Search This Blog


Sunday, 26 April 2015

Will the newly found economic growth in The Netherlands survive a sudden rise in the unemployment figures, as a consequence of the new labour legislation coming into effect on 1 july 2015?

As I already argued in my last article, regarding the optimism of chairman Hans de Boer of the employers’ organization VNO/NCW with respect to the Dutch economy, there are indeed some clear greenshoots, which could point at a much more prosperous future.

As far as I’m concerned, there is however one factor which could soon spoil the party and trigger another, prolonged period of disappointing economic growth: the (youth) unemployment.

Lately, especially the youth unemployment seemed to reluctantly drop after more than five years of almost steady growth; especially after 2011 this growth soared until the second half of 2013. In the 1.5 years since, youth unemployment started to drop very slowly until the current level was reached.

Unemployment development from 2003 until 2015
for gender and age category
Data courtesey of:
Chart created by: Ernst's Economy
Click to enlarge
However, at this moment I suspect that this slow drop in the youth unemployment could soon come to an end. The cause for this expected disruption of the favourable unemployment trend will be the deployment of the new labour legislation on the first of July, by Minister of Social Affairs Lodewijk Asscher.

This legislation has been deployed with the best intentions by Lodewijk Asscher, in order to do something about the unfavorable position of flex workers and workers:

(the following excerpt of this new law has been acquired from De Volkskrant):

Per 1 July 2015, the difference between fixed and so-called flex workers becomes smaller. This is agreed by employers and labour unions in the so-called Social Agreement. It will become cheaper to dismiss fixed employees and the duration of the Dutch unemployment benefit (i.e. WW) will be restricted.

On the other hand, starting from July 2015 flex workers will be entitled to a ‘transition payment’, when they have worked in excess of two years for the same employer. This payment is at least one-third of a monthly salary per service year at the employer, capped at €75,000.

At the same time, these flex workers are entitled to a fixed contract earlier: after three contracts in two years (was three contracts in three years). In order to protect employees against ‘revolving door’ constructions – the employee goes away and magically reappears after a few months for a new series of temp contracts – the employee from now on is only allowed to return to the same company after six months, instead of three.

For the 230,000 temporary employees (acquired through an official temporary employment agency), things remain more flexible: six contracts in four years. The first one-and-a-half years, the temporary employee can be sent away at one day’s notice.

In spite of these good intentions by Lodewijk Asscher, this legislation seemed to work at large employers as a red cloth to a bull.

First, ING Bank started with their scheme to dismiss long-term flexible workers and workers from temporary labour agencies before the 1st of July, in order to avoid the mandatory payment of transition fees. Only after the minister stepped in personally, the flexible layer of personnel, that would be dismissed from their long-term work relation with the bank, received a kind of transition fee after all. Their dismissal itself, however, became an undeniable fact of life for these workers.

And soon, the bank was followed by the large insurance company Nationale-Nederlanden (NN). The following snippets also were printed in De Volkskrant:

Nationale-Nederlanden is currently dismissing loyal temporary workers, in advance of new labour legislation, to be deployed on the 1st of July. This new labour legislation should offer more certainty to flex-workers and temps. Just like ING earlier this month, Nationale-Nederlanden tries to avoid the so-called transition fee that it would have to pay to its temporary workers, after a future dismissal in the period after July 2015. This has been disclosed by an internal memo of this insurance company, which is in possession of De Volkskrant.

Temporary workers at Nationale-Nederlanden informed the newspaper that their contracts will not be prolonged, in order to prevent them from unwantedly acquiring a steady job at the company. “We had been promised that we could stay longer at the company than legally allowed, when we would switch to another temporary labour agency”, according to a temporary worker, who spoke on the basis of anonimity, as he still works at NN. However, this revolving door-principle has been explicitely forbidden by the new legislation. At NN there are workers who have worked at the company for more than ten years, using this modus operandi.

The insurance company leaves the dismissal of their temporary workers to the temporary employment agencies themselves. Only when these agencies offer their temps a fixed contract eventually – which happens almost exclusively with specialists who are in very high demand – they are allowed to stay at Nationale-Nederlanden, according to a spokeswoman of the insurance company. ‘When we really want to keep a very talented worker in our service, we offer him or her a fixed contract, of course.

Like I stated in my earlier article (see one of the aforementioned links), this is a very unfavourable development, which could have a substantial impact in the coming months; first and foremost on youth unemployment, but also in other age categories with flexible contracts.

Especially youngsters work at large companies with temporary and flexible contracts, in a majority of the cases. They could become the main victims of this corporate behaviour in the eve of this new legislation.

On top of that, I am convinced that NN and ING are not unique in this behaviour, but rather act as front-runners. They simply caught the heat from the Dutch press, due to their size and importance for the Dutch labour market. Other companies will soon follow in their footsteps and before we know it, the Dutch youth unemployment is on the rise again.

It is impossible to see this development loose from the growing disconnection between (large) employers and employees. Large employers see their personnel more and more as a flexible force of FTE’s, which can be deployed and dismissed at will. The following snippets are again from last week’s article:

While many executives and self-acclaimed leaders at large employers praise themselves for their exceptional qualities and skills, and use this as an excuse for their exceptionally high remuneration, they don’t really search for exceptional qualities among their personnel.

The ideal workers are people, whose knowledge and skills would always be fully up to date. They would not be overly ambitious and would never become bored of their jobs, even when their jobs would be boring, as a matter of fact.

They would be fully skilled and trained at any given moment, and in possession of the latest knowledge and techniques, regarding all important working areas and technical developments. And companies would not have to invest one penny in them, with respect to courses, workshops and trainings!

These workers would only require a moderate salary or hourly fee and when their services would not be required anymore, they would leave the company instantaneously.

Hence: the ideal worker does not require anything special, does not ask for anything and gives his very best on a daily basis, until his services have become superficial.

And an optimal labour market – to the eyes of many entrepreneurs – would be akin to the physical Law of Communicating Vessels: a labour force, which is so flexible that it always appears at the place and time where and when it is needed most. High demand for labour would immediately lead to high supply. Low demand would immediately lead to a magical disappearance of the labour supply…   

While I am an independent, flexible, freelance worker myself, I am one out of my own conviction and at my own choice. Many youngsters, however, do not have the luxury of such a choice: too often large employers simply don’t want to offer them a fixed labour contract.

In order for them to have a job, they are bound to work under a series of temporary or flexible contracts, either until their services are not needed anymore or until maintaining them becomes too risky or expensive for their temporary employers. This is an undesirable situation, which might prevent this youngsters from developing a healthy career, that  leads to a prosperous and financially independent future for them and their future families.

Lodewijk Asscher, the Minister of Social Affairs did a brave attempt to slow down this corporate behaviour, but this development can only really change when the large employers themselves experience the disadvantages and disruptive effects of this corporate behaviour in their own companies. 

Until then, youth unemployment might be on the rise again for quite a while…

Wednesday, 22 April 2015

Hans de Boer, the flamboyant chairman of employer’s organization VNO/NCW is very optimistical about the Dutch economic growth. He might have a point indeed, but he should carefully watch when the music stops….

You're all invited to the party
You know you didn't have to come
No rotten apple gonna spoil my fun
If you don't like what you see here
Get the funk out

It is hardly a secret, that during the last four years my stance has mostly been at the bearish side of the balance, with respect to the Dutch economy. Too often during this period, the economic crisis was declared finished by well-respected pundits, only for us to see a rebound of it a few months later.

My point was traditionally that there had not been enough of the necessary structural changes in the Dutch economy to logically declare a return to autonomous growth.

Nowadays, however, there is a wide array of improvements visible in the Dutch economy, at different areas. And although there is neither a strong impulse from an important economic development (i.e. such as the emerging of the world wide web or the development of the microprocessor) nor a structural driver for jobs (i.e. autonomous economic growth, based upon higher productivity and improved efficiency), it seems that the European quantitative easing program has done the job, in combination with the weaker Euro.

Buying European stuff is simply much cheaper nowadays (exports(!)) and the positive impulse of QE(EU) at the European stockmarkets is unmistakenably. Nevertheless, it is sensible to not forget that this economic revival is like a Roman Chair Dance: you can continue dancing for as long as the music plays, but don’t forget to always keep a keen eye upon an empty chair.

In other words, one should consider that this economic growth is probably the result of quantitative easing and quantitative easing alone: when the program stops, growth could be gone again.

One of the people who has a happy smile on his face these days, is the flamboyant chairman of employer’s organization VNO/NCW Hans de Boer

Hans de Boer of VNO-NCW during a broadcast
of BNR Newsroom in September, 2013
Picture copyright of: Ernst Labruyère
Click to enlarge
In the past, Hans de Boer was chairman of the steering group for youth unemployment and he is still very much involved in the subject. And particularly in the area of youth unemployment great progression has been made of late.

And for him, in his current role as chairman of the employers, the economic revival is also very good news. Exports are soaring again, consumption seems finally on the way back to better results and the housing prices have shown a rising pattern for almost a year in a row now.

So, it is good news all the way for him. Or isn’t it, after all?!

De Telegraaf:

Party-time in the economy! Our country is doing much better than anticipated earlier. While the Dutch Central Planning Bureau is expecting a general growth figure of 1.7%, the employers’ organization VNO/NCW is much more optimistical.

Chairman Hans de Boer is reckoning with a growth rate of at least 2%, which would bring us at the highest growth level since the economic crisis started in 2008. “Our economy is really doing much better than anticipated. My members told me that”, according to De Boer. “I have never been so optimistical about entrepreneurship in our country, as nowadays”. The improving economy is good news for employment and consumer confidence. On top of that, domestic spending will further increase.

These days, Hans de Boer certainly got what he wanted, albeit with a few important snags. Consumption had indeed increased considerably, but in spite of De Boer’s optimism, the consumer confidence had dropped (un)expectedly.

The following snippets come from the Dutch Central Bureau of Statistics:

In February, consumers spent 2.4% more upon goods and services than one year earlier. This is the largest increase in four years time, according to the CBS today. Consumers spend more money on gas, clothing and home furnishing. Consumer confidence dropped slightly in April, month-on-month. Consumption data have been adjusted for price changes and changes in the number of purchase days during this period.

In February consumers spent 4.1% more on durable goods than one year before. They especially spent more on clothing and home furnishing. Last week, CBS already published data which showed that fashion shops had higher year-on-year sales, for the first time in half a year.

In April the circumstances for consumption by Dutch households have once again improved month-on-month. The confidence of entrepreneurs in the manufacturing industry, with respect to future employment, has improved considerably. Stock ratings and housing prices have increased year-on-year. However, consumers were slightly more negative regarding future employment.

The mood among consumers slightly deteriorated in April 2015, in comparison with March. The consumer confidence dropped by 2 points to 0, which means that there are equal numbers of optimists and pessimists among the consumers. This slight deterioration is mainly caused by a dropping confidence of consumers in the Dutch economy and a declining willingness to purchase goods.

Domestic consumption by households,
adjusted for shopping days
Data and chart courtesy of:
Click to enlarge

Consumer confidence, seasonally adjusted
Data and chart courtesy of:
Click to enlarge

Oops, the last paragraph could be a small blow for De Boer’s good news story, although it can’t come unexpected.

There are still considerable reorganizations going on in the financial and construction industry – especially among banks and insurance companies, as well as construction companies not involved in residential real estate – and a number of companies is definitely busy to dismiss its workers from temporary labour agencies befory July 1st of this year, in order to prevent themselves from the obligation to pay transition payments.

Yet, there has been quite a lot of other good news, of late. See the following snippets from a number of older publications from the CBS:

The Dutch Central Bureau of Statistics announced today that the volume of exports of goods was 6.6% larger in February 2015 than twelve months previously. The growth was somewhat lower than in January. Exports of transport equipment, natural gas, and oil products grew by most in February. Exports of Dutch products as well as re-exports were higher than in February last year. The volume of imports was 0.5% larger in February than twelve months previously. In January, imports rose by 1.3%.

According to the Central Bureau of Statistics’ Exports Radar, circumstances for Dutch exports improved in April 2015 from March. The real effective exchange rates on an annual basis were far more favourable than in the previous month. Producer confidence in the eurozone and Germany was less negative than in the previous month.

Exports of goods (volume
adjusted for working days)
Data and chart courtesy of:
Click to enlarge
Exports have profited dramatically from the depreciation of the Euro, as a consequence of QE(EU). As long as the wages remain stable in The Netherlands, the export to non-Euro countries within the EU as well as outside the continent will remain soaring. However, this “success” has little to do with successful policies of Cabinet Mark Rutte II, as Hans de Boer stated in another article, and everything with quantitative easing Mario (Draghi)-style.

The Central Bureau of Statistics announced today that retail turnover was 1.2% up in February 2015 from the same month last year. Retail sales (volume) continue to grow, by 3% in February. Retail prices fell by 1.8%. Turnover and sales generated by food, drinks and tobacco shops and non-food shops improved in February.

Within the non-food sector, chemist shops and home furnishing shops reported higher turnover figures. This was also the case in the preceding months. For the first time in six months, clothing shops also achieved better results. Consumer electronics shops recorded a 3% turnover loss, versus a turnover growth by nearly 4% in January. Turnover results realised by household appliances shops, DIY shops and textile supermarkets were again below the level of the preceding month in February.
Supermarkets almost entirely accounted for the turnover and volume growth in February. Turnover generated by specialist shops hardly improved relative to one year previously. Mail-order firms and online shops saw turnover rise by more than 12% compared to February last year. The growth rate was higher than in January.

Turnover, price and volume
developments in February 2015
Data and chart courtesy of:
Click to enlarge
This information also paints a quite schizophrenical picture of the Dutch consumption. While especially clothing and home furnishing shops, as well as supermarkets show a very favourable picture for the first time in a long period, the consumer electronics shops and stores for household appliances and DIY articles present less favourable data. In my humble opinion, it seems yet much too early to declare the crisis to be defenitely finished, based upon these consumption data alone.

On top of that, there is still a firm hint of deflation in the price development, as you can see in the aforementioned chart. Although many pundits want you to believe that this is caused by the development of oil prices alone and nothing else, please don't believe them.

The Central Bureau of Statistics announced today that the number of people who found jobs has grown by an average of 6,000 a month during the past three months. Most people who found work are young. The labour force remained fairly stable during that period. As a result, the number of unemployed was reduced by an average of 6,000 a month.

Total and employed labour force
Data and chart courtesy of:
Click to enlarge

Figures provided by the Employee Insurance Agency indicate that last month, 443,000 unemployment benefits were paid, i.e. 12,000 down from February.

Last month, 626,000 people were unemployed. They were available for the labour market and looking for work, but they could not find work; 7.0% in the labour force were unemployed, versus 7.2% three months ago. The rest of the 15 to 74-year-old population (3.8 million individuals) did not have work and were not looking for jobs, the so-called non-labour force.

More young people found work. In the first three months of this year, the number of employed 15 to 24-year-olds rose by an average of 10,000 a month. The number of young people working twelve hours a week or more has also increased. Over the past three months, the unemployment rate among young people was reduced from 11.8 to 10.8%. The Employee Insurance Agency reports that the number of unemployment benefits also declined, in particular among 15 to 24-year-olds.

Labour force by age: average
monthly change over three months
Data and chart courtesy of:
Click to enlarge
Nearly two in three working young have flexible employment contracts (see second graph). The ratio is much higher than among over-25s. Nearly three in ten young people have permanent employment contracts and fixed working hours, as against nearly seven in ten working 25 to 74-year-olds.

Position in the working environment by age
Data and chart courtesy of:
Click to enlarge
 The number of employed people also grew among over-45s, though less rapidly than in the young population (see the aforementioned chart). In the first months of 2015, the number of working over-45s rose by an average of nearly 2,000 a month.

There were two very important snags in this CBS good news-article about the labour market, which it definitely is in my humble opinion. First, the employment among 45+ workers did not grow so hard as the employment among youngsters. While I am very happy that so many more youngsters find a job these days, the age group of 45+ is still extremely important for domestic consumption.

This is caused by the fact that this group has the highest salary and consequently the most spending money in general, but also has the highest expenses, due to generally higher consumption, higher spendings on food, beverage and hospitality, growing and studying children, expensive family holidays, as well as different labour circumstances (a higher rate of commuter traffic).

Therefore this statement upon the diminishing unemployment is not such good news as it seems initially.

The second snag is the excessive number of temporary and flexible contracts among youngsters. Only about 3 in 10 youngsters have a fixed contract these days and it is not plausible that this number will rise very soon.  The flex and temporary labour contracts of the vast majority of youngsters mean that they can be fired very easily, when the economy or the relative position of their employer requires that. This is not a firm base for durable economic growth.

Summarizing, I fully understand where the positive feelings of Hans de Boer come from and I agree with him that there are some very positive signals indeed. Yet, I am not so optimistical about the Dutch economy as he is. There are simply too many snags in the CBS data from the last few weeks.

As I told before on a few occasions, there is neither a strong impulse from an important economic or scientific development nor a structural driver for jobs in the economy. The current answer to all questions seems to be quantitative easing, Mario style. 

Therefore my advice to Hans de Boer is: enjoy the dance while the music plays, but always prepare to grab a chair when it stops.

Monday, 20 April 2015

Scratching the surface of civilization off some Dutch citizens: deaths of over 1100 refugees in the Mediterranean Sea applauded and hailed by a (small) number of Dutch people

For me – and probably for many other people – the last week was one of both grief, discomfort, disbelief and shame.

Grief that once again disaster struck upon a few of the numerous small boats in the waters of the Mediterranean Sea, filled to the brim with hundreds and hundreds of economic and political refugees. The mindboggling death toll was well over 1,100 casualties, in little over a week.

My growing discomfort is caused by the fact that the European Union could offer a few solutions to diminish this gruesome number of casualties, but is yet scared away by the consequences:
  • When the European Union would more actively pursue the gangs, involved in this kind of human traficking, up to their homes bases and departure points on Libyan and other North-African shores, it would be able to fight the problem at the root cause and stop the massive influx of new refugees. 
    However, such initiatives could easily lead to a more intense military involvement of the European Union, in an area that is already very unstable. An area which could very well form the next home base of extremely dangerous groups, like IS and others.

    Besides that, it would leave the strong impression that the European Union is mainly busy with making sure that the problems remain in the Middle-East and Northern Africa, instead of structurally solving these problems.
  • When a much larger number of navy ships from the EU member states would substantially increase the number and density of the search-and-rescue patrols upon the Mediterranean waters, they would be able to step in earlier and probably save many refugees’ lives.
    The obvious drawbacks of this choice would be that this a. would increase the number of refugees reaching European shores through the ships of their navy saviors and b. could form an extra motivation to refugees and the criminal gangs around them ‘to give it a shot’, as the chances for survival would probably dramatically increase.

  • And probably the hardest and therefore least popular solution is that the European Union really tries to make a difference in North Africa and the Middle East, by trying to spur economic growth in that region and diminish the political and religious tensions overthere, through the offering of political solutions, financial aid and possibilities to start negotiations between alienated parties.
    The war in Syria has escalated so much and has become so complicated over the last four years, that whatever the European Unions wants to do there, it will always be the wrong choice.

    For North-Africa, the situation is little better. Libya is a mess from a political and military point of view. The political stability in Egypt is hardly better and Tunisia, Algeria and Morocco are also not strongholds of stability and economic wellbeing. The littlest spark could fire up massive tribal, ethnical and religious conflicts in that explosive region.

And so the European Union still feels forced to sit on its hands and mainly pay lip-service to its desire to diminish the vast numbers of refugees on their wobbly boats.

In spite of the recent initiative of the Polish president of the European Council Donald Tusk, in which he asks for the organization of a European assembly regarding this topic, and the cries for help from Italian officials, I don’t expect much to happen soon.  

“We really want to help, but now we can’t do much about the refugee problem, as there are simply too many complications emerging from every decision that we make…” will be the general tendency of such assemblies, like the one organized tonight between the European Ministers of foreign affairs. And so we just wait for the next gruesome incident to happen… and the one after that one… and the next one after those two.

There is one thing, however, that is bothering me even more than the reluctancy of the European Union to search for really decisive solutions: a (hopefully) small, but probably growing group of angered, resentful and misanthropical respondents to news messages in The Netherlands, was actually applauding and hailing the accidents, which took place last week.

These respondents used words like:  “That is another 700 welfare payments less, times 50 years. K-ching!” or “I regret the 28 survivors. These people will become new parasites on our society, who will receive anti-trauma therapy at our expenses. For me this is a disappointing end to a very uplifting article”.

Of course, the pitying and grieving respondents – all people who were very upset about these enormous accidents – massively outnumbered the people full of ‘schadenfreude’, anger and resentment against these refugees.

Nevertheless, these incidents and the reaction to it proved that even in a country with a centuries-old tradition of hospitality and benevolence for people in need, the shining surface of civilization is only microns in thickness. 

Only seven years of economic crisis and 15-odd years of political agitation from various extremist political parties in The Netherlands were enough to scratch this shiny surface and expose the stinking layer of hardly disguised racism, hatred and resentment underneath.

Seven years alone were enough to dramatically change the concept behind the word “refugee”:  from a person in need, who made a desperate attempt to rescue his life and tries to search for a better future for himself and his family, into a parasite with whom many Dutch people don’t want to have any encounter at all and  who needs to be removed from Dutch and even European soil.

Although virtually none of the refugees poses any threat to the life, wellbeing and economic prosperity of any Dutch person whatsoever, the hatred and resentment among these respondents against the refugees is much stronger than the compassion and understanding for their desperate situation.

This is a development of which many politicians in The Netherlands – both on the right and the left wing – should be very, very ashamed and discomforted.

As it were those same politicians, who have had all the exposure on television to utter their increasingly radical opinions about economic and political refugees looking for a better future, accessible as they were for the political succes of such radicalizing opinions. Airplay, that worked to reinforce the already resident feelings of hatred and resentment against refugees among some Dutch citizens.

And it were almost the same politicians, who left the South-European refugee problem as a simmering stew of discontent, because they have been scared away from finding real and viable solutions for this mounting problem, until it is almost too late. 

Suddenly, it becomes so much easier to see how things could go wrong in the years before the Second World War: not only in Germany, but also in countries like The Netherlands.  The radical people in those ages could not become so successful because of their radicalism, but as a result of the fact that a growing part of the population silently or openly agreed with them.