In contradiction to what you may think, I’m not going to fulminate on how people living on a pay equal or slightly above minimum wage are not putting in enough effort and as a result only get low wages.
I am going to talk to you about this group of people though, yet the lower effort comes not from the employees but from the employers.
Ever since the first wave of guest workers came to The Netherlands, the Dutch have had unforeseen problems. The guest workers did their jobs good, and too cheap for local workers to compete. This has resulted not in the desired gross-income growth, but in a higher unemployment-rate. The guest workers simply took over the places of local workers who have had less education, or have a worse work-mentality or productivity.
No i’m also not going to tell you about our current government who has made the exact same error of opening the borders to Romanian, Bulgarian and Polish workers who are pushing lower skilled Dutch and people who have lower productivity from the labour market.
The, in the world almost unmatched, level of minimum wage is the subject here, it’s the second highest next to Luxemburg.
In Holland, the legally enforced minimum wage is $10,72; where as an equally skilled worker has the right to earn at least $5,15. Yes, that is in US Dollars, and yes, it is less than half of what the Dutch would earn! Luxemburg tops us by only 7 cents, but we still remain one of the world leaders. Why is this bad? I hear you ask.
Because of this high price on lower skilled workers, Eastern-Europeans, younger people and people in the social security are competing with each other to get a job. So far, the Eastern Europeans are winning the battle with ease. All groups are entitled to the same wage, it is however productivity and work-mentality wich puts our Polish friends in favor. They are much more willing to put in some extra hours, and work much faster with less hassle for the employer.
Young people however are less affected by this, they have a separate agreement to adhere to: if they are under the age of 23, there is a minimum youth wage which is lower than the regular minimum wage, making them more attractive for employers.
The main issue here is that the rest of the workforce has a problem: as they are too expensive employers don’t have a drive to take them in. There always is a better equipped or better performing person for the job, like the Polish. In 2005 around 70.000 Polish guest workers arrived in The Netherlands, nearly all of them are working in the agricultural or construction sector; area’s formerly dependant of lower skilled local workers.
So: if this is true, what should be the solution?
Yes: it is quite simple: lower the minimum wage and lower the taxes for lower incomes. This results in lower costs for employers, a better chance for lower skilled workers and people in the social security and an impulse for the latter group of people to gain a notch in income; as this is nowadays not the case due to high taxes.
Ahmed Aboutaleb (PvdA, State Secretary for "Sociale Zaken", the ministry of social matters) and Piet Hein Donner (CDA, minister of "Sociale Zaken") have recently urged employers to take on the task of employing people who now get their income from social security, in an effort to get more people to work. I seriously doubt whether employers will adhere to this call, the laws on the free market of labour tend to dictate otherwise…