Buildings on the Damrak in Amsterdam, the Netherlands (Unsplash/Ronni Kurtz)
The Netherlands is finally about to have a new government. Ten months after the elections, and three weeks after parties did a deal, Mark Rutte is due to present his fourth cabinet in a week.
I’m happy with many of the proposals in the coalition agreement, which I summarized here before Christmas; not surprising, since it’s a coalition of four centrist and center-right parties, led by my own (Rutte’s).
I am worried about their plans for the labor market, which would raise costs for employers and freelancers in order to discourage abuses of self-employment laws.
Spanish labor, finance and social security ministers Yolanda Díaz, María Jesús Montero and José Luis Escrivá give a news conference in Madrid, May 27 (La Moncloa)
Spanish employers and trade unions have done a deal with Pedro Sánchez’ socialist government to overturn several labor reforms of his conservative predecessor, Mariano Rajoy.
I argued against repeal. Rajoy’s liberalizations helped bring down unemployment, from a peak of 26 percent to 14 percent before the pandemic, and encouraged business growth. They allowed companies to opt out of collective bargaining agreements and expanded trial periods.
The reforms did not create more precarious jobs. The share of part-time, temporary and self-employed workers barely changed.
Skyline of Barcelona, Spain (Unsplash/Anastasiia Tarasova)
Maybe I left Spain too soon. The country is trying to lure (back) expats by cutting red tape and taxes.
Early in the pandemic, expats and tourists stayed away when Spain imposed one of the strictest lockdowns in Europe. For weeks, we weren’t allowed to leave our homes except to do groceries and walk the dog.
But as restrictions were relaxed, and teleworking became the norm Europe-wide, sunny Spain suddenly looked more attractive to knowledge workers in Northern Europe. Tens of thousands made the trek south.
Spain’s ruling left-wing parties have agreed to reverse the labor market liberalizations of the previous, conservative government, which made it easier for firms to hire and fire workers.
The decision is hard to justify even by the standards set by proponents of repeal. The reforms did not create more precarious jobs, they did not cause higher structural unemployment, and they barely made a dent in wages. Read more “Repeal of Spanish Labor Reforms Is Unwise”
Rotterdam, the Netherlands at night, September 16, 2015 (Unsplash/Rik van der Kroon)
Pressure is mounting on the Dutch government to reverse liberalizations in the labor market.
The OECD, a club of 38 wealthy nations, has endorsed a call by Dutch employers and trade unions to encourage the use of permanent contracts.
But where the OECD prioritizes reforms to make it cheaper and easier to hire workers full-time, the Netherlands’ own Social and Economic Council (SER), in which trade associations and labor groups are represented, would make temporary and part-time work more expensive.
The divide is mirrored in Dutch politics: Prime Minister Mark Rutte’s liberal VVD (of which I am a member) and the centrist Christian Democrats would reduce the cost of regular employment for businesses. The Labor Party and Greens would rein in zero-hours and freelance contracts. All four may be needed to form a government. Read more “Dutch Likely to Reverse Labor Market Liberalizations”
South Front Entrance of Union Station in Washington DC, July 4, 2019 (Unsplash/Caleb Fisher)
Big government is back.
Massive rescue programs have prevented business failures and unemployment on the scale of the Great Depression, even though last year’s economic contraction was nearly as bad. The European Union agreed a €750 billion recovery fund, financed, for the first time, by EU-issued bonds. The money comes on top of national efforts. The United States Congress passed a $2.2 trillion stimulus, worth 10 percent of GDP, in March and added $484 billion in April. An additional $900 billion in relief was included in this year’s budget.
Joe Biden, the incoming president, wants to spend $2 trillion more over the next four years to transition the United States to a greener economy and create a public health insurance program. Corporate tax would go up from 21 to 28 percent.
In Spain, a socialist government has introduced the biggest budget in Spanish history — partly to cope with the impact of coronavirus, but also to finance digitalization, electric cars, infrastructure, renewable energy and rural development. Taxes on income, sales and wealth are due to increase.
In the United Kingdom, the ruling Conservative Party is building more social housing and thinking about renationalizing rail. Unlike during the last economic crisis, it does not propose to cut spending even though tax revenues are down.
Same in the Netherlands, where all the major parties agree the government needs to do more to reduce pollution and prevent people at the bottom of the social ladder from falling through the cracks.
I’m not opposed to more government per se. I’ve argued the United States should imitate the policies of Northern Europe to improve child care, health care and housing.
The British flag flies over the Cabinet Office in London, England (Shutterstock/Willy Barton)
Two months ago, I argued Britain was once again the sick man of Europe. It had the second-highest per capita COVID death rate among major countries. Economic output had fallen 20 percent from the year before.
The crisis wasn’t lost on policymakers. The dual shock of coronavirus and Brexit — Britain formally left in 2019 but still applies EU rules and regulations this year — has led to something of a quiet revolution in Whitehall: the potential rebirth of the interventionist state.
There is still much wrong with how the British government has handled both events, the poster child for COVID being the decimation of the British aviation and travel industry as well as the arts. Not since the closing of the coal mines has an entire industry shrunk so dramatically.
French workers demonstrate against proposed pension reforms in Paris, December 17, 2019 (PS/Mathieu Delmestre)
French metro and railway workers have been on strike for almost a month to preserve privileges from an era when the trains ran on coal.
The people who suffer the most are workers on modest incomes who don’t own a car and normally commute into Paris by train; small businesses and shops which are understaffed; families that couldn’t get together for Christmas.
The unions behind the strikes claim they are fighting a “president of the rich” — Emmanuel Macron — on behalf of “the people”.
Piazza del Duomo in Milan, Italy, November 24, 2009 (Bjørn Giesenbauer)
Italy is creating a lost generation.
Consider the following statistics, some taken from the Financial Times:
30 percent of Italians between the ages of 15 and 24 are out of work, more or less the same rate as in Spain but almost double the eurozone average.
Of those in work, the majority are on temporary contracts.
Nearly eight out of ten young Italians are in part-time work and unable to find full-time employment, the highest rate by far among large European economies. In France and Spain, it’s about 50 percent.
Italy spends far less on tertiary education that its neighbors. The result: only 27 percent of Italians in their thirties have a university degree, the second-lowest rate in the EU, where the average is 40 percent. Italy does especially poorly in educating migrants: just 13 percent of its foreign-born population has completed university against 36 percent in the EU as a whole.
Average real incomes are roughly at the level they were in 1995. In France, Germany and Spain, they have grown about 25 percent.
Piazza del Duomo in Milan, Italy, November 24, 2009 (Bjørn Giesenbauer)
Italy’s ruling populists claim to have made good on their campaign promise to overturn the previous government’s labor reforms.
A decree:
Reduces the maximum length of temporary work contracts from 36 to 24 months;
Reduces the times such contracts can be renewed from five to four; and
Introduces a requirement for employers to prove a temporary contract is still warranted after one year.
Italy’s National Institute for Social Security estimates that 8,000 temp workers could lose their jobs as a result of the changes, but the Five Star Movement and League have dismissed these figures as “unscientific” and “disputable”.
