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Tuesday, 26 April 2011

Three recent trends in The Netherlands: Even if you don’t know what they mean, accept that they are there!

It’s just another week at the office: there is no real big news, except for the Q1 results of some large Dutch companies. Although these are interesting in their own right, I will ignore them for today to look into some interesting trends I noticed of late:

Mass Lay-offs

One glance at last months’ newspapers shows you a relatively new, but nasty trend: mass lay-offs. Although the general unemployment is dropping currently, there are a number of companies and organizations that are seriously cutting jobs (see table)

It could be that these job cuts are the beginning of a more serious trend towards less employment. I wrote a number of columns mentioning the Part time Unemployment Benefit (PUB). This was a 50% government subsidy on salaries for companies to keep people employed that had too little work. In this way the companies could keep experienced personnel on the payroll until better days arrived.

What I had against this PUB is that companies that made use of it, missed the chance to become ‘lean and mean’ again. They gathered their personnel in the 2000’s:  while there was a situation of excess consumption in the USA and Europe, this also caused excess production. This excess consumption came to a sudden halt in the year 2008 in Europe and it is improbable that this excess consumption will return within a few years.  By keeping your personnel on an excess level, you run the risk of returning to red marks as soon as the economy chokes again.

Update (April 28):
Although Panasonic is definitely not a Dutch firm, the following news fits perfectly in this topic: Panasonic/Sanyo is planning to fire 40,000 employees, mainly in factories outside Japan in order to cut cost and to better be able to fight the fierce competition. The amount of layed-off people is about 10,5% of the total amount of 380.000 employees for Sanyo and Panasonic combined.

That is a lot of unemployed people in one time: the crisis is far from over yet.

Pay increases for youngsters

Totally contradictive with the previous item is this one: youngsters are offered an increase in wages. The labor unions and the employers associations are currently reaching an agreement on getting rid of the ‘minimum youth salary’ and instead replacing this by the normal minimum salary, while looking at the years of experience of the youngster in question.

This is not as odd as it seems: there is a strong gulf of obsolescence ahead in The Netherlands and the generation that needs to capture this gulf is the generation that is currently in their teens and twenties. This is also a generation that needs to struggle for getting a good pension when they retire. The labor unions and employers decided not to wait for the salary demands of this group, but to anticipate it.

It is also a fair decision to raise the salary of experienced youngsters, instead of paying them the minimum youth salary: now a youngster of 19 with two years experience was paid less than a starter with no experience of 22.  Not only was it unfair towards the experienced youngsters, but it did lead in numerous cases to employers firing their youngsters as soon as they became 21 and hiring 16-year olds instead. Especially supermarket chain Albert Heyn ( had a reputation for doing this.

SME-enterprises can’t find follow-up for their company

Small and Medium Enterprise (SME)  entrepreneurs have a very hard time in finding a follow-up for their companies. They are sometimes forced to ‘eat it up’ (liquidate it) instead.

The FD writes about this quiet drama for entrepreneurs (link in Dutch). Here are some pertinent snips of this very interesting article:

Thousands of aging entrepreneurs are “reduced to beggary”, because they can’t sell their company in time.

“They find the tenders of interested parties too low, continue their company against their desire and start to be ailing. As a consequence they eat up their pension and are forced to accept social security in the end” according to investigator Lex van Teeffelen, who got an assignment of the Dutch Chamber of Commerce to investigate this problem.

He speaks of a quiet pension drama that is threatening to happen for 17,500 baby boomers. The group contains entrepreneurs of 50 years and older, mainly active in SME who combined offer 50,000 jobs. They want to sell their company to retire from business, but notice that the value of their company has diminished as a result of the crisis. Instead of accepting a lower price, they continue hoping for better times. “An unwise decision”, according to Van Teeffelen, who is connected to Hogeschool Utrecht (Utrecht College) .

In many cases the entrepreneurs performance drops and the chances of a successful sale diminish accordingly. In the worst case the entrepreneur has to close-down his company without any yields. As far as transactions are accomplished, the price is 20% to 30% lower than the pre-crisis level, according to product manager Sevkan Cevirgen of the Dutch Chamber of Commerce.

For Dutch readers this article is an absolute must-read, as it also emphasizes the roll of the large banks (or lack thereof) in the quest for a good follow-up for entrepreneurs who are planning their retirement. Although the average success-rate for the restart of an existing company is much higher than a start-up, the banks are in general not interested: the reason for this? The amount of money they can make with it in comparison with the amount of work that needs to be done.

The article shows that the economic crisis in SME companies is far from over yet and the chance it will be over in 2011 is negligible, is my opinion. Although this situation could indeed lead to some silent dramas, stating that these people are “reduced to beggary” is a little bit exaggerated in a country where nobody starves and everybody still has a minimum amount of income to live from. No tent camps in The Netherlands!

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