Rapid labour market response to COVID-19 pandemic
The labour market generally reacts with some delay to economic developments. Companies tend to adopt a wait-and-see attitude and do not immediately lay off scarce staff in the hope that the economy will recover quickly. But not this time. The COVID-19 pandemic and the resulting contact mitigation measures have resulted not only in an unprecedented contraction in the economy but also in an unparalleled fall in employment. Despite generous government support, the total number of jobs decreased by 2.7% in the second quarter compared to the first quarter. From an historic perspective, unemployment also rose rapidly, from 2.9% in March to 4.4% in September. This has led to a fast easing of labour market tensions, which will ultimately lead to lower wage growth. However, this trend has not yet emerged in the figures of Statistics Netherlands. At first sight, that might seem surprising.
New agreements do show low wage growth
In early October, Statistics Netherlands reported that negotiated (CAO) hourly wages including special remuneration increased by 3.0% in September compared to a year earlier. This increase is as high as in the first quarter and slightly higher compared to the second quarter, when negotiated wage growth fluctuated around 2.8%. At the same time, there was a significant discrepancy between the realised wage increases in the figures of Statistics Netherlands and the average wage increase in new collective agreements according to the Dutch General Employers’ Association AWVN. The AWVN indicator showed an average wage increase of 2.1% in September. This is much lower than the average of around 3% prior to the COVID-19 crisis.