OECD Economic Surveys : Netherlands 1966.

59 Pages·3.468 MB·English

by  OECD

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BASIC STATISTICS OF THE NETHERLANDS
THE LAND
Area 1,000 sq. km(cid:9) 33.4 Majorcities I Jan. 1966thousandsofin-,
Agriculturalarea 1 Jan.'66(1,000sq.km) 25.7 habitants:
Woodland 1 Jan.'66 (1,000 sq. km.)... 2.9 Amsterdam (cid:9) 862
Rotterdam(cid:9) 728
The Hague (cid:9) 593
Utrecht(cid:9) 271
THE PEOPLE
Population (thousands) (cid:9) 12,377 Net rateofincreaseper 1,000inhabi¬
No. ofinhabitants per sq.km(cid:9) 370 tants 1960-1965 (cid:9) 13.0
Net natural increase average 1960- Net immigration average 1960-1965
1965 (thousands)(cid:9) 154 (thousands)(cid:9) 8.6
PRODUCTION
Grossnationalproduct millions,cfguil¬ Gross national product at factor costs
ders 1963 (cid:9) 67,790 by origin in 1964:
GNP per head (USA %) (cid:9) 1.530 Agriculture (cid:9) 9%
Grossfixedinvestment(average1963- Industry (inc.. construction)(cid:9) 40%
65): Other(cid:9) 51 %
percentage of GNP (cid:9) 24
per head (USA $) (cid:9) 3^0
THE GOVERNMENT
Current government expenditure on CompositionoftheSecond Chamber;
goodsandservices (%ofGNP 1964) 15 Catholic popular party (cid:9) 32%
Current government revenues {_'/ of Labour party(cid:9) 28%
GNP 1964)(cid:9) 35 Liberal party (cid:9) 10%
Central government debt {"/ofcentral Anti-revolutionary party (cid:9) 9%
government current revenues 1965) 153 Christian-historian party(cid:9) 9%
Other (cid:9) 12%
Last elections: 1963
Next elections: 1967
LIVING STANDARDS
Calories per head per day 1964(cid:9) 2,880 Number oftelephones per 1,000inhabi¬
Average hourly earnings of workers in tants (1-1-1965) (cid:9) 173
industry October 1965 (cents). . 350 Number of radiosets per 1,000 inhabi¬
Numberofprivatecars per 1,000inhabi¬ tants (1-12-1965) (cid:9) 218
tants (1-8-1965) (cid:9) 104 Number of T.V.-sets per 1,000 inhabi¬
tants (1-12-1965) (cid:9) 170
FOREIGN TRADE
Exports: Importsofgoodsandservicesincludingin¬
Exports of goods and services including come payments to the rest ofthe world
income payments from the rest of the (average 1960-1965 as % of GNP).. 50
world (average 1960-1965 as percentage Main imports in 1965 (percentage of the
ofGNP) (cid:9) 50 total imports):
Main exports in 1965 (percentages ofthe Machinery and transport equipment 25
total export): Food, drink, tobacco(cid:9) 13
Machinery and transport equipment 21 Mineral fuels (cid:9) 10
Petroleum products(cid:9) 8 Textiles(cid:9) 11
Textileproducts(includingclothing). 10 Chemical products(cid:9) 7
Chemical products(cid:9) 10
Dairy products and eggs(cid:9) 5
THE CURRENCY
Monetary Unit: Guilder. Currency Unit per USA $(cid:9) 3.62
ECONOMIC SURVEYS BY THE OECD
NETHERLANDS
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisationfor Economic Co-operation andDevel¬
opment was set up under a Convention signed in Paris on
14th December 1960 by the Member countries of the Organ¬
isationfor European Economic Co-operation and by Canada
and the United States. This Convention provides that the
OECD shallpromote policies designed:
to achieve the highest sustainable economic growth
and employment and a rising standard of living in
Member countries, while maintainingfinancial stabi¬
lity, and thus to contribute to the development of
the world economy;
to contribute to soundeconomicexpansion in Member
as well as non-member countries in the process of
economic development;
to contribute to the expansion of world trade on a
multilaretal, non-discriminatory basis in accordance
with international obligations.
The legalpersonality possessed by the Organisationfor
European Economic Co-operation continues in the OECD,
which came into being on 30th September 1961.
The Members ofOECD are: Austria, Belgium, Canada,
Denmark, France, the Federal Republic ofGermany, Greece,
Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the
United Kingdom and the United States.
This document was approved
by the Economic and Development Review Committee
in July 1966.
CONTENTS
Introduction(cid:9) 5
Part I
The Wage Increases of 1964 and 1965(cid:9) 6
Thecauses ofthe wage explosion (cid:9) (cid:9) 8
Theinfluence ofthecreation ofthe EEC (cid:9) 8
The undervaluation ofthe florin .. .. ' (cid:9) 11
Over-full employment (cid:9) 14
Part II
Developments in 1964 and 1965 (cid:9) 17
Demand(cid:9) 17
Output (cid:9) 20
Monetary and budgetary policies (cid:9) 22
Budgetary policies (cid:9) 27
Wages, labour unit costs and prices(cid:9) 29
Changesinthenationalincomedistributionandeffectsoninvestments 33
Effects on the balance ofpayments(cid:9) 38
Part III
Early developments in 1966, prospects and policy problems 42
Demand and outputprospects(cid:9) 42
Economicpolicies in 1966(cid:9) 45
Conclusions (cid:9) 46
Statistical Annex(cid:9) 49
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ECONOMIC SURVEYS NETHERLANDS
INTRODUCTION
Thewage contracts negotiated for 1964resulted in whathas since been
termeda "wageexplosion. " Indeed, innominaltermstheincreaseinwages
was larger than any other since the immediate post-war period and, in real
terms, the largest since the war. Early forecasts warned that this would
result in acute internal and external disequilibria. In fact, the economy
absorbed the shock with astonishing resilience. Though productivity and
output grew more than during any non-recovery year,there was,it is true,
a substantial rise in prices. But the balance of payments, which deterio¬
rated rapidly during the first halfofthe year, was back to equilibrium by
the year's end.
Labour tensionsremained strongin 1965; and nominalwageincreases,
although less than in the previous year, were as high as in any other since
1950. The external surplus persisted throughout the year, albeit smaller
than in the period immediately preceding 1964. Both output and labour
productivity again exceeded the long-run trend. The official forecasts
for 1966 expect a continued growth, with output and productivity rising
somewhat more rapidly than in the past though no more than in 1965.
Developments in the Netherlands economy over the last three years
raise questions ofa fundamental character. There was a radical change in
the official wage and income policies, from an elaborate national system
to freer negotiation industry by industry. The effects of the internal de¬
mand and cost and price situations on the balance of payments proved
different from those expected. A very tight labour market situation still
persists, and its effects upon the longer-term development ofthe economy
pose difficult problems. The present survey attempts (Part 1) to summa¬
rise the developments which led to the wage explosion. Trends in
1964 and 1965 are examined in Part II, with particular regard to the effects
of the wage explosion on unit labour costs and prices, investment and
theexternal balance. Trends, prospects andpoliciesfor 1966 are discussed
in Part III. The Conclusions attempt to sum up the lessons which emerge
from recent experience.
Part I
THE WAGE INCREASES OF 1964 AND 1965
Incomes policies, based essentially on government influence through¬
out all stages of the wage determination procedures, had been followed
since 1945. Wages weremore or less directlycontrolled bythegovernment
up to 1958, but early in 1959 a differential policy, allowing wages in each
industry to be adjusted mainly in relation to increased productivity in the
industry itself, replaced the former system1.
During most ofthis period, conditions in the labour market were very
tight. From at least 1950, a growing number of employers were willing
to exceed the legal maximum wage rates in order to retain employees or
hire new ones. " Black wages " are thought already to have reached in
1956 and 1957 a level as high as the situation which eventually created the
1963 wage explosion, but the cooling-off of the economy during 1957-58
provided some relief. Though evidence about "black wages" is difficult
to obtain, informed estimates are that by 1963 " black wages " were of
the probable order of 6 to 7 per cent of the relevant wage bill.
Diagram 1. JOBS OFFERED AND UNEMPLOYMENT
AS A PERCENTAGE OF ACTIVE LABOUR FORCE, 1955-65
Seasonally Adjusted
%
5
Jobsvacant
.*
Unemployment
0 iiIiiiIiiiIiiiIiiiIiiiIiiiI
1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965
Source: TheNetherlandsBank.
1. Cf. Netherlands Economic Surveys, OECD; May 1962, paras. 16-18 and April
1963, paras. 36-45.
At the same time, labour and management appear to have become
increasingly dissatisfied with the existing regulations. For labour, the mo¬
tivations are obvious; and tensionsprobably developed atthetime between
rankandfileandunionleadershipwhichforcedthelattertochangeattitudes.
In the prevailing conditions in the labour market, employers also seemto
have preferred the possibility ofindividually bidding up wages to the exis¬
ting national arrangements.
Between 1960and 1963 the CentralPlanning Bureau based its forecasts
ontheassumptionthatincreasesinnominalwagesshouldnotexceedincrea¬
sesinlabourproductivity bymorethan 1 or2percent; this also correspon¬
ded to the official view ofthepermissiblewageincreases, and, by and large,
was reflected in the wage contracts ofthose years. But in the autumn of
1963, when the Government aimed at wage increases of 6 per cent (with a
forecast growth of productivity by about 4l/2 per cent and of consumer
pricesby2percent)thelabourunionsrefusedtoacceptthem,anddemanded
wage increases exceeding, in some cases, 20 per cent. Some employers
seemed willing to accept an important part ofthe unions' demands. After
protracted negotiations, agreementwas reachedfor a two-phase 10 per cent
rise in contract wage rates during 1964 which, together with the carry-over
from the preceding year's increases and special allowances for social se¬
curity and increased rents, resulted in an actual increase of 15 per cent
over 1963.
Table 1. COMPONENTS OF WAGE CHANGES PER WORKER, 1964-66
Percentincreasesoverthepreviousyear.
1964 1965 19661
TotalIncrease (cid:9) 15.0 11.0 10.5
Newcontracts (includingextraholidays) (cid:9) 11.6 3.5
0.7 2.0 8f>
Bonuspayments (cid:9) 2.0
0.8 2.0 1.3
Socialsecurityallowances(cid:9) 0.4 1.9
Weatherdifferential (cid:9) 0.6
0.9 1.8 0.7
1. Forecast.
Source: Central Planning Bureau.
Owing to the larger wage increases granted to public employees,
averagewagesroseby 16percentfrom 1963 to 1964andwiththe2percent
increase in employment, the national wage bill increased by 18 per cent.
Consumer prices rose by 6.5 per cent. The GNP (in volume) increased
by 8.3 per cent, and labour productivity in enterprises increased by 7.5 per
cent. Gross fixed investment increased by 17 per cent (in volume). Im-
ports rose rapidly during the first halfof 1964 but not faster than they had
risen throughout 1963 and stopped rising after the middle of the year;
exports rose very rapidly throughout the year and the current account
deficit ($ 172 million) was less than predicted in the Central Economic
Plan for 1964.
The situation in the labour market did not improve in 1964. The
negotiations for 1965 held in the autumn of 1964 provided for an increase
ofabout 4 per cent in basic contracts, a 2 per cent lump sum payment in
twoinstalmentsand othermiscellaneousbenefitswhichbroughttheincrease
in wage per worker in industry up to 11 per cent over the previous year;
with the 2 per centincrease in employment, thewage bill for 1965 was 13.6
per cent larger than in 1964.
Demand pressure in 1965 remained high, albeit somewhat lower than
in 1964,andconsumerpricesroseby4percent. TheGNP(involume)also
increased less (about 5 per cent) and labour productivity in industry rose
by 4 per cent. The increase in gross fixed investment was much less in
1965 than in 1964 (6 '/£ per cent compared with 17 per cent) but still consi¬
derably more than expected. Imports for the year as a whole rose by
6per cent, whilst exports were 8Vipercenthigherthanin 1964. Thecurrent
account switched from a deficit to a surplus of$42 million.
The Causes ofthe Wage Explosion
Various explanations have been suggested for the wage explosion of
1963-64: integration within the European Economic Community where
(at least in France and Germany) real wages were higher; the possible
under-valuation of the florin; the conditions of over-full employment
prevailing in the Netherlands. All these explanations raise questions,
especially when the timing and the dimensions of the wage explosion are
taken into account.
The Influence ofthe Creation ofthe EEC
It has been often pointed out that real wages in the Netherlands in
1958 were lower than in the other EEC countries except Italy. Despite
the known difficulties of international comparisons of real wages, statis¬
tical inquiries seem to support on the whole the conclusion that real wages
in the Netherlands in 1958 were below those in France and Belgium, but
not significantly below those in Germany1. Another inquiry for 1961
1. Formarriedworkerswithtwochildrenintheiron and steel industryrealwages
werefoundtobe, in 1958, 80percentoftheFrenchbutonlyslightlybelowtheGerman,
Incoalmining, Dutchwageswere 10percentlowerthanBelgian, equaltoFrenchwages
and almost 20 per cent higher than German (cf. RevenusRéels,CECA1954-58Office
Statistique des Communautés Européennes, No. 2, 1960, p. 151). Thisreport also con¬
cluded (p. 59) that in 1958 "the price level was particularly low" in the Netherlands
andwas "thelowestofall theCECAcountries, andthe florinhadapurchasingpower
considerably higher than the value fixed by its official exchange rate."