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Monday, 23 October 2017

Private companies and governmental bodies in The Netherlands should stop fooling around with the wages and just raise them!

Private companies and governmental bodies in The Netherlands should stop fooling around with the wages and give their workers some real wage increases, in order to fight their decades-long stand-still.

“Empty promises make empty hands”

One can ponder about the question whether the current Big Recession, which started in 2008, was in fact not the 2nd Big Depression? I have done so on a number of occasions.

The sheer duration of the current recession of (now) almost 10 years was already remarkable, as well as the truly lackluster recovery of the international economies after such a deep crisis. There has been no conspicuous period of wildfire growth and no infectious optimism in the global society to mark the end of the crisis.

To the contrary, the envy and sometimes sheer hatred against minority groups in various Western societies and the mounting tensions between countries all over the world are like a simmering forest fire, that could come to a blaze at any moment. 

International crises are still the order of the day and more and more countries have chosen for very authoritarian leaders, like Kim Jung Un, Vladimir Putin, Donald Trump, Xi Jinping and Recep Tayyip Erdoğan. There are hardly any signs that this trend is going to stop (outside the European Union).

Even the normal ‘beacon of stability’, the European Union, went through a rough period with mounting tensions and old, historic battles that need to be settled again.

See for instance the Scottish and Catalonian quest for independence and the exaggerated Spanish reaction to the latter. Or the emerging Brexit in Western Europe, seemingly based upon ridiculous economic expectations, fairytale politics and old allergies against the EU.

And in (Eastern) Europe there has been the emergence of increasingly authoritarian leaders in Poland and Hungary, while the continent also had to deal with the mounting success for alt-Right political parties, like the Alternative für Deutschland, the FPÖ in Austria or the Front National in France.

Many of these trends seem to have been fired up by the growing discontent of the average Joe and Jane Sixpack with their financial and economic situation. 

To these eyes, much of this discontent is caused by the circumstance that Joe and Jane have mainly footed the bill for this crisis, when they saved the international financial industry with a lot of hard-earnt money and received the biggest hits from the side-effects of the crisis. 

And now the crisis seems over and done with and national politicians are celebrating their successes, they don’t notice anything positive in their paycheck. “Empty promises make empty hands”, as the quote in the header of this article says.

That is arguably the most important factor of this depression (i.e. that is what I still call it): the benefits of the recovery are almost solely landing in the laps of the financial industry and their financial wizards, the large corporations and their executive managers and in the coffers of the central government. The common personnel and the lower civil servants are often still living from paycheck to paycheck, with always too much month for their wages.

And to make things worse: many countries saw the return of “mini-jobs” (in any shape or form), that pay so little wages that one job is not enough to survive the month and/or pay for the family. Many workers are thus forced to have more than one job to get through the month. Even older workers that should already have retired years ago, are sometimes still forced to work every day, to earn enough money to stay alive and have a decent life.

All this happens in combination with the ongoing marginalization of the common workers, who are more and more treated as ‘durable means of production’ and increasingly have to compare themselves with computers and robots, which seemingly have a lot of advantages and not the drawbacks of real human workers:

And so, instead of being an asset of the utmost importance for the well-being and future success of the company that needs to be cherished, educated and elevated, workers are rather seen as a possible risk. A risk that needs to be contained and mitigated. As a matter of fact: distrust and risk mitigation seem the name of the labour game, currently...

In fact, many workers in large companies seem little more than a durable means of production with a limited preservability for the future, only tolerated and appreciated until the moment that someone or something better (i.e. “robotized systems”) comes along the way.

This is for instance expressed in unscrupulous slogans, like “Be up or be out” and the growing impatience of executive management with average ‘water carriers’ among the personnel of companies. Every worker must either be a passionate Olympic champion in his own working area or he will be replaced by someone who is! There are unfortunately quite a lot of companies, which see their personnel as ‘one trick ponies’, useful for the greater good of the company for as long as they master their trick

At the other end of the spectrum there are the successful entrepreneurs, captains of industry, successful sports stars and artists, who are cherished and pampered by many politicians and officials as the winners in society.

They are encountered with blind admiration, ubiquitous (financial) support, sometimes ridiculous pay-checks and on top of that tax breaks that increase their already high incomes, while the normal workers foot the bill of the missing tax payments with higher (in)direct tax payments and diminished subsidies on living and healthcare. 

All this has led to a widening wage gap between the winners and losers in the European and Western society as a whole.

Although much of this is not so bad in The Netherlands as in other countries,  like the United States, Russia, the United Kingdom, Italy or Spain, it is nevertheless a fact that common workers and civil servants have also in The Netherlands been on a decades-long standstill in wages.

If there has been one constant factor since the start of the Big Recession in 2008, it has been the fact that the Collective Labour Agreement Wages (i.e. in Dutch CAO-lonen) have been trailing the official inflation rate from a distance.

This is disclosed by this chart that I based upon the latest data by the Dutch Central Bureau of Statistics. And even though this chart does not go farther back than 2010, the situation in earlier years has been equally poor or even poorer.

The average wage growth among private companies, subsidized companies
and governmental bodies, versus the inflation rate (i.e. consumer price index)
Chart created by Ernst's Economy for You
Data courtesy of Dutch Central Bureau of Statistics
Click to enlarge
People should consider that every year that the wage increases trail the annual inflation, the purchase power of workers diminishes. So after fifteen-odd years of reduced wage growth and sturdy inflation, the common workers are slowly getting poorer and poorer. 

And at the same time they see that the higher and executive management and financial investors are swimming in cash, coming from the good company results and successful investments. And when these workers make too much noise about that, they may be dismissed from the company, as still enough other workers are hungry for their job.

Of course these generally poor wage increases were defensible in the early years of the crisis, as many companies in many different industries were strapped for cash and running out of sales, new assignments and projects.

But now it seems that there is absolutely no reason for being frugal anymore, as the cash money is sometimes flowing up to the ceiling of the large and smaller corporations in 2017. To put it even stronger: most companies would be able to (and perhaps should) increase the wages of their common workers with at least the inflation rate + 2% or even 3%.

Hans de Boer, chairman of VNO/NCW
Picture copyright of: Ernst Labruyère
Click to enlarge
Nevertheless, even though Hans de Boer, the chairman of the Dutch association for large employers VNO/NCW, reluctantly admits that there is in many cases enough room for larger wage increases for common workers, he emphasizes that companies in some industries are yet struggling with the economic circumstances.

And the Dutch government still hides itself behind the mantra that the state’s cashbook needs to be maintained with the utmost caution, in order to meet the Dutch and European rules.

The consequence is that most companies – even the ones that could afford a substantial wage increase – are still dragging their feet, when it comes to bigger paychecks. They look at eachother and sigh slowly: ‘We are yet afraid to give our workers too much money, as the tides might turn again”.

On top of that, there is the Dutch government that hands out money with one hand (reduction of income taxes), while grabbing money back with the other hand: increase of the low VAT rate to 9% from 6% and another increase in the healthcare costs.

The inevitable effect is that the common workers – even in this situation of sturdy economic growth – look at their paychecks and wonder when they will receive THEIR slice of the economic pie.

Therefore I want to make a call to especially the large employers and the local and central government bodies, and to the Small and Medium Enterprises as well, to stop fooling around and give their common workers a substantial payment raise, when they can afford it.

The current economic crisis and the quite poor societal mood of this moment all over the Western World and in The Netherlands will only stop when the common workers can afford a little more luxury, better quality articles and better food than at this moment.

The enduring success of the extremely cheap store chains and thrift stores points to it that people are still extremely reluctant of spending more money and often even don’t have the money to spend, as a consequence of the abundance of taxes, rising healthcare expenses and environmental levies on basic supplies, like housing, transport, food and energy, in combination with their paycheck that is going nowhere.

It is time for the companies and the government to come into action and stop hiding themselves in the woods!

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