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Monday, 21 February 2011

The Labor Unions in The Netherlands are fine people. But who are they representing anyway?

If you look at Mike Shedlock (www.globaleconomicanalysis.blogspot.com; one of my favorite bloggers),  saying he is not a friend of (public) unions is the understatement of the year. Don’t take my word, but read this: Scapegoating madness: Mom, Susie hit Tommie too.

And I can’t blame him if you look at the (pension) deals the (public) unions made for themselves and their members in the USA. Extortion IS the right word for it in some cases, I think.

In The Netherlands, the most overregulated country in the world, things aren’t that bad. The big unions (FNV and CNV) and their smaller counterparts are making sensible deals with the employers, who are united in MKB Nederland (medium and small business association) and VNO-NCW (association of entrepreneurs) and with the government, via the SER (Social-Economic Council).

These organisations make sure that the wages do neither rise too slow, nor too fast and that everybody gets his fair share of wealth.

The law in The Netherlands makes that every employee is bound to the deals between:
-     employers (represented by the two employers associations, the big companies and the government) and
-     employees (represented by the labor unions)
through the CAO (collective labor agreement).

This worked quite well overhere: the Netherlands doesn’t have a large history of big strikes and extortion of employers and employees and everybody is in general satisfied with his payment.

But I still DO have a problem with the labor unions in The Netherlands. For me there is one simple question: “who are the unions representing anyway”?!


Diagram 1: Union members (blue line) vs. labor force (black line).
  Source: CBS, the Dutch Central Bureau of Statistics

This is my reason: in 1960 every 1-in-3 people was member of a labor union (see diagram 1). Although you can still discuss how fair it is that 33% of the labor union members decide for 66% non-members, there is at least a considerable amount of members under the employees.

But in 2010, only 1-in-4 employees is member of a labor union and the number of members is diminishing quickly (see diagram 2), as especially older employees, heading for retirement, are still member of a union.

Diagram 2: Members of labor unions 1990-2007.
Source: CBS, the Dutch Central Bureau of Statistics
To give you a hint: in 2007 of the people under 25 only 4.5% (!) was member of a labor union and I don’t expect this number to rise. I also don’t expect that the people under 25 will become member as soon as they are over 25. This means in plain English that the labor unions will lose the right for their existence. You might think about it how you want, but this is reality.

As it now seems that the labor unions are a phenomenon going extinct, there are two things to be done:
-     Labor unions should find ways to get new members quickly, OR
-     The government should call an end to the collective labor agreements and should let employees decide for themselves.

In my independent opinion, the latter should happen.

Ernst

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