Competitive pressures on the Dutch Welfare state,
A case study on ‘The Wet Werk en Zekerheid’.
Bsc. Political Science: Governance and Policy Mitchel Jan Vrouwe, 10777954
University of Amsterdam Thesis supervisor: Arlen, G. Second reader: Schliesser, E. Word count: 7991
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Introduction
The Netherlands is by many accounts striving for a fair level of income inequality. People who need help can count on one of the most developed welfare systems in the world. However, due to economic crises, welfare states around the world have been put under pressure. The
Netherlands has one of the most equal levels of income inequality in Europe, which in part can be contributed to the functioning of its welfare state (Mathijssen 2016: 300-304). However, recent years have seen major institutional and civic changes to the way the Dutch welfare state functions.
One important change comes from the contracts under which people work. The new form of contracts surrounding work is called 'Flex-work.', it is a form of work where employees get small contracts with low hours and low social benefits (Dekker 2018). In the Netherlands, the number of people who get a flex-contract has been steadily increasing, from 22% in 2003 to 35% in 2017 (CBS 2018). The increase in the number of flex-contracts has been criticized often because it gives people less living security: they can more easily get fired and often get less social benefits as opposed to people with permanent contracts. It is hard to fire employees with permanent contracts and when these people do get fired, they are paid financial compensation for the time they need to find a new job (UWV 2018). With flex-contracts, people can get more easily fired. When people with flex-contracts get fired, they do not get a compensation for it. Other benefits such as holiday benefits and paid sick leave are either much lower or non-existent in flex-contracts (Troost 2015). Thus, a big pillar of the Dutch welfare state depends on what kind of working contract is signed.
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the number of permanent contracts is relatively decreasing with respect to flex-contracts. The increase of non-permanent contracts can thus be seen as undermining the welfare state because these contracts don't include the same social benefits as permanent contracts have (CPB 2016). This has led people to have less security because the laws surrounding flex-work exempt employees from many social security features. Political parties and labour unions saw this increasing trend of flex-work as a problem and wanted to change labour laws to give people with flex contracts more security (FNV 2015b), (CNV 2016), (PvdA 2018).
In 2015 there has been a major overhaul of the Dutch work and social security laws to address the problems surrounding flex-work. The ‘Wet Werk en Zekerheid’, Law work and security (WWZ), aimed to make it easier and less costly to hire and fire employees (WWZ 2016). The WWZ was enacted to give citizens more job security by making it financially more attractive for employers to give their employees permanent contracts. Instead of a push for more social security, the goal of the WWZ was an increase in permanent contracts (Ibid.).
On first sight, the WWZ seems to create more social security, by making permanent contracts more appealing for employers. But the methods used to make it more appealing seem paradoxical: lowering social security that comes with having a permanent contract to give people more social security.
To see why and how this law became so paradoxical, we should look at the institutional foundation of the WWZ. The WWZ was formed with help from the representatives of labour and employers, the so-called ‘Social partners' (SvdA 2013). Contrary to the United States and other liberal economies, where the economies are mostly market centred, the Dutch welfare state is more corporatist (Akkerman 2005: 193-195). A corporatist economy is an economy
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were representatives of industries work together with the government to create and regulate the economic markets. Together they discuss work regulations, economic reforms and the functioning of the welfare state (Delsen 2002: 172-173). This means that government, employer organisations and even labour unions agreed with the idea of downgrading social security to get an increase in permanent contracts.
Neoliberal ‘competitiveness theory’ might help explain why this is happening. The competitiveness theory states that welfare states will steadily erode because of the rise in international competition (Krugman 2002: 21-23). States are lowering their social benefits programs to become a more attractive economy for investors (Swank 2002: 38-39). Many authors, such as Agnes Akkerman (2005: 191) and Jan Aart Scholte (2005a: 12), also claim that competitive pressures can be witnessed in Europe and in the Netherlands. But there are counter-arguments, a well-functioning welfare state might support skills that are needed in different kinds of industries. While companies do not always want to pay for new training, a welfare state could support citizens as they learn new skills. Supporting the welfare state could then potentially be supporting the economy by preventing the risk of market failure (Estevez-Abe, Iversen and Soskice 2001: 145).
Because of the corporate system in the Netherlands (and therefore the widespread agreement with the WWZ’s paradoxical changes to labour law), the WWZ is a great case to analyse the influence of competition rhetoric on a highly developed and on agreement based economic welfare state. While the welfare state of the Netherlands is not being in existential danger, there have been major institutional reforms in the way it functions. The WWZ is one of the largest labour law reforms and therefore one of the best cases to analyse the changing of
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the welfare state.
The WWZ tried to achieve greater social security by making permanent contracts more attractive to employers. But this would come at the expense of the social security that came with having a permanent contract. This is a paradox that could potentially be explained by competitive theory.
This leads to my research question: in how far is the ‘Wet Werk en Zekerheid’ a move for a more competitive Dutch economy?
This paper will shed light on institutional changes of the Dutch welfare state. It is important to know in what way policies influence the functioning of welfare states and more importantly how specific legislation interacts with the everyday lives of citizens. This paper will try to help understand the societal effects of the WWZ and provide insights into why this legislation was enacted. Scientifically this paper will help to build better knowledge on how the Dutch welfare state functions and to what effect the competitiveness theory holds true in this case study.
To answer the research question, this paper’s theoretical framework will provide a way to differentiate between different welfare states. Then this paper will discuss what the
competitiveness theory is and how it works. Thereafter, there will be discussed how
competitive reasoning can and has been used to put pressure on welfare states. In the methods section, this paper will present the case of the Dutch Welfare state and the methods on how to analyse competitive pressures on the welfare state.
The analysis will consist of four parts. Firstly, on what basis did the WWZ form? This part of the analysis will focus on the ‘Sociaal Akkoord'. In this accord, the social partners agreed on
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what was needed from the government in terms of new labour regulations. Secondly, this paper will analyse the workings of the WWZ itself. And thirdly this paper will analyse how the actual law (WWZ) was received by the social partners. These three points will build up to answering this paper's research question in the final part of the analysis.
Welfare state
There is not one definition of a ‘welfare state’, many authors describe it however in wide terms. Wedderburn (1956) argues that a welfare state is a state that alters market mechanisms. She claims that the welfare state “implies a state commitment of some degree which modifies the
play of market forces in order to ensure a minimum real income for all.” (Wedderburn 1956:
128). Others like Brigss (1961) focus more on the organized power aspect, not per sé a state, which could alter these market mechanisms. Briggs thus implies that non-governmental actors too can have a role in altering market mechanisms (Briggs 1961: 235-236). However, these wide terms are ultimately not quite helpful to determine if a country is a welfare state or not. Some form of ‘commitment’, as Wedderburn (1956) wrote, is something that every country makes, while we can agree that not every country is a welfare state. Almost every western economy has some kind of social provision for their poorest citizens.
While it is not all-encompassing, Gospa Espring-Anderssen (1989) thought it may be more useful to categorize the different welfare states by the central ideas that surround them. In her essay; “The Three Political Economies of The Welfare State’’, she categorizes three different welfare systems by the central ideas of their workings: Liberal, corporatist and
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The corporatist welfare state is built on an alliance with employers, employees and
government. The socialist welfare state depends mostly on governments that regulate and protect their citizens (Espring-Anderssen 1989: 20-21).
To get a broader picture of how welfare states function, we should look at the institutional basis of the welfare state: the economy. Hall and Soskice (2001) differentiate between two types of economies: namely; liberal market economies and coordinated market economies. Liberal market economies function with the idea that the markets should be given incentives to be as competitive as they can be. This is done with the idea that the law of supply and demand will make a most efficient outcome. The governmental institutions should only intervene if market mechanisms are not functioning well (Hall and Soskice 2001: 8).
Coordinated market economies are economies where more regulation is allowed and governments can intervene more when market forces are normatively not functioning right. Government and other actors can change the rules in which markets operate, to find the best market structure. These economies generally don’t agree that perfect market competition will give the best outcome for their economies. From this view, markets should be regulated to give fair outcomes for their citizens (Hall and Soskice 2001: 8-9).
Competitiveness theory
The institutional and technological changes that have occurred throughout the world have changed the way the world economy functions. Since the Second World War, transnational trade has boomed and with it, transnational firms have taken an ever-growing important role in the world (Schwartz 2000: 219-225). This increase in transnational trade has led to dramatic
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changes in the way states function. Where there used to be companies that were state bound, nowadays multinational companies have interests and responsibilities in multiple states at the same time. Governmental institutions had to adapt to this new reality, were transnational companies and capital have become much more adaptable to economic changes in countries (Swank 2002: 15-20).
A statist way of governance, that is top-down and between state-level actors, is no longer viable and has been changing into polycentrism; multiple regulating/governing actors (Scholte 2005b: 186-188). Regulation and other market-interactions are being carried out at every level of government and non-governmental actors have gotten more influence in the decision-making process (Ibid.). The increase in transnational trade and globalization led to increased competition between countries (Schwartz 2000: 219-225). The rationale of this increasing trend of becoming more competitive can be summarized by a quote from Paul Krugman in which he described the economist’s thought process: ‘’the taxes and regulations
imposed by Europe's elaborate welfare states have made employers reluctant to create new jobs’’ (Krugman 2002: 23). Extensive welfare states would hinder economic growth by making it
too expensive for companies to produce and/or sell their goods in these countries (Idem: 22-24).
As became clear from the previous section the welfare state should in one way or another alter the market, so that citizens can live a ‘humane’ life (Wedderburn 1956: 128-129). But the continuing trend of increasingly more neoliberal governance gave way to the idea that by lowering government assistance and protection a country could form an economy that is more efficient. These neoliberal policies were implemented in a time that transnational trade
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was steadily increasing (Schwartz 2000: 219-225). With the trade becoming more transnational, so did capital. Duane Swank (2002) explained that when economies become more intertwined, they are also becoming more competitive. Every country wants jobs and capital for their citizens. For countries to get these benefits for their economy they will give companies a compensation a tax break or the government can lower the requirements for employee compensation (Swank 2002: 18-23). Because there is a limited amount of capital and
companies, countries compete to get them in their country. This results in a market mechanism where countries would want to make their economies as attracting as possible for these
companies to settle in (Ibid.). The competitiveness theory predicts that countries are being pressured to give financial incentives to companies which can be done by, among other things, lowering wages and imposing fewer taxes on companies. Governments would give companies more incentives to and weaken their social security institutions with the idea that the economy will become more competitive (Swank 2002: 18-28).
There is a vast literature that would argue that this liberal view of the end of the welfare state is not necessarily true. Social protection can rescue the market from itself by preventing market failure (Estevez-Abe, Iversen and Soskice 2001: 145). Market failure occurs when markets do not follow the rules for perfect market competition (Mankiw and Taylor 2014: 239-245). When a market does not follow perfect market competition there should be an
intervention in the market, which in this case could be the preservation of skills by social security (Estevez-Abe, Iversen and Soskice 2001: 145-146).
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Pressures on the welfare state
The increase in globalization produces more economic volatility and forces governments to adapt. This adaptation to more economic volatility can mean retrenchment or restructuring of the basic functions of welfare states (Kersbergen and Vis 2014: 125-130). A more transnational world has its effects on the functioning of the state. Countries have had to deal with the problems that arise with more competition which makes old structures and institutions outdated (Scholte 2005a: 16). To deal with transnational trade and inter-industry working structures, governments tend to adapt to a more decentralized form of regulating markets (Scholte 2005b: 186-188).
The increase in global trade and the increased maturity of the European markets have intensified the conflict between employers and employees. As Kathleen Thelen states:
‘’employers are seeking greater flexibility through a retreat from uniform, national standards in
favour of local bargaining on issues such as wages, working times, and work reorganization’’
(Thelen 2001: 71). But an increase in deregulation and plant-level bargaining can only really be verified in highly liberal markets (Thelen 2001: 79). Coordinated markets seem to take another approach: decentralization. Instead of trying to make agreements nationwide, coordinated markets seem to re-regulate, industry-wide (Idem: 84).
Duane Swank’s research showed that in many Euro countries the classical corporatist way is being met with lower governmental influence and a decline of labour unions their ability to counter the increasing focus on capital and transnational competition (Swank 2002: 259-261). In the past, corporatist welfare institutions have held widespread liberalization influences on welfare policy at bay. The deep institutional power of labour unions has protected many
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European corporatist countries from big changes to welfare policy (Swank 2002: 210-217). Thelen points out that this institutional power has come under threat. In corporatist
economies, governments are lessening their grip on the functioning of the economy and are willing to let their power go from the national to the industry level. But this does not mean that negotiations are entirely decentralized, it is a slow forming process (Thelen 2001: 91-96).
As can be seen in Sweden and in Germany in the late 1990’s the dynamic between employers and employees has changed to talks on lower levels of industry before the national level comes to play (Thelen 2001: 91-100). But there is not a uniform way to see this; richer countries also have more choices to handle the increased pressures on welfare provisions, more developed countries do not necessarily have to deal with the retrenchment of the welfare state (Scholte 2005a: 10-16). This can be supported by the research of Hopkin and Lynch, their research showed that, due to currency and institutional differences, European countries behave differently when confronted with income inequality (Hopkin and Lynch 2016: 338-342).
A change to more liberal way of thinking comes with a new way of thinking about market mechanisms and the way countries should form and regulate their economies. Less top-down governance, decentralization and increased focus on supply and demand rhetoric can be seen as being a way of more liberal thinking and therefore as a way of creating a more
competitive economy. Of course, this isn't an end-all solution, this method of viewing pressures on the welfare state only covers corporatist welfare states which still leaves room for the different institutional forms, corporatist states use.
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Dutch corporatism
The social partners system is mostly called ‘Poldermodel’ or the ‘Dutch Miracle’, a system of highly cooperative agreement on the rebuilding of the economy of the Netherlands after the second world war (Akkerman 2005: 190). There has been much debate if this structure still exists (or even existed at all) (Delsen 2002: 172-173). Nowadays it is safer to call it a form of highly hierarchical corporatism. In this corporate system, the government wants the unions of labour and companies to deliberate on social and economic problems and solutions. The government has the last say and has the power to punish the other partners in different ways when they do not cooperate (Akkerman 2005: 191). The executives of the labour unions are democratically chosen by their members (FNV 2018), (CNV 2018). And the employer
organizations, such as VNO-NCW (the biggest employer organization), represent a large portion of small and middle business owners (VNO-NCW 2018). Because labour unions exist for the interest of employees rights and employers organizations protect economic interests, the social partners view of the WWZ is vital to analyse any changes to the Dutch welfare state.
The corporatist nature of the Netherlands is best described by the many different institutional organisations in which the government and the different actors/ social partners deliberate. Such institutions are The Sociaal Economische Raad (SER) and 'Stichting van de Arbeid' (SvdA). In these institutions, the social partners are encouraged to deliberate on
pressing economic questions and possible solutions. These institutions then formulate advise to provide to the government. The idea behind these broad deliberative organs is that there should be platforms in which the different actors, which have different interests, reach agreements (SER 2018).
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The advice that these institutions give is kept in high regard by most governments and is mostly acted on (SER 2018). Therefore, it is important to look at the social partners when we want to analyse how and why the WWZ was implemented. The different advice-organs sketch what is to be expected and needed from the law. Then the government takes this advice and is obligated to consider it when forming a law.
This process was used to form the WWZ. To analyse the forming of the law is thus in part analysing what the Social Partners advised. In the WWZ's case, the 'Sociaal Akkoord' was the advice that the government was given. This accord was formed by the 'Stichting van de Arbeid' (SvdA), which is an advice organ that consists of the Social Partners (SvdA 2013b).
Methods
The ‘Wet Werk en Zekerheid’, Law work and Security (WWZ), was one of the biggest overhauls of the Dutch social and work security institutions. To see if the Netherlands are being pressured by globalization and more transnational competition, to lower the level of their welfare state, this paper will analyse the ‘Wet Werk en Zekerheid’ as a case-study. A case study is useful for extensive research on one subject. Also, a case study lends itself for an explorative and
deepening research on the theories used (Bryman 2012: 66-77). To use a case-study to analyse transnational competition influences on the decision-making of WWZ, can be helpful to extend the knowledge of competition theory and the effects this has on a corporatist welfare state.
The WWZ is an interesting case because it is presented as a law that will improve social security, but it has some contractionary methods to achieve this. The WWZ tries to get more permanent contracts and therefore more social security but wishes to achieve this by lowering
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the social security that comes with having a permanent contract. To analyse competitive influences on the WWZ and therefore the Dutch welfare system, this paper’s analysis will focus on the social partners their role in forming this law. The competitive theory focusses much on changing institutional roles in corporatist welfare states (Thelen 2001: 91-100). To analyse the social partner’s role in the WWZ is thus a great opportunity to analyse competitive influences on the Dutch welfare state.
A case study on the WWZ also brings restrictions. The use of a case study specifically, on the WWZ that applies only to the Dutch corporatist welfare state, is quite narrow. While many corporatist welfare states have to deal with competitive influences, the institutional basis of these corporatist states differ. As such, this case is not representative for all corporatist welfare states, let alone more liberal welfare states. Also, this case focusses on competitive influences on Dutch labour law, while competitive influences can be seen on many more fronts such as business tax and income distribution (Swank 2002: 15-30). And at last, the ‘Sociaal Akkoord’ and the WWZ focus on all forms of security and work, but this paper will only focus on the parts surrounding flex-work.
The WWZ was only put fully into effect in 2016 and is currently being revised. Thus, this paper will not be analysing the results of the WWZ. Rather, this analysis will focus on the ideas of the WWZ and the role of the social partners in the forming of this law. The goal of this paper is to analyse the forming of the WWZ and learn how the different actors react to the pressures of staying competitive and what this means for the Dutch welfare state.
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Analysis
Prelude to the WWZ: Sociaal Akkoord
In 2013 the social partners and the government reached, through the deliberative organ: ‘Stichting van de Arbeid’, an accord to handle the problems in the labour market (SvdA 2013b). To get out of the bad financial weather, after the financial crises, they needed to work together. In this accord, they agreed on fundamental solutions to the problems in the labour market (Ibid.). The social partners acknowledged that they needed to expand and protect the rights of people with flex-contracts, while also using the full potential of the labour force. The income and work security was decreasing, which in part they blamed on a too big of an expansion of flex-work (SvdA 2013a: 2). They agreed with each other and acknowledged that they needed to revitalize and redefine the roles of government and social partners. To help both employers and employees, they needed to find a balance between flexibility and security (SvdA 2013a: 5).
Plans were made to better protect people with flex-contracts, through a better-organized unemployment benefits programs and more rights when these people get laid off. The accord acknowledged that people who have flex-contracts have less social security.
However, this form of contract would still be needed to stay competitive. The accord speaks of partially decentralizing unemployment benefits and countering the unjust/illegal forms of flex contracts (SvdA 2013a). The parties agree that flex-contracts are beneficial for both employers and employees. But they also agree that it can be to the disadvantage of employees: ‘we must
acknowledge that in increasing fashion there are forms of too much flexibilization’ ’where the form of the contract is fully unbalanced in the disadvantage of employees' (SvdA 2013a: 20).
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to ask the government to decentralize one of the social benefits programs: ‘Werkloosheids Wet’, Jobless law. Together, they put forward an initiative to structurally fund this benefits program. The idea was that by doing this, the benefits program was closer to the people who would need it and could be custom made to promote people to work again (Svda 2013a). A reaction from the Ministry of Social Affairs and Employment (SZW), on the ‘Sociaal Akkoord' and the SER, came on 24 November 2015 (Ministry SZW 2015). In this reaction, the Ministry of Social Affairs and Employment agrees with the trends that were sketched in the ‘Sociaal
Akkoord'. They agreed that the global competitive world is changing the way work is performed in the Netherlands and that while the trend must be addressed, the flexible-trend must be embraced to fully adjust to the new reality which is formed in part by the increasing importance of transnational trade and investments (Ministry SZW 2015). The problems that were
addressed, by the Social Partners in the ‘Sociaal Akkoord’, have been heard and are being tackled by among others: the WWZ (Ibid.). The ministry also agrees with the request to decentralize the institutions and policies that support the people who have lost their jobs and are searching for new jobs.
The Social Partners agree on the rising levels of global competitiveness. They suggest that the Netherlands must embrace this trend, while also keep an eye out for people who have contracts that give little to no security. The interesting thing is that their advice mainly focusses on getting people back to work as fast as possible. While some forms of flex-contracts are ‘fully
to the disadvantage of employees’, their solutions mainly focus on getting people back to work
(SvdA 2013a: 20). The push for decentralization of government assistance also follows what can be expected from a welfare state that is being pressured by global competitiveness (Scholte
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2005b: 186-188). The ministry’s reaction, to the proposals and observations of the social partners, is almost full agreement. Social security will be achieved by working. These points were to be implemented by law in the WWZ.
Wet Werk en Zekerheid
The WWZ, which came fully into effect on the first of January 2016, was put in place to create a better working environment for both employers and employees (WWZ 2016). The law, of course, has made many changes to already existing laws. It is not possible to cover all of the changes that were implemented in this paper. Instead, I will layout the main central ideas of its workings. The law is generally divided into four points:
- Simplifying dismissal law
- Lowering the premiums an employee gets when he loses his job - Incentivizing employers to give permanent contracts
- Giving unemployment benefits a more ‘activating’ role (WWZ 2016, UWV 2016)
The simplification of dismissal law was meant to help support the institutional basis of the trend that companies wanted ‘flex-employment'. In irregular times, small companies didn't need all the employees that were already hired. But to lay off people was quite costly and time-consuming. To help companies overcome hard financial times, people were to let go of the said companies. Companies that were in the right of letting people go in the old system had to fill out many forms that would take much administrative time to organize (Svda 2013a).
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find a new job. Employers already thought about this before they would hire people or give them a permanent contract. To lower the barriers for hiring people, the WWZ stated by law that it would only have to be a year and a half, so it would cost employers less to fire someone when they have a permanent contract. Thus, employers would more easily give employees a permanent contract (WWZ 2016).
To incentivize employers giving permanent contracts to their employees instead of giving them (half-) yearly contracts it was decided that after two years of temporary contracts the employer should give a permanent contract with all the social benefits that this entails. The idea was that when an employee already works for two years at a company, the company would want to keep this employee. The cost of training a new employee would be greater than giving that person that already knew the ins and outs of this company a permanent contract. This would thus be beneficial for employees because the employers would pay for the skills that an employee had accumulated (FNV 2015b).
The last major point of this law was transforming the unemployment benefits and giving them more of an activating role. People who were out of a job weren’t encouraged enough to find a new job, because they still got money from the unemployment benefits. To keep people more engaged to find a new job, people would only get unemployment benefits when they were actively searching for a job. After receiving the unemployment benefit for half a year, every job offer has to be taken or the unemployment benefit will stop (UWV 2016).
Two major transformations regarding the decentralization of labour market institutions have also found its way into actual policy. One of these is a two-yearly talk with the UWV, social benefits organization. The reason the cabinet gives is that this will result in a better and more
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efficient execution of the UWV’s tasks (Ministry SZW 2015). The other transformation is about trials to promote working at local and regional levels. The social partners will launch initiatives to promote working at local levels to complement the role of the UWV (Heerts 2015). These trials are financed by the social partners and are co-financed by the national and local
governments. The idea behind these trials was to find, in a better and more efficient manner, work for people who are out of a job (Ministry SZW 2015).
What we can derive from these points is that the law wished to achieve a higher employment by making it easier for people to get permanent contracts. The way that this would be achieved is: lowering the employee’s benefits, making it easier and cheaper for companies to lay people off and give people a financial incentive to keep searching for a job. The WWZ seems to reaffirm the stated paradox: giving people more security by making it easier to get a permanent contract but this would be achieved by lowering the social security that came with having and losing a job. The national government is committed to transforming the labour market into a more flexible and efficient system. The social security that among others the name ‘Law work and Security’ implies is centred around people working. All the rights that people get are rights that let them be more flexible, which is especially beneficial for the employers. It doesn’t mean that employees are necessarily worse off, they too could benefit from a more efficient system. But as the Social Partners already have said: extreme flexibility gives less living security (SvdA 2013a).
The support that the government gives to the social partners, to start trials decentralizing tasks of the UWV and giving the Social partners more power in the form of advice in the UWV, gives the impression that bigger institutional changes are underway. The
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social partners consist of labour and employer organizations, the increasing influence of
employers in one of the unemployment institutions is a big institutional change. This, of course, is done to make the UWV’s processes more efficient but the unemployed come to the UWV because they were laid off by the employers. When employees in every institution must deal with employers, who just laid them off, employees cannot have the impartial actor who helps them. This role of an impartial actor was normally the government, but with more
decentralization, this impartial role is traded for efficiency. The influence of the social partners is, of course, limited and the decentralization of the UWV's task is only in the trial phase, so we should wait for the exact results.
Social partners reaction
In the Sociaal Akkoord, the Social Partners gave advice on what to implement in the WWZ. But the actual law can deviate from what the Social Partners advised. The biggest critiques from the media have been that temporary employees had to be handed a permanent contract after two years. They only could work at the same company again after six months. This resulted in many temporary employees that were laid off, while they normally work longer at the same company (Troost 2016), (Vossers 2015). Some of the unions, whose job it is to protect employee’s rights, are quite positive. The ‘Federatie Nederlandse Vakbeweging’ (FNV), the largest union of the Netherlands, called it a success: ’The WWZ works as intended’ (Kager 2016). And as FNV Vice-chairwoman Catelene Passhier has said: ‘The dismissal law has become fairer, simpler and
quicker’ (Passhier 2016).
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of courage’ from big companies to invest in their employees. ‘’Big companies only care about
their profit margins’’ is the claim (Passhier 2016). While the FNV sees the initial changes of the
WWZ as a good thing for their members, they also claim that the problems with the law come from companies that focus too much on profit. The law obviously needs to address the
problems surrounding the responsibility of employers, but the FNV doesn't blame the WWZ for it. The FNV claimed that employers don't seem to uphold the central idea of the law: more security for flex-workers (FNV 2015), (Kager 2016). This is interesting because they themselves co-formulated the Sociaal Akkoord, an agreement between employers, labour unions and government. The government almost fully agreed with these plans and the central idea was: social security through work.
VNO-NCW’s stance on flex-work is that it is vital for companies and therefore the nation to embrace the opportunities that flex-work gives. Economic competition forces companies to stay flexible (Delft 2018). Trying to lower the number of flex-contracts means less
competitiveness which is neither good for the employers nor the employees. They argue: flex-work is good for employees because it gives companies the opportunity to rapidly adapt to new economic situations, which in turn results in more jobs (Ibid.). Less flexibility would lead to less economic growth, which in turn will lead to fewer jobs and less salary for employees. One of the critiques VNO-NCW has is that the law hasn’t gone far enough in promoting flexible work contracts. Companies and entrepreneurs have a craving for flexible workers, trying to counter this is not beneficial for anyone (Delft 2018). Michaël van Straalen, from MKB-Nederland (small and middle business owners), even goes as far as calling it ‘achieving the opposite of what was
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security even when they are ‘flex-employed’ (Ibid.).
While it clear that employers would rather have more flexibility and fewer costs, it is quite the difference from what has been said by the labour unions. While the labour unions claim that the WWZ is a good law, they say employers are preventing more social security. The employer organisations argue that this law hasn’t done enough to help business owners. The labour unions state that progress has been made in dealing with flex-work, but employers actually would like more flex-work.
Welfare State and competitiveness
To make a judgment on the level of competitiveness that affected the WWZ, this section will first lay-out the competitiveness theory's main points. Hereafter, the different parts will be discussed.
Competitiveness theory focusses on the increased market-thinking and increased efficiency that is needed for a country to stay competitive in a more transnational world. To achieve this, countries would supposedly give financial incentives to companies, this would come at the cost of social security (Swank 2002: 21-23). To better adapt to rapidly changing market circumstances, governments tend to decentralize as to become less static and more adaptive (Scholte 2005b: 186-188). Corporatist economies will let go of national-level bargaining/regulating and increase the level of more local, industry-level bargaining (Thelen 2001: 91-96). All the while the influence of labour unions on the decision-making process is flailing. Where labour unions used to hold wide-spread liberalization at bay they now feel the pressure of staying competitive (Swank 2002: 259-261).
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What we have seen from the Sociaal Akkoord is that there is little doubt that the social partners and the government agreed that some forms of protection from the market should be cut down. Their reasoning was that adapting to the market changes would yield the most efficient results. Social protection will come from making it easier to work (Ministry SZW 2015). While some parts of the welfare state were weakened, we cannot say that employees were necessarily worse off. But we can say that the agreement between the social partners, to make flex-work easier and cheaper, is a form of conferment to market mechanisms. One of the criteria for judging if the welfare state is under pressure from global competitiveness is the lessening of the government’s their grip on market mechanisms (Swank 2002: 15-20). What we have seen from the WWZ is that the government almost fully implemented the economic reasoning of the Sociaal Akkoord (Ministry SZW 2015). Making it easier for employers to hire and fire employees and transforming the out of work benefits to promote working more, is a clear example of the lessening of the government’s influence on the labour market.
That these transformations would serve to promote an increase in permanent contracts is mostly build on three properties of the law: lowering the time someone can work with a temporary contract, lowering the time someone could get unemployment benefits and
lowering the costs of permanent contracts for employers (WWZ 2016). The reasoning was that employees would benefit from this by making it easier to switch jobs and when their skills are permanently needed they could more easily get this kind of contract (UWV 2016), (WWZ 2016). Instead of guarding against the forces of the labour market, the government uses the market to get more people to work by lessening the social protection people would normally get. These changes to labour law result in a law that incentivizes permanent contracts, based on a push for
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flexibility, which stems from an increased level of competitive reasoning.
The Social partners also wished to take more responsibility in the labour market. While the Dutch government hasn’t made any big changes regarding the institutional role of these actors, they have agreed to give the social partners an advising role in the UWV, the
unemployment organization (WWZ 2016). Also, trials have been started to execute the UWV's tasks at a more local level, financed and partially executed by the Social Partners (Heerts 2015). The granted advising role gives the social partners more influence in this organization but hasn't given them any direct control. The decentralization trials, financed by the Social Partners, can be seen as an increased role of the Social partners and a decrease in the role of the
government. But because these are trials and are not something permanent yet, we can only say that the government is willing to try out these forms of decentralization.
The idea of these market reforms has always been that the economic laws of supply and demand would make markets more efficient which would, in turn, help the economy (NVO-NCW 2018). What can be seen from the Sociaal Akkoord and the successive WWZ is that this central idea of supply and demand is used to promote and defend more flexible work (SvdA 2013a). The problems that came with more flexible work were acknowledged but are countered by lowering the social security and embracing the trend of flexible contracts.
The social partners their observations and recommendations from the Sociaal Akkoord were almost fully implemented in the WWZ. The Labour organization, FNV, does think this is a great law that promotes working (Passhier 2016). The only downside is that employers are not doing enough to support workers. The employers-organization, VNO-NCW, thinks this law is a step in the good direction but the government should relax the laws surrounding flex-work
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more. VNO-NCW states that increased flexibility will lead to a better and more efficient economy and should not be held back (Delft 2018).
The economic reasoning behind this law was making the Netherlands more competitive. To answer this thesis’s research question: To what effect is the ‘Wet Werk en Zekerheid’ a move towards a more competitive Dutch economy?, it is mostly based on regulating the flexibility of the Dutch labour force but not countering it. The WWZ is based on economic reasoning to make the labour market more competitive and thus increasing the
competitiveness of the Dutch economy. More flexibility was implemented by lowering the amounts of costs and time it took to fire an employee. Lower unemployment benefits were set in place to promote working more. And a beginning has been made to decentralize the
workings of the UWV.The WWZ, clearly, has been influenced by competitive reasoning. Through the WWZ, competitive reasoning has found its way to the Dutch welfare system.
Conclusion
The increase in transnational trade brings challenges to governing institutions. Welfare
provisions can help citizens, who need it, find social protection. But expenses on welfare will, in theory, make it harder for countries and companies to stay competitive in the world market. Corporatist welfare states have been seen lowering their influence over economic markets. The influence of market and competition thinking has had its effects on multiple European
countries. But can these influences be seen in the Dutch welfare state? The Dutch corporatist welfare state depends much on the advice of the Social Partners; Unions, employer
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workers more security against the rise of flex-work. The Social Partners have had much influence over the substance of the WWZ. That is why the WWZ can be used to analyse the level of influence staying competitive has on the Dutch welfare state.
In the Sociaal Akkoord, the foundation was made, of what was to be implemented in the WWZ. The Social Partners agreed that Flex work needed to be addressed, as it would give low working security but it also brought much economic gain for companies. While the Social Partners saw that the structure of flex contracts was at the disadvantage of employees, they would still need flex-contracts. The Social Partners also wanted a bigger role in getting people back to work and have a say in the UWV. The WWZ reflected a desire for less top-down governmental influence and more influence for the Unions and employers-organisations as a way of making the labour market more efficient.
In the WWZ, the government agreed on most points with the social partners. The law can be divided into three points with one goal: Simplifying dismissal law, lowering
unemployment benefits, giving unemployment benefits a more ‘activating’ role and
incentivizing employers to give permanent contracts. It becomes clear that this law decreased the level of governmental support and regulations to get people more permanent contracts. The agreement to increase the influence of the Social partners in the UWV and starting trials decentralizing tasks of the UWV, show at least a willingness of the government to try out some forms of decentralization.
The Social Partners got almost everything that they wanted from the WWZ. The labour union FNV, thus calls it a great success and a step in the right direction (FNV 2015a). That a labour union calls this law a success seems to indicate that they couldn’t have done more to
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prevent further spread of competition policy. As Kathleen Thelen already stated, labour unions are in a precarious position and see their influence dwindle (Thelen 2001: 91-100). However, the FNV blames the employers organisations for caring too much about profits. VNO-NCW, the employers organisation, also sees the benefits of the WWZ because it helps companies to attract employees. But their reaction is that more should be done to make Dutch companies more competitive with other countries.
The law depends much on economic competitive reasoning. Lowering unemployment benefits, making it easier to hire and fire employees and indirectly forcing people to work all revolve around the idea of making the labour market more efficient and therefore more competitive. The willingness of the government to decentralize parts of the unemployment organisation, UWV, shows that the government was willing to give the Social Partners more influence on the Labour market. The government states that all these changes were
implemented to give employees more permanent contracts and thus more social and working security. An increase in permanent contracts would be achieved by making the market more efficient. This new level of efficiency would be achieved by lowering what it entails to have social security.
As to answer this paper’s research question; in how far is the ‘Wet Werk en Zekerheid’ a move for a more competitive Dutch economy?, the law is greatly influenced by competitive reasoning. Everything would be achieved by lowering social benefits, to increase the level of work security. The level of social security in the Netherlands has been decreased as to make room for more efficiency, which stems from competitive reasoning.
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Discussion
This paper has been written to better understand competitive influences on welfare states. By looking at the Netherlands, we can analyse the effect of competitive pressures on a highly developed welfare state that relies much on its corporatist nature. By analysing the Social Partners their role in the WWZ, this paper tried to better understand the dynamic between the government, labour unions and employers-organisations in forming the WWZ. This is an
interesting case because all the actors who are affected by competitive pressures have had a say in this law-making process.
The paradox: ‘trying to increase social security by downgrading what it is to have social security’, hasn’t been mentioned by the labour unions. This is remarkable because the WWZ clearly decreases social security that people with permanent contracts already had, which is against what unions normally stand for. It would seem that the unions have willingly been quiet about the changes that the WWZ has brought. One explanation is that this is political, the minister in charge of the WWZ was a member of the PvdA (Social democrats), a party that has close ties with labour unions (PvdA 2015). But it also could have been more strategical, at least now the labour unions have had influence in a policy that was bound to have appeared. It would have been interesting to have interviews with the leadership of the labour unions and see why they have been so positive about the law. I can only recommend this for future studies.
Focussing on the Dutch case, specifically, also brings restrictions. The Dutch model of Social Partners, who behave in a highly deliberative manner, is quite unique in the world. Most Northern European countries do have corporatist welfare systems. but for example, Sweden relies more on the government and in Germany there seems to be more conflict between
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labour unions and employers (Swank 2002: 170-181), (Thelen 2001: 91-100). The results of the dynamic that we have seen in the Netherlands is thus not representative for all northern European countries, and even less for more liberal economies like Great-Britain or the United States. Also, by analysing the WWZ this paper only analysed the effects on the Labour market, while there are indications that competitive pressures also have effects on Capital markets and capital-tax policy as Piketty pointed out. For future research, it would thus be interesting how the Dutch government has changed their capital and/or business tax in the last few years. This would grant us more knowledge about not only the labour market but the Dutch economy as a whole.
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