Employers concerned about persistently higher collective wage agreements

Employers in the Netherlands are concerned about the substantial wage increases secured in recent collective bargaining agreements. "Many companies cannot pass on their rising costs," warned employers' association AWVN, the most important advisor in the field of employment conditions for Dutch companies.

An average 8.2 percent wage increase was agreed in negotiations over the 38 collective bargaining agreements that were concluded in May. The pay increases were once again above inflation. Statistics Netherlands (CBS) previously announced that the annual inflation level in the Netherlands was 6.1 percent in May.

According to AWVN, the current percentages will force many companies to take cost-cutting measures to remain competitive. For several months now, the organization has observed that labor unions are more likely to demonstrate, go on strike, or threaten to do so. AWVN said it is now calling on the unions to "seek a new balance in the collective labor agreement negotiations." In the eyes of employers, they should also take into account "long-term effects."

AWVN's figures are closely monitored by De Nederlandsche Bank (DNB), the country’s central bank. DNB President Klaas Knot also reiterated last week that he was concerned about the high wage increases that unions and employers have recently agreed on in some sectors. Wages rose by 10 percent or more in some industry sectors.

As a result, it may become more difficult to put an end to the significant inflationary price increases seen recently, Knot indicated in a round table discussion at the Tweede Kamer, the lower house of Dutch parliament. The central bank head also warned earlier that if the unions have their way and wages continue to rise by 10 percent or more, a wage-price spiral is imminent.

In such a scenario, people will have considerably more cash on hand, they will then spend more, and companies, which see their costs continue to increase, will be encouraged to raise their prices even further to take advantage of increased demand. That will ultimately make it more difficult to bring inflation down, Knot said.