Wage increases in collective labor agreements continue to rise, employers concerned

In recent months, trade unions have again succeeded in agreeing on higher wage increases. AWVN, the most important employment conditions advisor for Dutch employers, is "very concerned" about this. "The sharply rising wage costs can weaken the competitive position of Dutch companies."

In the 25 collective labour agreements agreed upon last month, wages were increased by an average of 5 percent in a year. In June, the average was still 4.6 percent; in May, it was 4.5 percent. AWVN saw a downward trend before that, but the employers' association no longer dares to say where the development is heading.

It was also not so long ago that AWVN noted the strongest wage increases in years. These were monthly averages of around 8 percent. These substantial increases followed the sharp increase in energy prices after the Russian invasion of Ukraine. Last year, the wage increase began to weaken again until a few months ago.

The AWVN figures are being closely monitored by De Nederlandsche Bank (DNB). Strong wage growth could fuel inflation again. The central bank previously stated that the chance of this happening was small. However, if the average wage increase continues to rise in the coming months, this risk could become more real.

According to AWVN, the high wage agreements in July can be explained by a combination of factors. The association points to, among other things, the persistent inflation, partly caused by the calculation of previous wage increases in the prices of products and services. The unions are seizing on this to force significant wage increases.

The unions also believe that significant salary increases are still needed to repair previous loss of purchasing power for some collective labour agreements. Employers also have to deal with a tight labour market. This makes it difficult for them to find new staff and, therefore, try to retain their current staff with more attractive employment conditions.

"Finally, there seems to be a habituation," is the impression at AWVN. "The collective labor agreement parties seem to have become accustomed to high wage figures and use the figures from the past year as a reference instead of the long-term prospects."

However, according to the association, the economic circumstances require great caution. AWVN strongly recommends that collective bargaining negotiators include the economic situation of companies and industries in the negotiations.