Unions respond to public sector cutbacks

EIRO Online, [6] October 2003

In its June 2003 coalition agreement, the Netherlands’ new government announced major spending cuts affecting government departments, which will result in public sector job losses and wage restraint. Trade unions representing civil servants are fiercely opposed to the plans and question how the proposed job cuts can be consistent with the government's promises on improved public safety, care and education. The unions also claim that the planned wage restraint will further damage the public sector's ability to recruit and retain suitable qualified staff.

In its June 2003 coalition agreement, the new government of the Christian Democratic Appeal (Christen Democratisch Appl, CDA), the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) and the social liberal Democraten 66 (D66), led by Prime Minister Jan-Peter Balkenende, highlighted the poor economic and budgetary situation in the Netherlands. It refers to a dramatically deteriorated position, not only as a result of the worldwide economic downturn, but also as a result of a number of structural economic characteristics peculiar to the Netherlands. In his statement of the coalition government's policy, the Prime Minister pointed to spiralling pension costs and high wage costs in comparison with other countries. This, he stated, could mean that when the global economy finally does pick up, the Netherlands may miss out.

The government plans to respond to the recession by implementing a package of rigorous spending cuts and increasing the burden of taxation and contributions in a bid to restore budgetary balance by 2007. This approach goes against the views of many economists, who call for continuing investment, especially at times of economic hardship, or at least for finding a better balance between investment and cuts. From this perspective, it would be sufficient to comply with the budgetary conditions laid down by EU Economic and Monetary Union (EMU) and simply learn to live with the remaining budget deficit for the time being. Lodewijk de Waal, the chair of the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) and his counterpart at the Christian Trade Union Federation (Christelijk Nederlands Vakverbond, CNV), Doekle Terpstra, are even calling for the adoption of more stringent EMU budgetary conditions.

Many of the spending cuts announced by the government affect employment and wages in the public sector. On the latter point, the government agreement states that, over the coming four-year period, cabinet will cut the funding available for pay and conditions in the public sector by one percentage point annually, in relation to the current medium- to long-term forecast. Because, in addition, higher pension contributions will have to be covered by employees, at least in part, this effectively implies a wage freeze. The government will also decrease spending on ‘incidental’ wage increases by EUR 510 million.

There is still uncertainty over how many jobs will have to be cut under the government's plans to streamline government departments. Neither the June 2003 coalition agreement nor the policy plans presented on ‘budget day’ (the third Tuesday in September, when the Queen traditionally reveals the government's policy plans in her speech) provide any clarity in this regard. The plans include reducing the number of staff and achieving the same objectives using less money (through efficiency gains) across the board for all ministries. According to Johan Remkes, Minister of Internal Affairs, the question of how many compulsory redundancies will be necessary in the years ahead ‘cannot, however, be answered at this point in time’ . Nonetheless, it is clear that the largest cuts will affect the Ministry of Defence, where staff numbers must be reduced from 72,000 to 65,000.

The trade unions have come up with figures for the likely job losses on the basis of the planned cutbacks. The day after ‘budget day’ , Abvakabo, the civil servants' union affiliated to FNV, stated that, as a consequence of the government's plans, 50,000 jobs would be at stake.

Trade union criticisms

In response to the government's plans, the trade unions have argued that it would be unfair to impose the negative consequences of the economic crisis one-sidedly on public sector employees and called for good redundancy plans to be drawn up in the event of compulsory job losses. Furthermore, they have complained that wage ceilings imposed in advance will unacceptably limit the scope for negotiation in future public sector collective bargaining. However, beyond these normal industrial relations arguments, the unions have also specifically raised a number of questions about the role and functioning of the public sector, which they believe should be satisfactorily addressed before announcing staff and spending cuts.

The union's key question on this point concerns the definition of the public sector's tasks. The civil servants' unions affiliated to both FNV and CNV have for some time been calling for a debate to determine which tasks the public sector should continue to carry out and which—due to cost considerations—it should ‘hive off’ . Only based on the outcome of this debate should it be decided how many civil servants are needed to carry out the agreed tasks and how many jobs, if any, could therefore be cut. The trade union's approach has been given support by the leading governmental legislative and administrative consultative body, the Council of State (Raad van State), which, in its recommendation on the government's draft 2004 budget, asserts that if ‘decisions on volume and efficiency gains are made without political choices having been made on reducing tasks that will no longer be carried out by the government bodies themselves, this would lead to overwork’ .

The unions state that no discussions are taking place on these issues and that instead the politicians are making numerous promises to the country's citizens, such as more police on the streets, cuts in waiting list for healthcare and better education. Furthermore, it is claimed that the public is demanding a better implementation of government policy, which currently leaves much to be desired. Studies carried out by the Audit Office (Algemene Rekenkamer) indicate that government pays considerable attention to formulating policy but much less to ensuring execution and results (Tussen beleid en uitvoering - lessen uit recent onderzoek van de Algemene Rekenkamer [Between policy and implementation—lessons from recent research carried out by the audit office], 2003). Dissatisfaction is reportedly growing among the public about public service quality and, according to research conducted by the Social and Cultural Planning Office (Sociaal en Cultureel Planbureau), this is partly the result of ongoing changes within the organisation of government ‘which certainly contributes little to effective policy’ (Sociaal Cultureel rapport [Socio-cultural report], 2002).

The unions argue that more tasks and better and swifter task execution require more civil servants rather than fewer, a view which is supported by the increased level of government expenditure on external employees. ‘The greater workload and relatively low percentage of civil servants serve to significantly push up spending on external staff and costly policy advice,’ according to the leader of the Abvakabo union.

The government's argument that job cuts could be achieved by reducing the level of bureaucracy is dismissed as fiction by the unions. First, they question the idea of that the Dutch public sector is inefficient, comparing the size of the Dutch public sector with the situation in other European countries. Figures published by the Organisation for Economic Cooperation and Development (OECD), suggest that in 2000 the Dutch public sector represented 10.5% of all employment, a lower figure than in almost all the other countries in Europe (Highlights of public sector pay and employment trends: 2002 update, 2002). Another trade union argument is that bureaucracy does not hinge on people but on rules and regulations, procedures and organisations. According to the unions, it is not the employees that should be made redundant, but the rules that should be tackled. Furthermore, agreements should be clarified and organisations should be made more transparent.

Simply cutting civil service jobs without first gaining sufficient insight into the tasks to be carried out by the public sector has been dubbed a ‘cheese slicing’ operation by the unions, in that jobs will be trimmed throughout the sector and the fewer workers that remain will have to do the same amount of work. This will increase the workload and absence will rise, it is argued, leading ultimately to erosion of service quality.

Public sector employment

With regard to the government's planned public sector wage ceiling, the trade unions warn that a further erosion of pay prospects in the public sector would have a negative effect on the image of the public sector as an employer, over and above the unacceptable consequences for the employees themselves.

In February 2001, the Ministry of Internal Affairs issued a committee report (known as the Van Rijn report) entitled ‘The job market in the public sector. Investing in people and quality’ (De Arbeidsmarkt in de collectieve sector. Investeren in mensen en kwaliteit), which contained an analysis of labour market issues affecting the public sector and put forward solutions for the problems identified ( NL0104129F). This was seen as necessary at the time because the government was having great difficulty in recruiting and retaining suitably qualified personnel, to such an extent as to pose a threat to public service provision.

While continuing economic growth at the time was singled out by the Van Rijn committee as one of the important causes of public sector staff shortages (as it resulted in a tight labour market), reference was also made to the influence of other developments of a more permanent character that would not go away even if economic growth were to slow, such as:

The Van Rijn committee proposed adopting measures and making investments directed at improving the position of the public sector in the employment market, which also includes improving career opportunities. A 2002 report on the image of the public sector as an employer by researchers from the Organisation for Strategic Labour Market Research (Organisatie voor Strategisch Arbeidsmarktonderzoek, OSA) highlighted the necessity for investment in the financial and material aspects of working for the public sector (Het Imago van de Publieke Sector als Werkgever [The image of the public sector as an employer], WF van Raaij, H Vinken and LPM. van Dun, OSA publication 184, 2002). In addition to improving career prospects, OSA also explicitly mentioned wage improvements.

The unions now state that the spending cuts proposed by the government will undo what has been achieved on the basis of the investments resulting from the Van Rijn report, because the public sector will be set back years in terms of wage trends in relation to the market sector, once again tarnishing the public sector's image in the labour market. This too will ultimately diminish service quality, it is claimed.

Commentary

In their response to the proposed cutbacks in the public sector, the trade unions representing civil servants have not only drawn attention to the legitimate interests of civil servants—such as the right to a reasonable income, job security and leeway for wage negotiations—but also entered the broader debate on the role and functioning of government. This relates to developments that are more or less isolated from economic trends, such as the need for sufficient, properly qualified employees in order to continue to guarantee good services. The ‘task definition debate’ too is in principle not linked to the broader performance of the economy, although the need to prioritise in the face of a more limited budget is certainly becoming more pressing.

The findings of various studies would seem to support the views of the unions. The Audit Office indicates that policy is to a large extent not implemented properly, if at all, and reports published by the Van Rijn committee and the OSA support the unions' wage claims. While it would be wise to point out that the research findings are far more nuanced than merely calling for more staff and better pay—after all, the rift between policy and execution could also be attributed to poor communication, bureaucratic procedures or rapidly changing policy objectives, and the image of the public sector as an employer depends on more factors than wage considerations alone - the trade unions nevertheless have definitely struck a chord here. In so doing, they extend the interests of their membership to all Dutch citizens who wish to make use of services offered by government. Because the unions combine reasonable wage demands with the possibility that government may hive off tasks and therefore jobs, they furthermore show themselves to be open to the government's argument that spending cuts are unavoidable. (Marian Schaapman, HSI)