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Tuesday, 17 January 2012

Are the Dutch unions able to reinvent themselves? Or will 2012 be the year of their swan song?


In 2011 in The Netherlands, the labor unions were going through arguably their worst year in decades.

The largest federation of labor unions FNV almost imploded due to an internal battle between the federation leadership and the leaders of three of its biggest labor unions.

The subject of this battle was the new pension plan that was negotiated in 2010 between the union leaders, the leaders of employers´ associations and the minister of Social Affairs, Henk Kamp (aka the Social Partners).

President Agnes Jongerius of the FNV was cheering upon the new pension agreement between the social partners in The Netherlands, when it was approved by all parties involved. She was boasting that ´the Dutch pension system was now saved for the future´.

At the same time, the leaders of the three biggest labor unions within the FNV were ´conspiring´ to discard the new pension agreement, as they all considered it a bad plan for various reasons. And to be honest, it was an extremely bad plan.

This open mutiny led to a heavy brawl between the rogue union leaders and the federation leadership during the last six months of 2011. This brawl ended in Agnes Jongerius stepping aside as president of the FNV and with the formation of a ´new affiliated union in establishment´, distinctively called ´De Nieuwe Vakbeweging´ (i.e. The New Affiliated Union). This new federation will be presided ad interim by former Secretary of State Jetta Klijnsma, while she is a person that can stand above all parties. In this way the FNV hopes to find a new future.

The other large federation of labor unions CNV (the Christian federation) had in 2011 less public internal discussions on the negotiated pension plan, but it also suffered from internal discord. This discord led last week to the (large) labor union of police personnel planning to leave the federation very soon.

All in all, 2011 was a terrible year for the labor unions.

And during 2011, the first year of my blog, I wrote a number of articles on the labor unions:

I argued in my articles that these labor unions have much more power during labor negotiations and in the pension funds than their sheer membership justifies. I also argued that when the current generation of people between 45 and 65 retires, the foundation under the labor unions almost disappears entirely.

Please look at the following charts for an illustration of this statement. These charts are based on data from the Dutch Central Bureau of Statistics (www.cbs.nl), covering the membership numbers of the labor unions from 1999-2011 vs the total (working) workforce in The Netherlands from 1999-2011.

As the CBS data on labor union membership didn’t contain data for 2000, 2002 and 2004, I interpolated these data. I also aggregated the 2011 numbers on the total workforce from the Q1-3 results.

Percentage of working men being member of a Labor Union
Data courtesy of www.cbs.nl
Click to enlarge
  
Percentage of working women being member of a Labor Union
Data courtesy of www.cbs.nl
Click to enlarge

Sometimes a picture says more than a 1000 words.

The number of men between 45 and 65 that is member of a labor union is still quit large, but it has been rapidly declining from 63% in 1999 until 46% in 2011. The amount of women in the same age being member has been declining until 2006 and has afterwards been quite stable at about 30%.

Of the younger generation (25-45) less than one in five is still member of a union among men and women. And of the youngest generation (<25) only about one in ten is member of a labor union.

In 22 years, when the current generation from 45-65 years old has totally retired, the number of labor union members will have diminished to less than one in five workers or worse, when nothing happens.

I made some tough and in my opinion justified remarks about the labor unions in my past articles and I think that the unions are still too busy with representing their older and aging grassroots, at the expense of the younger members.

Besides that, the new Dutch pension plan, negotiated by the labor unions, is turning the pension system in a casino. It pays out to the current retired people and the workers close to their pension, while the younger workers can be left with empty wallets in the future.

It does so by using expected future returns on (risky) investments to calculate the current available pension money, instead of the conservative (and low (!)) repo interest of the ECB. The riskier an investment is, the higher the expected future returns will be and the more money you can pay out to the current retired people, based on these returns.

But still, I understand that labor unions are hard to replace.

As we are in a crisis situation currently, workers need a party that represents them during negotiations with their employers and defends their interests, especially in industries with many low-qualified workers and large employers with much power.

While higher qualified workers are often quite capable of representing themselves at their employers and they possess skills that makes it harder to fire them, low qualified workers can be the victim of employers that tell them: either you decrease your wages, or you and your colleagues are out! Then it is good to have a union around that says: ‘Don’t you dare to do so, employer, or you will suffer from massive strikes in the coming months’.

So, to be frank: we can’t miss the labor unions, as they still have an important function in negotiations between employers and employees.

But we can miss the current labor unions like a sore tooth. The unions of which the leaders have become extremely arrogant, live in an ivory tower, represent only the oldest categories of workers and show the same addiction to power and awarded, honorary executive functions as normal politicians.

Unions leaders during the last 25 years have been prime-minister, supervisory board member, mayor, leader of a large university conglomerate and other awarded jobs for which they lacked the experience and knowledge. Those are the union leaders that we can do without.

Therefore it is my conclusion that the labor unions are doomed, unless they can reinvent themselves and turn again into organizations that really represent workers; not only the oldest ones, close to their pensions, but all workers. With true leadership from people that care about workers and that still ‘have a dream’. Not from people that see the role of chairman of a union as a career move towards a prosperous job as board member or mayor of a large city.

Come on, labor unions. Please surprise us in 2012; we still need you, although we don’t like that thought very much.

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