Public Sector Shock

Public Sector Shock

The Impact of Policy Retrenchment in Europe

Edited by Daniel Vaughan-Whitehead

The goal of this volume is to study this ‘public sector shock’. While budgetary reforms seek to ensure a more balanced and sound economic policy, they may generate new work inequalities among public sector employees, most particularly among women, who account for a considerable proportion of public sector employment. Cuts in education and training may also have an impact on the quality of human capital in both the public and private sectors, despite the fact that the recent crisis has shown the value of education as employees with better skills and training are more likely to maintain their jobs and incomes.

Chapter 10: The Netherlands: Wage cuts no longer a constructive option

Wiemer Salverda

Subjects: economics and finance, labour economics, public sector economics, social policy and sociology, economics of social policy, labour policy


In the financial crisis many countries are taking policy measures aimed at lowering the wage bill of the public sector, often by drastically lowering pay rates. The Netherlands has gone down that road before. During the deep recession of 1980–85 nominal public sector pay rates were one-sidedly lowered by 3 per cent in 1984 and ‘frozen’ for most of the 1980s. That percentage may seem benign with hindsight, but at that time it was unique and high inflation affected purchasing power more strongly. It meant a one-time lowering of actual individual earnings and a permanent lowering of wage scales, but individual pay kept moving up because of tenure and did not necessarily remain frozen. In the end, the one-sided nature of the system of public sector wage negotiations was done away with – after unions had appealed to the ILO – while at the same time 12 decentralized wage agreements were instituted across the public sector in 1993 (Osmani 2011: 8). In the current crisis, public sector pay has been treated differently, and so far no pay cuts have been enforced though there have been suggestions and proposals for a freeze. That may be a matter of time – this took four years from the start of the recession in the 1980s. Currently, wage negotiations are long-drawn-out without reaching a conclusion, or their conclusion has been moderate or unsuccessful. Thus in practice there has already been a freeze of wage rates.

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