The outlier for the time being is the collective labor agreement Parquet, for the approximately 800 employees in the parquet industry. Wages there will increase by more than 5 percent per year, unions and employers agreed this month. Three years in a row, the ‘wage scale’ of floor layers has grown by EUR 50 gross. In addition, there is an annual wage increase of 3 percent.
That is close to what the CNV union had asked for, says director Roel van Dijk. According to him, the fact that the trade union demand was largely granted is partly due to staff shortages. The demand for people who can lay floors is high.
Van Dijk: „It is no fun to lay wood on your knees all day. It is physically demanding.” Employers, says the CNV director, will therefore have to keep work attractive in other ways. For example, with a good salary.
In addition to the rapidly rising inflation, the staff shortages explain the higher wage increases, says Paul de Beer, professor of labor relations at the University of Amsterdam. He still thinks the wage increase is “moderate” given the current situation. “Certainly if you see that the FNV union has been demanding a 5 percent wage increase for a few years. A few years ago that seemed too ambitious, now that is no longer an unreasonable requirement.”
Also read: Prices will go up and your wages will not. How is that possible?
Prices are now about 11 percent higher than a year ago, mainly because energy and fuels have quickly become more expensive. This high inflation is hurting employees and employers. In every collective bargaining agreement, the question is therefore on the table: who is going to pay for the price increases?
Employers do not see it as their task to maintain the purchasing power of the Dutch population. Moreover, they are uncertain about the economic outlook, according to the AWVN.
Employers will always find reasons not to raise wages. It is just before, during or after a crisis.
‘Money to shareholders’
The FNV union has had it with those arguments. “Employers always find reasons not to raise wages,” said chairman Tuur Elzinga recently in a radio interview with BNR. “It is just before, during or after a crisis.” Also for corona, said Elzinga, there was little willingness to raise wages. “The money is there, it only goes to the shareholders.”
But Elzinga cannot deny that companies are now dealing with two crises, says Van der Velde of employers’ club AWVN. “The shortage of raw materials and the rising prices of raw materials as a result of the war in Ukraine. And in addition, the problems with China as a supply country, where a lot of production capacity is still switched off.”
And yes, says Van der Velde, even companies that have not yet experienced any problems are cautious. “Once you have given a structural wage increase, you will no longer lose that cost item.” That is why the AWVN is in favor of more flexible rewards, such as profit sharing.
How far can wage increases go up? The last time inflation rose towards 10 percent – in the 1970s – wages rose even faster. But the union’s power has declined sharply since then. While in the 1970s more than one in three employees was a member of a union, it is now about one in seven.
Also listen to this episode of NRC podcast Onder de Streep: Do we no longer need the union?
Nevertheless, professor De Beer of the UvA does not want to rule out a strong wage wave such as in the 1970s. “It’s hard to predict how this will end,” he says. “But the moderate wage development of the past forty years does not have to be a permanent phenomenon.”
De Beer believes that it is only logical to raise wages much further, especially for employers who say they are suffering from staff shortages. “It’s strange if you complain on the one hand that you’re understaffed and at the same time say you don’t have room to raise wages.”