Dutch businesses struggling to keep up with wage increases, employers say

Dutch businesses are struggling to keep up with wage increases, according to the employers’ organization AWVN. Businesses feel forced to give in to trade unions’ demands because they want to remain attractive in the tight labor market, but it comes at the expense of profitability and investments. Employers want to focus more on increasing productivity to avoid hiking prices again and driving up inflation, the AWVN said.

“Trade unions still want to improve purchasing power but do not pay enough attention to the carrying capacity of companies and sectors,” Raymond Puts of the AWVN said in its interim evaluation of collective bargaining agreements concluded so far this year.

The average wage increase in agreements concluded in the first half of this year is 5.7 percent. That is lower than last year’s 7.1 percent but still very high, the AWVN said. “That puts pressure on profitability and investment capacity, and in the long term, the affordability of wages becomes a problem. The only way out is to raise prices to generate more income.”

Employers want to pay more attention to improving productivity. They want to link certain remunerations with company objectives in the collective bargaining agreements. For example, staff will receive a certain increase if turnover increases to a certain level.

Puts also noted that unions are still arguing for differentiated wage increases - where employees in lower pay scales receive more than those in higher pay scales - in many collective agreements. He is worried about this. “It brings the pay scales closer together. This can go so far as to mean that juniors have the same salary as seniors or that employees earn almost as much as their managers. The effect is that there are fewer incentives for employees to be promoted and that pay ratios become unbalanced.”