After a number of significant wage increases, employers have had enough

Trade unions believe income growth is desperately needed to compensate for the “sky-high” inflation of recent years, but employers think it is now a good thing. The major employer organizations VNO-NCW, MKB-Nederland and AWVN to call the increases are unsustainable. “Agreeing these kinds of percentages on autopilot is irresponsible in the long term,” says Alfred van Delft of VNO-NCW.

Employees have had the strongest arguments in collective labor agreements recently, says economist Mathijs Bouman. “They were able to substantiate their wage demands by pointing to increased inflation and their loss of purchasing power. Due to the personnel shortages, employers also had to listen.”

With the tight labor market, expensive groceries and high energy bills, employees had strong bargaining weapons. The result: the fastest salary increases of the century, even if you adjust for inflation. In November, the real wage increase was 4.4 percent, according to statistics agency CBS.

Prices are still rising, but much less rapidly than in 2022 and now less rapidly than salaries:

It can no longer be this way, according to employers’ organizations. They are now coming up with a stack of new arguments: companies are also suffering from cost increases, they say, and the number of bankruptcies increasing this year. “The economic tide is becoming a bit bleak, so we need to work on the earning capacity of companies,” says Van Delft.

This “bleak tide” comes after years of few bankruptcies and high corporate profits, partly because companies benefited from price increases for their products. The profits of Shell, Unilever and Heineken sometimes rose to record heights.

But according to employers’ organizations, money is no longer splashing around in most companies. “That is an image that is largely outdated,” says Van Delft. “Look across the board at small and medium-sized businesses, at retail and the corona debt situation. Inflation in relation to the Ukraine war has also taken the fat off the bones of many companies.”

The employers have a point there, Bouman agrees. “The economy has been shrinking for three quarters in a row. The economic climate is no longer favorable for companies. In that respect, it is not surprising that they throw bankruptcies, inflation and the decline of the industry into the game of wage negotiations. Catering companies For example, they are just as affected by more expensive products and high energy prices as consumers.”

A return to strong economic growth seems unlikely for the time being, because high energy prices will continue to depress the incomes of citizens and companies for a long time to come. Bouman: “It is inevitable that society will have to accept a loss of prosperity. Someone has to digest that: the citizens, the government or the companies.”

The energy ceiling was an example of this ‘consumption’: the government subsidized part of the population’s energy costs. “The costs were thus passed on to subsequent generations, who ultimately have to pay off the debt,” says Bouman.

By paying their employees more salaries, companies also contribute. “As a result, their profitability is now under pressure,” says Bouman.

Employer organizations believe that society looks too readily to companies to pay for cost increases. Van Delft: “In wage negotiations, unions rely too much on the principle: inflation must be compensated on a one-to-one basis and that must be done in the collective labor agreements. We do not think that is justified.”

VNO-NCW would like to see the government take on more costs by reducing taxes on labor. “Ultimately, working should pay more, it would be nice if citizens kept more of their gross wages,” says Van Delft.

In the meantime, many political parties are calling for a higher minimum wage, which would incur even more costs for employers. Bouman: “Employers must then increase the wages of the entire bottom half of their employees. After all, you want to continue to encourage employees to make a career within the company in order to keep them with you.”