After months of struggling to make ends meet, last month’s budget came as a relief to Dutch postman Richard Huisjing.
The government pledged to enforce a 10 percent minimum wage hike from January to deal with the massive rise in the cost of living after Russia’s large-scale invasion of Ukraine led to skyrocketing costs for power and other goods.
But Huisjing, who earns just a little more than the current minimum, fears that even this won’t be enough to cover his bills.
“Food prices are going up, so is energy,” he said. With no dependents, he says he can handle it now, but is “afraid for the future”.
Since the war in Ukraine started in late February, the cost of cooking staples has skyrocketed. A three-litre bottle of sunflower oil for Huisjing’s deep-fat fryer – indispensable in most Dutch households for making chips and bitterballen – has doubled to € 10 in a few months. His battered bicycle, his only means of transport, will soon need to be replaced .
The cost of living in the Netherlands, where inflation was 17 percent in the year to September due to a rise in energy prices, is reflected across Europe. In the eurozone, prices rose by 10 percent annually. In the three Baltic states, inflation is more than double. Wages have been raised for the poorest workers in the 21 EU countries that have minimum wage laws.
However, this round of pay increases is not pleasing to everyone, leading to clashes between worker groups and companies.
ETUC, the EU-wide confederation of trade unions, said the real value of minimum wages had fallen by about 5 percent on average – and by nearly 20 percent in some member states.
“The current crisis has an even greater impact than the financial crisis on low wages,” said Esther Lynch, deputy general secretary of the ETUC. “No matter how good you are at household budgets, you won’t be able to make ends meet.”
Tuur Elzinga, chairman of the Huisjing trade union, FNV, dismissed the budget as a plaster. “Nothing is being done structurally to tackle the fundamental causes of the imbalance in society. We have only gotten richer as a country, but the money remains in limited pockets.”
FNV wants the minimum wage – now between €10.14 and €11.46 depending on the number of hours worked – to be €14 per hour.
Companies believe that the Dutch government is already going too far, too fast. The VNO, the Dutch employers’ organisation, said the government should increase benefits for workers instead of forcing companies under heavy pressure to pay more.
Geert-jan Castelijn, owner of a family-run fashion store near the southern city of Maastricht, said he would struggle to foresee the increase. Although only a handful of his 25 employees earn minimum wage, he said he had to increase all salaries to maintain differences between pay scales.
Fortunately, last year he secured his energy costs until 2026, but still wants to reduce consumption. “I want to invest in energy efficiency and in personnel development,” says Castelijn. “We cannot raise our prices by 10 percent. Customers are already delaying purchases.”
The rapid pay rise makes it difficult to budget, he said. He has to repay a corona emergency loan of 224,000 euros from the state over the next five years. “We can have a vicious circle, with rising inflation and wages” [together] like we saw in the 1970s,” he said.
Economists, including rate setters at the European Central Bank, have warned that workers should expect a cut in real wages to avoid a “wage-price spiral” in which inflation remains high for years and affects living standards.
Philip Lane, chief economist at the ECB, said last month: “To get inflation back, we need to realize that corporate profitability will decline for a while and wages will not fully keep up with inflation for a while either.”
But officials elsewhere say the lowest paid workers in the labor market should be fairly compensated.
An EU directive recently approved calls for a level of 60 percent of the gross amount to be met. The Dutch increase lags slightly behind these figures.
According to Green MEPs, about 25 million workers would see a 20 percent increase if member states followed suit.
Stefano Scarpetta, director of employment, labor and social affairs at the OECD, said in September that the automatic top-up mechanisms in countries like France and Belgium are “an effective way to preserve the purchasing power of the low-paid”. Scarpetta added that automatic or not, “it would be important to regularly adjust statutory minimum wages in the current context of relatively high inflation”.
Given the tight labor market, the increase in the minimum wage is not expected to lead to companies laying off many employees. The UK’s experience since 2015 suggests that higher wages need not come at the expense of jobs: the minimum wage rose rapidly to 60% of median income in five years, making it one of the highest in the OECD, with no significant increase in unemployment.
Back in the Netherlands, employment is so plentiful that Huisjing has decided not to wait for government support. He starts a new job this month at a hardware store that pays $13 an hour. “Politicians are always chasing the problem. They just wait and offer help too late,” he said.
Additional reporting by Delphine Strauss in London