Tulip Tower: Dutch Labor Unions’ Heightened Place Within Then Netherlands
By Mason VanGorp
Dutch employers and labor unions have reservations about plans announced by Prime Minister Mark Rutte’s government to wind down major COVID-19 financial support programs by October 1st. This post analyzes the positives and potential negatives of Dutch labor unions’ intriguing ability to effect economic legislation within the Netherlands’ government as a member of the Social-Economic Council.
RELEVANT BACKGROUND:
In the Netherlands, Prime Minister Mark Rutte announced his plan to end financial support programs for businesses, including one that reimbursed companies for most lost sales on the condition they abstain from laying off workers during the pandemic.[1] The government specifically argued that disease rates have fallen from earlier highs and economic growth is forecast at 3.2 percent for 2022 after an even stronger rebound this year.[2] Dutch Parliaments is due to debate the decision next week (Early September 2021).[3]
The social-democratically oriented Federatie Nederlandse Vakbeweging (FNV), the country’s largest labor union with roughly 1.4 million members and 17 affiliate unions, has said that the plan comes “too early”, and support should continue at least through the end of the year.[4] “The risk that people lose their jobs is still large, as there are enough companies-for instance in travel and cultural sectors-that are still struggling,” said spokesperson Annika Heerekop.[5]
Most European countries, including Britain, France and Spain, are currently planning to wind down similar furlough programs at the end of September, with Germany extending its short-time work allowance program through the end of the year.[6]
ISSUE PRESENTATION:
As members of the Netherlands’ Social-Economic Council (SER), Dutch labor unions have immense sway in drafting economic legislation.[7] This lofty position is in strict contrast with unions in the U.S., where there have been multiple union-busting and anti-union trends throughout history.[8] Though providing employees with representation is inherently admirable and facially positive, Dutch citizens clearly don’t believe in the efficacy of labor unions:
In 2001 about 25 percent of Dutch people who were employed were organized in a union.[9] This number has continually dropped over the past two decades. From 2017 to 2019, labor unions in the Netherlands lost 101 thousand members in the fourth largest fall since the start of measurement in 1901.[10] Union membership is now at its lowest level since 1988.[11] Specifically, the number of union members decreased in all age groups, but especially among young people up to the age of 25 years, minus 29 percent.[12]
Half of all workers who do not belong to a trade union told the national stats office that they have never seriously considered membership.[13] Thirteen percent said that unions have no influence on their employment conditions, eight percent said membership was too expensive, and another eight percent said that unions do not stand up for their interest.[14]
Considering these statistics in the context of Prime Minister Rutte’s aforementioned plan and upward trends in industry regulation, competition and labor mobility: Should the Dutch government consider revising labor unions’ place in government?
ANALYSIS:
i. When one observes the strong legal position employees have in the Netherlands, it is clear that unions have undoubtedly played a major role in the Netherlands’ labor and employment law.
Dutch employment law is not consolidated into a single code.[15] Rather, the employment relationship under Dutch law is governed by the compulsory statutory regulations primarily laid down in the Dutch Civil Code and the Collective Labour Agreement.[16] Labor and employment is a segment of law that is still changing in the Netherlands, as recently as 2015 the Work and Security Act (the Act) was introduced. The Act introduced far-reaching changes in Dutch employment and dismissal law.[17] Extra birth leave, a decrease of the state pension age, and an increase of the maximum transition payment are just a few developments stemming from the Act.[18] All of these employee benefits arguably stem from unions’ heightened place within Dutch government.
Unions have also played a role in the drafting and enactment of the Working Conditions Act, which stipulates that an employer and employee are jointly liable in supporting health, safety, and wellness in the workplace.[19] This Act also pertains to minimum wages and minimum holiday allowances (which are normally adjusted each year).[20] Dutch unions have also played a prominent role in social media and data privacy, anti-discrimination laws and enforcement of restrictive covenants.[21]
ii. Labor unions’ lofty place in Dutch government was established by law, but adverse effects on consumers and the Netherlands’ economy raise questions regarding unions’ efficacy in this position.
The 1950 Industrial Organisation Act laid down this greater involvement of employees in social and economic policy, and legally established the SER as a public body.[22] Through the SER, industry was given an advisory role as well as being granted administrative powers, including the option of setting up commodity and industrial boards.[23] Although established by law, the SER is not a government body and is financially independent of the government.[24] The SER’s work costs approximately €16 million per year and is funded by industry.[25]
Consideration for the Consumer?
Because the SER is comprised of both labor unions and employers, one of the biggest potential criticisms is that there is no consideration for the consumer. The Social and Economic Council Act requires the SER to promote the interests of trade and industry and to encourage industry to be guided by the public interest in its operation.[26] The SER tends to focus on work conditions and wages but pays little attention when it comes to the terms and conditions or the “fine print” that applies when consumers purchase goods and services from businesses. In fact, Dutch government had to take action in the form of tax cuts to foster an increase in household consumption.
SER’s alleged inability to consider global market conditions.
The argument that union-free enterprises offer more job security than their union counterparts because the latter are too sclerotic to adapt quickly to frequently changing global market conditions permeates throughout the SER as evidenced by the country’s recent economic risks. Economic growth in the Netherlands was expected to decline to 1.2 and 0.8 percent in 2020 and 2021.[27] In fact, the Dutch economy was officially in a recession in 2020.[28] In response to these projections, the government rolled out an economic stimulus plan that included significant tax cuts and extra investment as a way to promote growth.[29] A prominent argument is that a body which advises the government on economic policy should not tend towards issues that strictly pertain to the employee/employer relationship.
Though it has merit, this argument is relatively weak as the COVID-19 pandemic is an exacerbation of these aforementioned economic problems. Many may argue that the Netherlands’ shrinkage in trade surplus and lower exports is evidence that the SER is hindered in considering the economic performance of the country before the needs of employees/employers, but in reality, many of the major destinations for Dutch exports experienced short economic downturns in light of the pandemic.[30]
iii. The SER and its place in Dutch governance should not be greatly altered.
When the SER was established following a long period of discussion on social and economic order in the Netherlands at the end of World War II, most people felt that the government should be more involved in economic growth, employment, and social security.[31] For the government to be able to do that and continue this mission, it needs the ongoing involvement of industry.
In all fairness, many of the SER’s goals pertaining to employee rights have seemingly been achieved as recounted in this post. The Netherlands is well-known for the protection its labor and employment law protects employees. However, the COVID-19 pandemic and the Prime Minister’s plan, has shown that promoting full employment and fair income distribution are dynamic goals that will change throughout time.
Though it has become the main platform for social dialogue in the Dutch social market economy, more consideration needs to be placed on how the SER could potentially affect the Netherlands on an international scale. For example, in the 1970s, because of rising political polarization and the 1973 oil crisis, the SER was unable to resolve economic problems.[32] As such, an amendment to the Industrial Organisation Act officially designating a place in the council for experts on foreign policy and economics. These experts would not only advise on how proposals may affect the nation’s economy, but also on how the nation’s economy will affect employers and employees.
CONCLUSION
Not only will this minor change help keep the SER informed, but it may also foster more trust from Dutch citizens towards labor unions. Placing a greater emphasis on the economy means that unions will stand up for the interest of all, as an economic advisory body should. Though there is a longstanding ideological debate on whether or not labor unions help or hurt a nation’s employment opportunities and economy, the two should not be mutually exclusive for the SER. Labor unions have clearly done a lot of good in the Netherlands but if they are to remain in their prominent role, they must shrink back into their advisory role and develop a focus on the potential ramifications its actions and recommendations will have on the country’s economy.
[1] Toby Sterling, Mixed reactions as Dutch gov’t aims to stop COVID-19 financial aid Oct. 1, Reuters (Sep. 2, 2021), https://nationalpost.com/pmn/health-pmn/mixed-reactions-as-dutch-govt-aims-to-stop-covid-19-financial-aid-oct-1.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] See The Social and Economic Council of the Netherlands (SER), https://www.ser.nl/-/media/ser/downloads/engels/algemeen/informatiebrochure-en.pdf
[8] Robert M. Smith, From Blackjacks To Briefcases — A History of Commercialized Strikebreaking and Unionbusting in the United States (2003).
[9] Dutch labor unions lose over 100,000 members in two years, NL TIMES, https://nltimes.nl/2019/10/25/dutch-labor-unions-lose-100000-members-two-years.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] Palthe Oberman, Employment Law Overview: Netherlands 2019-2020, L&E Global, https://knowledge.leglobal.org/wp-content/uploads/sites/2/LEGlobal-Employment-Law-Overview_Netherlands_2019-2020.pdf.
[16] See Article 7 DCC, see also Id.
[17] See Dutch Work and Security Act, Accountants and Belastingadviseurs, https://www.aame.nl/wp-content/uploads/2018/09/AAmeInformationonDutchWorkandSecurityAct.pdf.
[18] Id.
[19] See Dutch Working Conditions Act, ArboNed, https://www.arboned.nl/en/compliance-law/dutch-working-conditions-act.
[20] Id.
[21] Id.
[22] Netherlands Industrial Organization Act of 1950, 106 U. Pa. L. Rev. 499 (1958).
Available at: https://scholarship.law.upenn.edu/penn_law_review/vol106/iss4/1.
[23] Supra note 7.
[24] Id.
[25] Id.
[26] Id.
[27] Nic Vrieselaar, The Netherlands: Economic risks now also have a Dutch origin, Rabobank, https://economics.rabobank.com/publications/2019/december/the-netherlands-economic-risks-now-also-have-a-dutch-origin/.
[28] Deepest recession in 100 years facign Dutch economy; better of than other EU countries, NL TIMES, https://nltimes.nl/2020/06/08/deepest-recession-100-years-facing-dutch-economy-better-eu-countries.
[29] Mehreen Khan, Netherlands rolls out economic stimulus plan as downturn looms, Financial Times, https://www.ft.com/content/d45d8378-d962-11e9-8f9b-77216ebe1f17.
[30] Supra note 27.
[31] Supra note 7.
[32] See Duco Hellema, The Netherlands and the Oil Crisis, Amsterdam University Press (2004).