Wassenaar Agreement marks turning point for labour market

A quarter of a century ago, on 24 November 1982, employers’ organisations and trade unions convened in the Labour Foundation to reach the so-called Wassenaar Agreement. The Agreement combined wage restraint with a redistribution of labour to combat (youth) unemployment and enhance competitive power. The Agreement was concluded in the midst of a deep economic crisis: in 1981 and 1982, the economy was shrinking and as a result employment suffered a severe setback.

Collectively negotiated wages per month

Moderate wage increases

The Wassenaar Agreement had a huge impact on the labour market. In the 1970s, the Netherlands became entangled in a wage-price spiral with annual wage increases ranging between 5 and 15 percent. After 1982, collectively negotiated wage increases exceeding 5 percent have not occurred. Wage restraint steadily became a more effective instrument to prompt employers to recruit staff.

Dramatic growth employment

In the 1970s, the population grew much faster than the employed labour force. In the early 1980s, the number of employed persons in fact diminished. Simultaneously, unemployment soared.
In the year following the conclusion of the Wassenaar Agreement, the economy improved and employment began to rise. Since then, the number of employed persons has risen substantially. In 2006, the employed labour force had grown by 2.5 million people relative to 1982.

Economic developments and employment

Working hours decline further

Wage restraint and redistribution of labour were the pillars of the Wassenaar Agreement. Reduction of working hours, part-time work and early retirement would create jobs for unemployed. Working weeks have indeed become shorter since the Wassenaar Agreement became effective. Working hours of full-timers, for example, have been reduced by an average 5 percent. As more women entered the labour market, the demand for part-time jobs grew and currently one in two jobs are part-time. The average number of working hours per person employed was, however, already declining prior to the conclusion of the Wassenaar Agreement.

In recent years, the policy of redistribution of labour has been abandoned. Marginal population growth and ageing of the population have boosted labour participation. Finding the right people is currently the issue rather than creating jobs.

Working hours full-timers

Hans Langenberg and Job van der Zwan