Low-Wage Work in the Netherlands

Chapter 1: The Debate in the Netherlands on Low Pay

CHAPTER 1 The Debate in the Netherlands on Low Pay Wiemer Salverda, Maarten van Klaveren, and Marc van der Meer Employment performance in the Dutch labor market is exceptional in several ways. Today the employment rate in the Netherlands is the highest of the euro zone, and the unemployment rate the lowest. As the country has passed through several deep recessions, the structure of production has shifted from an industrial to a service economy, with the help of a gradual adaptation of the institutional structure. Firms have responded strategically to competitive and institutional pressures by changing their product market strategies, work organization, and human resource policy. In this study, we evaluate the effects for various groups of low-paid workers who are experiencing a growing income differentiation, increasingly diverse patterns of working time, and an overrepresentation of part-time contracts and more unpleasant working conditions than those in jobs higher up the pay ladder. We examine the quality of their jobs and attempt to answer the question of how job quality is affected by the environment of Dutch labor market institutions. This chapter introduces the national debate on low pay and employment , together with the predominant characteristics of Dutch governance of the labor market and the economy. This debate has long roots that go back all the way to the aftermath of the Second World War, riding three successive “waves” of policymaking regarding wages and social insurance. The waves were all generated or accommodated by the organizational-institutional setup first put in place in 1945 and retained by the country ever since, though its functions have evolved over the course of the intervening sixty years. In addition, the chapter sketches the shape of the discussion on the organization of low-wage jobs—that is, their content and role in firms’ division of labor. We conclude with the layout of this volume. But first we summarize the three central features of the research that led 16 to this work: the analysis of institutions, firm strategies, and job quality . These issues are pursued in more detail later, particularly in chapter 4. THREE CORE ISSUES: INSTITUTIONS, FIRM STRATEGIES, AND JOB QUALITY This volume combines an institutional analysis of low-wage employment in the Dutch national economy with an in-depth study of forty companies and organizations: eight in each of these five industries: retail trade, health care, food production, call centers, and hotels. Our goal is to show how low-wage jobs have been shaped in a small and open consultation economy that operates in an environment of intensifying and increasingly worldwide competitive pressures, capital mobility, and rapid technological change. The study by Eileen Appelbaum and her colleagues (2003) guided our own study. It charts well these extremely interesting premises and shows that both institutions and firm behavior matter a great deal in determining the quality of low-wage work. This has inspired us to combine three key concepts : institutions, firm strategy, and job quality. EXAMINING INSTITUTIONS Institutions are widely discussed as formal and informal rules that guide human behavior, but their particular effect on low-wage work is seldom well understood. In this work, we raise questions about how institutions fit a wider economic framework and about their effects . We distinguish between two broad categories of institutions affecting , first, the reward of work to the individual employee and the costs to the employer and, second, the content of the job and the organization of work, including the skill level of jobs in interaction with the educational attainment of workers, their flexibility in interaction with employment protection, and their working conditions in interaction with health and safety rules and sickness and disability insurance. GRASPING FIRM STRATEGIES Virtually throughout the twentieth century, the dominant firm strategy was focused on the organizational concentration of enterprise acThe Debate in the Netherlands on Low Pay 17 tivities. In our case studies, we show how this orientation toward “internalization ,” aimed at reducing external constraints and uncertainties , has given way to strategies of “externalization” through the outsourcing of staff, jobs, and departments and resulted in an extensive internal and external flexibilization of work processes. This shift makes firm behavior a key element of this research. How do firms design their organization, particularly regarding job quality, given that the institutional environment in which they operate may constrain them but may also stimulate them? OPERATIONALIZING JOB QUALITY The decline of industrial employment and the shift to a service economy...