Religion, Class, and the Postwar Development of the Dutch Welfare State 9789048537648

Table of contents :
Contents
List of Abbreviations
Preface
Part I. History and Theory
1. The Dutch Welfare Puzzle
2. The Politics of Social Solidarity
Part II. The Politics of Welfare State Expansion
3. Welfare Reform in the Age of Austerity
4. Welfare State Expansion and the Confessional Preoccupation with Personal Responsibility and Self-Help
5. Completing the Social Insurance System
6. Catering to the Low Paid
Part III. The Politics of Retrenchment
7. The Emergence of Welfare Without Work
8. Tackling the Inactivity Crisis
9. Towards an Active Welfare State
10. Population Ageing and the Need for Further Reform
Part IV. Conclusion
11. The Political Determinants of Solidaristic Reform
Bibliography
Index

Citation preview

Religion, Class, and the Postwar Development of the Dutch Welfare State

Religion, Class, and the Postwar Development of the Dutch Welfare State

Dennie Oude Nijhuis

Amsterdam University Press

Cover illustration: Citizens collecting their old age benefits in the early 1960s Source: Johan de Haas / International Institute of Social History Cover design: Coördesign, Leiden Typesetting: Crius Group, Hulshout isbn 978 94 6298 641 1 e-isbn 978 90 4853 764 8 (pdf) doi 10.5117/9789462986411 nur 754 © Dennie Oude Nijhuis / Amsterdam University Press B.V., Amsterdam 2018 All rights reserved. Without limiting the rights under copyright reserved above, no part of this book may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the written permission of both the copyright owner and the author of the book.

Contents List of Abbreviations

9

Preface 13

Part I  History and Theory 1 The Dutch Welfare Puzzle 19 The Uneven Trajectory of Dutch Welfare State Development 23 Unions, Employers, and the Importance of Broad Worker  Solidarity 30 The New Politics of Welfare Reform in the Netherlands 37 The Organization of the Book 42 2 The Politics of Social Solidarity 45 Welfare Reform and the Logic of Solidarity 48 Christian Democracy and the Political Foundations of Social Solidarity 54 Organized Labor and the Question of Inclusiveness 59 Solidarity in the Age of Retrenchment 65

Part II  The Politics of Welfare State Expansion 3 Welfare Reform in the Age of Austerity Immediate Postwar Measures The First Major Reform: The Introduction of the Unemployment Insurance Act The Organization of Social Insurance

71 74 81 90

4 Welfare State Expansion and the Confessional Preoccupation with Personal Responsibility and Self-Help 99 Slow Progress on Most Fronts 102 The First Landmark Act: The Introduction of the General Old Age Act 112

5 Completing the Social Insurance System 125 The Confessional Turnabout and the Introduction of the General Assistance Act 129 Health Insurance Reform and the Limits of Solidarity 136 Improving the Generosity of Unemployment Insurance  Protection 139 Equal Opportunity and the Introduction of the Act on Disability Insurance 147 6 Catering to the Low Paid 153 The General Old Age Act and the Introduction of the Social Minimum 157 Towards a Truly Inclusive Welfare System: The Introduction of the Net-Net Link 162 The Rapid Expansion of Social Care and Social Housing  Programs 172

Part III  The Politics of Retrenchment 7 The Emergence of Welfare Without Work The Dutch Disability Insurance Program and Its Use for ­Redundancy Purposes Dealing with the Return of Long-Term Unemployment Labor Redistribution and the Introduction of Industrial Early Retirement Schemes

200

8 Tackling the Inactivity Crisis The Struggle Over Retrenchment Towards a More Coherent Retrenchment Agenda The 1987 Reform of the Social Insurance System

207 212 219 227

9 Towards an Active Welfare State Tackling the Disability Insurance Crisis The Long Road Towards Administrative Social Insurance Reform The Purple Government’s Work Strategy

235 239 248 254

10 Population Ageing and the Need for Further Reform The Reform Agenda of the Second Balkenende Government The 2005 Overhaul of the Health Insurance System

263 266 274

181 184 194

Old-Age Provision and the Challenge of Population Ageing The Changing Landscape of Social Welfare Provision

280 285

Part IV  Conclusion 11 The Political Determinants of Solidaristic Reform 295 Reconsidering the Uneven Trajectory of Dutch Welfare State Development 297 The Future of the Dutch Welfare State 305 Bibliography 317 Index 337

List of Figures and Tables Figure 7.1 Labor force participation rate of men aged 55 to 64 in various countries (in percent) from 1965 to 2000 Figure 7.2 The number of disability benefit recipients per 1,000 active labor market participants by age in various countries in 1990 Figure 8.1 The social minimum compared to average wages in industry, 1970-1995 Figure 10.1 Public spending on old-age pension provision, health care, and other social programs as a percentage of the gross national product from 1980 to 2015 Table 7.1 The number of benefit recipients of various social insurance programs, the general assistance program and early retirement schemes, 1970-1990 (in thousands of recipients) Table 7.2 Number of participants in various early exit pathways as a percentage of the number of non-employed men aged 60-64, 1975-1990 Table 10.1 The use of the wage indexation mechanism since 1980

183 185 223 276

182 204 281

AAW ABW ANW AOW ARP AWBZ

List of Abbreviations

DIVOSA

General Disability Act (Algemene Arbeidsongeschiktheidswet) General Assistance Act (Algemene Bijstandswet) General Survivors Act (Algemene Nabestaandenwet) General Old Age Act (Algemene Ouderdomswet) Anti-Revolutionary Party (Anti-Revolutionaire Partij) General Act on Exceptional Medical Expenses (Algemene Wet Bijzondere Ziektekosten) Dutch General Employers’ Association (Algemene Werkgeversvereniging Nederland) General Widows and Orphans Act (Algemene Weduwen- en Wezenwet) Christian-Democratic Appeal (Christen-Democratisch Appèl) Christian Historical Union (Christelijk Historische Unie) Christian Union Federation (Christelijk Nationaal Vakverbond) Bureau for Economic Policy Analysis (Centraal Planbureau) Central Social Employers’ Federation (Centraal Sociaal Werkgevers Verbond) Social Insurance Supervision Committee (College van Toezicht Sociale Verzekeringen) Christian Union (Christenunie) Democrats 66 (Democraten ’66) Association of Social Services’ Directors (Vereeniging van Directeuren voor

FCWV

Sociale Arbeid) Catholic and Protestant-Christian Employers’ Unions (Federatie van

FNV FvB

Katholieke en Protestants-Christelijke Werkgeversverbonden) Federation of Dutch Labor Unions (Federatie Nederlandse Vakbeweging) Federation of Industrial Insurance Associations (Federatie van

GAK GMD IOAW

Bedrijfsverenigingen) Common Insurance Office Common Medical Service (Gemeenschappelijke Medische Dienst) Act on Income Provisions for Older or Partially Disabled, Unemployed Persons

AWVN AWW CDA CHU CNV CPB CSWV CTSV CU D66

IOAZ

IVA IWI JWG

(Wet Inkomensvoorziening Oudere en Gedeeltelijk Arbeidsongeschikte Werkloze Werknemers) Act on Income Provisions for Older or Partially Disabled, Former Selfemployed Persons (Wet Inkomensvoorziening Oudere en Gedeeltelijk Arbeidsongeschikte Gewezen Zelfstandigen) Income Insurance Program for the Fully and Permanently Disabled (Inkomensverzekering voor Volledig en Duurzaam Arbeidsongeschikten) Inspection Service for Work and Income (Inspectie Werk en Inkomen) Job Guarantee Act (Jeugdwerkgarantiewet)

10 

Religion, Cl ass, and the Post war Development of the Dutch Welfare State

KAB KSW KVP LISV LPF MHP NCW NKV NOSV NVV NWW NZa OSV PEMBA PvdA RKWV RVV RWW SDAP SER SGP SP STAR SVR TAV

Catholic Workers’ Movement (Katholieke Arbeidersbeweging) Framework Act on Specific Welfare (Kaderwet Specifiek Welzijn) Catholic People’s Party (Katholieke Volkspartij) National Institute for Social Insurances (Landelijke Instituut voor Sociale Verzekeringen) Pim Fortuyn List (Lijst Pim Fortyn) Labor Union Federation for Middle and Higher-Level Personnel (Vakcentrale voor Middelbaar en Hoger Personeel) Christian Employers’ Federation (Nederlands Christelijk Werkgeversverbond) Netherlands Catholic Trade Union Federation (Nederlands Katholiek Vakverbond) New Social Insurance Organization Act (Nieuwe Organisatiewet Sociale Verzekeringen) Dutch Association of Trade Unions (Nationaal Verbond van Vakverenigingen) New Unemployment Insurance Act (Nieuwe Werkloosheidswet) Dutch Healthcare Authority (Nederlandse Zorgautoriteit) Social Insurance Organization Act (Organisatiewet Sociale Verzekeringen) Act on Premium Differentiation and Market Regulation (Wet Premiedifferentiatie en Marktwerking bij Arbeidsongeschiktheidsverzekeringen) Labor Party (Partij van de Arbeid) Roman Catholic Workers’ Federation (Rooms-Katholiek Werkliedenverbond) Council of Trade Union Federations (Raad van Vakcentralen) State Group Scheme for Unemployed Workers (Rijksgroepsregeling voor Werkloze Werknemers) Social Democratic Workers’ Party (Sociaal-Democratische Arbeiderspartij) Social-Economic Council (Sociaal-Economische Raad) Reformed Political Party (Staatkundig Gereformeerde Partij) Socialist Party (Socialistische Partij) Labor Foundation (Stichting van de Arbeid) Social Insurance Council (Sociale Verzekeringsraad) Act on the Reduction of the Disability Volume (Wet Terugdringing

Arbeidsongeschiktheidsvolume) Act on the Reduction of Disability Arrangement Claims (Wet Terugdringing TBA Beroep op de Arbeidsongeschiktheidsregelingen) Supplementary Benefits Act (Toeslagenwet) TW Act on Sickness Absenteeism Reduction (Wet Terugdringing Ziekteverzuim) TZ Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen) UWV Federation of Dutch Industries (Verbond van Nederlandse Ondernemingen) VNO VNO-NCW Federation of Dutch Industries- Christian Employers’ Federation (Verbond van Nederlandse Ondernemingen- Nederlands Christelijk Werkgeversverbond)

List of Abbreviations

VNW VUT VVD

WLZ WMO WOR WRR

Association of Dutch Employers Early retirement schemes (Vervroegde Uittreding) People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie) Act on Disability Benefits for Young Disabled Persons (Wet Arbeidsongeschiktheidsvoorziening Jonggehandicapten) Act on Adjustment Mechanism (Wet op Aanpassingsmechanismen) Act on Disability Insurance (Wet op Arbeidsongeschiktheidsverzekering) Act on Disability Insurance for the Self-employed (Wet Arbeidsongeschiktheidsverzekering Zelfstandigen) Basic Childcare Provision Act (Wet Basisvoorziening Kinderopvang) Act on Collective Public Health Prevention (Wet Collectieve Preventie Volksgezondheid) Act on Flexibility and Security (Wet Flexibiliteit en Zekerheid) Return to Work Scheme for the Partially Disabled (Werkhervatting Gedeeltelijk Arbeidsgeschikten) Work and Income According to Work Capacity Act (Wet Werk en Inkomen naar Arbeidsvermogen) Jobseekers Employment Act (Wet Inschakeling Werkzoekenden) Coupling with Adjustment Possibility Act (Wet Koppeling met Afwijkingsmogelijkheid) Act on Long-term Care (Wet Langdurige Zorg) Social Support Act (Wet Maatschappelijke Ondersteuning) Works Councils Act Scientific Council for Government Policy (Wetenschappelijke Raad voor

WSW WULBZ

Regeringsbeleid) Social Employment Act (Wet Sociale Werkvoorziening) Act on the Extension of Wage Payment during Illness (Wet Uitbreiding

WVG WVLZ

Loondoorbetalingsplicht bij Ziekte) Act on Services for the Handicapped (Wet Voorzieningen Gehandicapten) Act on Extension of Wage Payment during Illness (Wet Verlenging

Wajong WAM WAO WAZ WBK WCPV WFZ WGA WIA WIW WKA

WVOA WW WWB WWV ZW

Loondoorbetalingsverplichting bij Ziekte) Prohibition of Discrimination by Working Hours Act (Wet Verbod Onderscheid Arbeidsduur) Unemployment Insurance Act (Werkloosheidswet) Work and Social Assistance Act (Wet Werk en Bijstand) Unemployment Provision Act (Wet Werkloosheidsvoorziening) Sickness Act (Ziektewet)

11

Preface As a result of its peculiar welfare trajectory, the political and organizational weakness of forces that are traditionally viewed as the major proponents of the welfare state, and its ability to combine generous levels of social provision with high levels of employment, the Netherlands has long attracted much attention from welfare state scholars. At the same time, however, we still lack a comprehensive account of the Dutch welfare state’s postwar trajectory – let alone one that is accessible to an English-language audience. This book aims to offer such an analysis. As is the case with most scholarly accounts, it has both empirical and theoretical goals. Its empirical goals are twofold. The first is to provide a thorough analysis of the preferences of the main welfare actors in the Netherlands – Christian-democratic, social-democratic and liberal parties as well as the main union and employer federations – and the role they have played in the process of postwar Dutch welfare reform. The second is to explain the main features of the postwar trajectory of the Dutch welfare state, which include its slow development under leftist governments in the immediate postwar period, its rapid transformation into unmatched levels of generosity under mostly right-wing governments in following years, and its subsequent transformation into a more active but still comparatively generous system of social protection. The book’s primary theoretical goal is to provide a critical analysis of some of the central claims of the welfare state literature, in particular those that relate to the impact of Christian democracy and the labor union movement on welfare state development. These claims, and my criticism of them, will be outlined at length in the chapters below. For here, it is sufficient to point out that the willingness of Christian-democratic parties and (various types of) labor unions in the Netherlands to accept and push for welfare initiatives that massively redistributed resources from the middle-class and other affluent groups towards low income and otherwise vulnerable economic groups has been remarkable, and that this warrants a fundamental reconsideration of the role of Christian democracy and the labor union movement in the postwar development of European welfare states. To illustrate this, the book will make numerous references to the situation in countries other than the Netherlands. The central argument of the book is that the postwar expansion of the Dutch welfare state has had strong consequences for the distribution of income and risk in society and that middle-class groups rather than the truly affluent have largely carried the costs of this. Rather than explaining

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Religion, Cl ass, and the Post war Development of the Dutch Welfare State

the success of efforts to expand the boundaries of the postwar welfare state through the formation of “political alliances” between low-income and middle-class groups, as many scholars have attempted to do, this book consequently investigates for what reasons the middle-class groups have refrained from rallying against welfare initiatives that redistributed resources among different societal groups in a successful manner. It argues that at least two factors played a major role in this. The first was the dominant role of Christian democracy and the emphasis of Christian-democratic parties on social justice and solidarity with the less fortunate. The second was the mostly sectoral nature of labor union organization in the Netherlands and the remarkable willingness of the main union federations to support welfare initiatives that redistributed income and risk among different categories of wage earners. The analysis put forward in this book draws on a large number of secondary and primary sources. The latter include minutes of meetings, internal memos, and press briefings of political parties, the cabinet, parliament, ministries, administrative social insurance agencies, advisory councils, labor unions and employer federations. The extent to which I relied on these sources varies per chapter. As the book emphasizes the importance of union and employer federations in shaping the course of the Dutch welfare state’s postwar development, in particular during the first three to four chapters of the postwar period, and little research has been done on this subject to date, the first chapters of the book make relatively heavy use of sources from the main union and employer federations. On the union side these are the two largest union federations, the Federation of Dutch Labor Unions (Federatie Nederlandse Vakbeweging or FNV), as well as its predecessors, and the Protestant Christian Union Federation (Christelijk Nationaal Vakverbond or CNV). On the employer side these are the Federation of Dutch Industries-Christian Employers Federation (Verbond van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond or VNO-NCW) and its many predecessors. As the minutes of meetings and internal memos of cabinets, ministries, political parties, labor unions, and employer organizations were of limited availability for the post-1980s period, the third part of the book relies more heavily on an analysis of parliamentary debates, internal notes of meetings in corporatist platforms like the Social-Economic Council (Sociaal-Economische Raad or SER), and newspapers and other press sources. I am confident that by doing so I continued to present the interests and preferences of the main actors in an accurate manner. For the discussion on the use of social security programs for early retirement purposes in the Netherlands in

Preface

15

Chapter 7, I made extensive use of archives from organizations responsible for the implementation of these programs, including the Common Medical Service (Gemeenschappelijke Medische Dienst, or GMD), the Federation of Industrial Insurance Associations (Federatie van Bedrijfsverenigingen or FvB), and the Social Insurance Council (Sociale Verzekeringsraad, or SVR). Finally, I interviewed multiple social security experts and leaders from political parties, unions, and employer organizations. Writing this book has been a difficult and protracted task, and I am therefore fortunate to have been able to benefit from the support of many friends, colleagues, and institutions. Generous funding from Leiden University’s Institute for History and the International Institute of Social History (International Instituut voor Sociale Geschiedenis, has enabled me to do research for and write this book. I have received immense help from archivists at the National Archives of the Netherlands (Nationaal Archief or NA), the International Institute for Social History, the Federation of Dutch Industries-Christian Employers Federation, the Radboud University Nijmegen’s Catholic Documentation Center (Katholiek Documentatiecentrum or KDC), the Vrije Universiteit Amsterdam’s Historical Documentation Center of Dutch Protestantism (Historisch Documentatiecentrum voor het Nederlandse Protestantisme or HDP), and the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen or UWV). They include: Frank Kanhai, Lodewijk Winkeler, Piet Hazenbosch, Hans Seijlhouwer, Teun van Lier, Thijs van Leeuwen, Monique van der Pal, Ed Kool, and Anne Oechtering. At every stage of the writing process, friends and colleagues have offered countless suggestions, comments and advice. For their assistance and comments, I gratefully thank Thomas Paster, Peter Scholliers, Matthieu Leimgruber, Pierre Eichenberger, Peer Vries, Kees van Kersbergen, Jelle Visser, Karen Anderson, Cathie Jo Martin, Kathleen Thelen, Leo Lucassen, Jacques van Gerwen, Jeroen Touwen, Richard Griffiths, Alexandre Afonso, Cátia Antunes, Marlou Schrover, Lex Heerma van Voss, Ruud Koole, Martijn van der Burg, Thomas Lindblad, Manon van der Heijden, Jeroen van Veldhoven, Henk Looijesteijn, Joshua Gordon, Paul Bridgen, Susanna Fellman, and Marek Naczyk. My special thanks go out to Peter Swenson, whose influence is evident in every aspect of this book. Last but not least, I want to thank my wife, Ayben. Without her patience and understanding, this book could not have been written.

Part I History and Theory

1

The Dutch Welfare Puzzle

In the period following the Second World War, few advanced industrial societies have been as successful in creating and maintaining an elaborate system of social provision as the Netherlands. For many decades now, the Netherlands has enjoyed – or suffered from – a reputation as a vanguard among welfare states. Its system of “cradle-to-the-grave” care is viewed as generous in terms of both its accessibility and the high level of its benefits. At a time when scholars are increasingly concerned about the emergence of “dual” welfare systems, high levels of financial solidarity in the Netherlands still assure that all citizens are entitled to adequate levels of protection against labor market risks such as unemployment, sickness, disability, and old-age. Despite an ongoing need to reform in the face of economic challenges like the current ageing crisis, the Dutch welfare state’s continual ability to provide generous levels of care and protection seems guaranteed. In fact, with a labor market participation rate that ranks among the highest in the European Union, the Netherlands stands out as being particularly well equipped to deal with these challenges.1 As such, it serves as a clear reminder that high and comprehensive levels of care and protection against labor market risks do not have to conflict with national economic performance. Of course, the Netherlands has not always been known for its ability to combine generous levels of social provision with high employment levels. Indeed, during most of the twentieth century, it was not even considered as particularly successful in providing adequate levels of social protection for all its citizens. In the first half of the century, Dutch legislators acquired a strong reputation for their conservative views on welfare state development: a reputation that they only slowly managed to dispense with in the postwar period. By the late 1950s, contemporaries still widely regarded the Netherlands as something of a “welfare laggard”.2 Compared to most other Western nations, Dutch social insurance benefits offered moderate replacement rates at best, which were granted for short periods and based on rather strict eligibility criteria. Moreover, large sections of the population 1 In 2008, the Dutch labor market participation rate was the second highest in the European Union, behind Denmark. See OECD, Labor Force Statistics (Paris: OECD, 2010). 2 By 1956, among thirteen western European countries, only three devoted less of their gross domestic product to social insurance spending than the Netherlands. See Peter Flora, State, Economy, and Society in Western Europe, 1815-1975: a Data Handbook in Two Volumes. Volume 1: The Growth of Mass Democracies and Welfare States (London: Macmillan Press, 1983) 456.

20 

Religion, Cl ass, and the Post war Development of the Dutch Welfare State

were still not covered against labor market risks like disability and sickness. It was not until the mid-1970s when all of these features – which had previously given commentators reason to view the Dutch social insurance system as underdeveloped – had disappeared. By then – and as a result – the Netherlands was spending more on social benefits than any other nation in the world.3 Widely admired for its unrivaled ability to offer adequate provision against the financial consequences of labor market risks for all of its citizens, the Dutch welfare state thus came to improve the quality of countless lives. Nonetheless, its ability to do so naturally came at a substantial financial cost, which considerably increased when a long period of economic upheaval following the outbreak of the first oil crisis in the early 1970s prompted a dramatic inflow of workers into the social insurance system. As a result of this massive inflow, the generosity of the Dutch welfare state by the end of the decade no longer attracted universal admiration. Contemporaries increasingly viewed it as a central cause of what the Swedish sociologist Göran Therborn considered as constituting “perhaps the most spectacular employment failure in the advanced capitalist world”. 4 An ever-larger group of critics argued that the combination of generous benefits with lenient eligibility criteria rendered the Netherlands an excellent example of a society that offered “welfare without work”.5 Prompting yet another major transformation of the Dutch welfare state, the following decades witnessed a plethora of measures aimed at reducing the dependency on state benefits in the Netherlands. Beginning with careful attempts to tighten eligibility criteria in the 1980s and followed by much more far-reaching reform in subsequent years, these measures proved quite successful. By the turn of the century, the Netherlands no longer constituted a society that offered welfare without work; rather, it boasted one of Europe’s 3 From the mid-1970s to the late 1980s, social spending in the Netherlands even exceeded that of Sweden. See Duane Swank and Alex Hicks, “The Determinants and Redistributive Impacts of State Welfare Spending in the Advanced Capitalist Democracies, 1960-1980”. In Norman Vig and Stephen Schier, Political Economy in Western Democracies (New York: Holmes & Mayer, 2001) 115; Peter Flora (ed.), Growth to Limits: The Western European Welfare States since World War II. Volume 4: Appendix (Synopses, Bibliographies, Tables) (Berlin: Walter de Gruyter, 1987) xix. 4 Göran Therborn, Why Some Peoples Are More Unemployed Than Others: The Strange Paradox of Growth and Unemployment (London: Verso, 1986) 152. 5 See, for instance, Kees van Kersbergen and Uwe Becker, “The Netherlands: A Passive Social Democratic Welfare State in a Christian Democratic Ruled Society”, Journal of Social Policy 17:4 (1988) 477-499. The term “welfare without work” has been coined by Gøsta Esping-Andersen in his Welfare States in Transition. National Adaptations in Global Strategies (London: Sage, 1996).

The Dutch Welfare Puzzle

21

highest employment rates. Moreover, it had managed to improve its labor market performance while largely maintaining the generous nature of its welfare state. Today, the social insurance system still offers some of the world’s highest and most accessible benefits. As a result, the transformation of the Dutch welfare state from a “passive” into a more active system of social protection can only be viewed as a tremendous success. This book aims to describe these two major transformations of the Dutch welfare state, namely from a long-time “laggard” to welfare “leader” and subsequently from a passive into a more active system of social protection. Accordingly, it aims to provide a comprehensive history of its postwar development. Despite its unique development trajectory, the Dutch case has not received much attention in the English-language literature on welfare state development.6 Indeed, even in the Dutch language, the few comprehensive accounts that exist are generally either out of date or focus on specif ic programs or policies.7 Moreover, they have failed to explain many of the Dutch welfare state’s most important features. As we will explore, these include its slow development under leftist governments in the f irst years of the postwar period, its rapid transformation into unmatched levels of generosity under mostly rightwing (i.e. confessional-liberal) governments in subsequent years and the broad consensus on many of the redistributive initiatives that made this 6 The most comprehensive work on the Dutch welfare state’s development during the first four decades of the postwar period is Robert Cox’ The Development of the Dutch Welfare State: From Workers’ Insurance to Universal Entitlement (Pittsburgh: University of Pittsburgh Press, 1993). More or less comprehensive treatments of the period following the 1980s can be found in Jelle Visser and Anton Hemerijck, “A Dutch Miracle”: Job Growth, Welfare Reform and Corporatism in the Netherlands (Amsterdam: Amsterdam University Press, 1997); Erik de Gier and Abram de Swaan (eds.), Dutch Welfare Reform in an Expanding Europe: the Neighbours’ View (Spinhuis: Amsterdam, 2004); Barbara Vis, Politics of Risk-taking: Welfare State Reform in Advanced Democracies (Amsterdam: Amsterdam University Press, 2010); Mara Yerkes, Transforming the Dutch Welfare State: Social Risks and Corporatist Reform (Bristol: Policy Press, 2011). 7 The most comprehensive accounts can be found in J.A.A. van Doorn and C.J.M. Schuyt, De stagnerende verzorgingsstaat (Amsterdam/Meppel: Boom, 1978); Mirjam Hertogh, “Geene wet, maar de Heer”: de confessionele ordening van het Nederlandse sociale zekerheidsstelsel, 1870-1975 (Den Haag: VUGA, 1998); Joop M. Roebroek and Mirjam Hertogh, “De beschavende invloed des tijds”: Twee eeuwen sociale politiek, verzorgingsstaat en sociale zekerheid in Nederland (Den Haag, 1998); and Willem Trommel and Romke van der Veen (eds.), De herverdeelde samenleving: de ontwikkeling en herziening van de Nederlandse verzorgingsstaat (Amsterdam: Amsterdam University Press, 1999). See also Jacques van Gerwen and Marco van Leeuwen, Zoeken naar zekerheid. Risico’s, preventie, verzekeringen en andere sociale zekerheidsregelingen in Nederland 1500-2000 (Amsterdam: Amsterdam University Press, 2000); and Coen Teulings, Romke van der Veen, and Willem Trommel, Dilemma’s van sociale zekerheid: aan analyse van 10 jaar herziening van het stelsel van sociale zekerheid (Amsterdam: VUGA, 1997).

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Religion, Cl ass, and the Post war Development of the Dutch Welfare State

generosity possible. In addition – and highly related to this – existing studies have paid insufficient attention to the leading role of union and employer federations in shaping the course of the Dutch welfare state’s postwar development. A major purpose of this book is to illustrate this role, which was particularly important during the period of so-called welfare state expansion that lasted up to the late 1970s. As we will see, the main contours of many of the most important social programs in this period were not decided by the governing parties or parliamentary initiatives, but rather during negotiations between the major union and employer federations. Sometimes these negotiations were part of a broader political process in which parliament requested – and subsequently largely adopted – organized industry’s advice through existing corporatist institutions like the Social-Economic Council (Sociaal-Economische Raad, or SER), which also included state representatives. However, new welfare initiatives also increasingly originated – and adopted a more-or-less definitive shape – during bilateral negotiations between unions and employers over wages. The first chapters of this book illustrate how this invasion on the primacy of politics explains many of the Dutch welfare state’s peculiar characteristics. Furthermore, they also explain how the prominent role of union and employer federations in Dutch welfare state development fit with confessional – and to some extent socialdemocratic – thinking on subsidiarity and the organic society that these political groups had developed in the prewar period. This role became subject to ever-greater political concern when the social insurance system’s costs increased in political salience during the late 1970s, ushering in a long period of retrenchment. This eventually resulted in a dramatic break with the long-established tradition of organized industry control over the implementation of social insurance programs. At the same time, organized industry would no longer play a leading role in setting the outlines of welfare state reform. Permanent concerns over the social insurance system’s financial viability, the declining confessional share of the vote and even the (partial) move towards decentralized bargaining all pointed in the direction of a restoration of the primacy of politics. Nonetheless – and as illustrated by recent discussions over old-age pension reform – the influence of union and employer federations remains substantial. The following analysis illustrates how they helped to shape the Dutch welfare state’s postwar transformation from a long-time welfare laggard to welfare leader and subsequently from a passive into an active system of social protection.

The Dutch Welfare Puzzle

23

The Uneven Trajectory of Dutch Welfare State Development Having long been recognized as a defining feature of advanced industrial societies, the origins of the modern welfare state date back to the late nineteenth century. Yet it was only in the decades following the end of the Second World War that some nations – and even then not all – succeeded in offering adequate levels of protection against economic misfortune for all citizens. In the many decades in between, efforts to provide “cradle-to-thegrave” care for all citizens often involved harsh political conflicts between societal groups with different ideologies and interests. In most nations, these conflicts mainly revolved around the need to expand the social insurance system. While applying the instrument of social insurance to ever-greater numbers of people and labor market risks certainly constituted a popular method of achieving adequate levels of protection against ill fortune for all citizens, it also proved highly controversial. After all, it meant that traditional methods of organizing the social insurance system were no longer sufficient. To ensure that the social insurance system also adequately catered to less privileged groups, public pooling of risk was simply insufficient; rather, it was also necessary to ease eligibility rules, introduce a more redistributive way of relating benefits to contributions or even introduce partial tax-financing. The resulting move away from actuarial principles naturally encountered stiff opposition both on principled grounds and from organized interests which stood to lose from the redistributive consequences. In the Netherlands, this resistance was particularly severe for an exceptionally long time. Undoubtedly the longstanding parliamentary dominance of confessional parties and the partial confessional nature of industrial organization held strong importance in this respect. During much of the twentieth century, confessional political parties, employer organizations, and even unions proved quite reluctant to introduce the principle of the social insurance to broad groups of citizens and labor market risks. In fact, guided by the principled view that insurance against labor market risks should be achieved by voluntary rather than government-mandated solutions, some confessional forces rejected the principle of state insurance against labor market risks altogether. Others simply emphasized the need to adhere to strict actuarial principles.8 These views – and the confessional insistence on limiting state involvement in the implementation of social insurance 8 For some comprehensive accounts of confessional views on social insurance development in the Netherlands, see Kees van Kersbergen, Social Capitalism: A Study of Christian Democracy and the Welfare State (London: Routledge, 1995); Hertogh, “Geene wet, maar de Heer”; and Marcel

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programs as much as possible – seriously hindered welfare state growth in the Netherlands during the first half of the twentieth century. Indeed, most confessional forces only slowly came to accept the need to move away from strict actuarial principles after the Second World War. However, when they finally did, they were often willing to go much further than their counterparts abroad. Those same confessional forces that had hindered welfare state growth in the Netherlands for so many decades were by the 1960s giving their full support to the further expansion of a system of social protection that was by then already among the most generous in the world. The notion that this expansion was based on an ever-greater move away from actuarial principles no longer seemed a cause of great concern in confessional eyes. Among the confessional political parties, the conversion of the Anti-Revolutionary Party (Anti-Revolutionaire Partij, henceforth ARP) was perhaps most remarkable. Despite always containing a more left-oriented faction, the five ARP-led governments of the 1920s and 1930s had been characterized by a consistent lack of progress on the social insurance front.9 Furthermore, the party still harbored many principled opponents of compulsory membership of public and private insurance programs against labor market risks in the immediate postwar years. However, in subsequent years, its emphasis on self-reliance and personal responsibility increasingly gave way to a societal view in which the government played a crucial role by providing a “shield for the weak”.10 By the 1960s, the ARP gave its support to many measures that conflicted with actuarial principles. This stunning transformation of confessional views on social insurance has long baffled scholars. A large body of literature now exists explaining this transformation by arguing that increased electoral competition with the left simply forced confessional political parties to adopt a more supportive stance on welfare state expansion. This argument suggests that in the prewar years – and to some extent also in the direct postwar period – confessional parties were largely sheltered against electoral competition due to the fragmentation of Dutch society into ideological and vertically integrated Hoogenboom, Standenstrijd en zekerheid. Een geschiedenis van oude orde en sociale zorg in Nederland (Amsterdam: Boom, 2004). 9 For an excellent account of different views on social insurance development within the ARP during the prewar period, see Hoogenboom, Standenstrijd en zekerheid, 151-162. 10 As early as 1952, the ARP used the term “schild der zwakken” in its election program. Nonetheless, its move to the left has been a development that is often placed in the late 1960s. See, for instance, Jan-Jaap van der Berg, “De ARP als evangelische volkspartij?” In George Harinck, Roel Kuiper, and Peter Bak, De Anti-Revolutionaire Partij 1829-1980 (Hilversum: Uitgeverij Verloren, 2001) 255-280.

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networks of societal and political organizations, known as “pillars” (in Dutch: zuilen).11 When these organizations – and the subcultures that they had created – began to crumble in the postwar years, renewed competition with the left forced confessional parties to take the popular route of welfare state expansion. This (de)pillarization thesis is also widely used to explain why the rapid expansion of the Dutch welfare state largely occurred under confessional-liberal governments and not under the left-oriented governments that dominated the postwar political landscape until the late-1950s.12 While acknowledging that the fracturing of old consociational politics was not unimportant to the rapid transformation of the Dutch welfare state during the 1960s and 1970s, this book agrees with Therborn that its influence was probably indirect and mediated in a complex way.13 The period of rapid welfare state expansion and depillarization roughly overlapped, albeit by no means completely.14 Nonetheless, electoral competition alone cannot explain 11 For a thorough account of this phenomenon and its supposed effect on Dutch welfare state development, see Göran Therborn, “‘Pillarization’ and ‘Popular Movements’. Two Variants of Welfare Capitalism: the Netherlands and Sweden”. In Francis Castles, The Comparative History of Public Policy (Cambridge: Polity, 1989). 12 For some examples of this thesis over the years, see Van Doorn and Schuyt, De stagnerende verzorgingsstaat; Van Kersbergen and Becker, “The Netherlands”, 490; Cox, The Development of the Dutch Welfare State, 212-213 and 135; Peter Hupe, “Beyond Pillarization: the (Post) Welfare State in the Netherlands”, European Journal of Political Research 23 (1993) 359-386; Robert Goodin, Bruce Heady, Ruud Muffels, and Henk-Jan Dirven, The Real Worlds of Welfare Capitalism (Cambridge: Cambridge University Press, 1999) 67; Robert Goodin, “Work and Welfare: Towards a Post-productivist Welfare Regime”, British Journal of Political Science 31:1 (2001) 19; Evelyne Huber and John D. Stephens, Development and Crisis of the Welfare State: Parties and Policies in Global Markets (Chicago: University of Chicago Press, 2001) 165; Kees van Kersbergen, “Religion and the Welfare State in the Netherlands”. In Kees van Kersbergen and Philip Manow, Religion, Class Coalitions and Welfare States (Cambridge: Cambridge University Press, 2009) 140-141; and Jeroen Touwen, Coordination in Transition: The Netherlands and the World Economy, 1950-2010 (Leiden: Brill, 2014) 151-152. 13 Therborn, “‘Pillarization’ and ‘Popular Movements’”, 211. 14 The electoral decline of the two main Protestant parties in the Netherlands – the aforementioned ARP and the Christian Historical Union (Christelijk-Historische Unie, or CHU) – actually set in during the 1930s, long before either of the two made a substantial shift towards the left on issues related to social insurance development. By contrast, the Catholic People’s Party (Katholieke Volkspartij, KVP) – whose more left-oriented stance in the immediate postwar years resulted in Protestant accusations that it had “degenerated” into a party for workers only – received a steady share of the vote of around 30 percent until as late as 1967. Subsequently, it rapidly lost voters; for instance, its share of the vote had decreased to about fifteen percent by 1977. The process of de-confessionalization held immense importance for this: between 1961 and 1971, church attendance among Catholics decreased from 71 to 33 percent. For the accusation that the KVP had degenerated into a party for workers only, see Van Kersbergen and Becker, “The Netherlands”, 487.

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the rapid growth of the Dutch welfare state from the 1960s onwards, let alone its increasingly redistributive nature. To explain this, we need to look at the gradual acceptance – especially among confessional but to some extent also liberal forces – of the need to sever the link between benefit entitlement and individual contributory effort. As we will see, this acceptance started long before the confessional parties began to lose electoral ground in a major way and was the outcome of a decades-old process in which an emphasis on personal responsibility slowly gave way to conceptions that stressed solidarity with the less privileged. These solidaristic concerns ensured that the expansion of the Dutch welfare state was increasingly accompanied by redistribution of income and risk among different sections of the population. Contrary to popular perceptions of welfare state development, this redistributive process by no means benefited the broad mass of voters at the expense of a small group of privileged persons.15 Instead – and as we will see – they often benefited relatively small groups of risk-prone, low-income wage earners and persons in self-employment at the expense of middle-class groups or voters at large. The broad acceptance of most of these redistributive measures and their importance in ensuring that all Dutch citizens – including the less privileged – could by the early 1970s count on adequate protection against the major risks in life illustrates the limitations of the depillarization thesis and other approaches that explain party support for welfare state expansion (and a lack of party support for welfare retrenchment) by pointing to the electoral popularity of welfare arrangements. The problem with such explanations is that postwar discussions over welfare reform seldom revolved around the question of whether such arrangements were to be introduced and expanded in the first place; instead, they centered on whether insurance was to be made compulsory or voluntary, whether entitlement rights were to be directly linked to individual contributory effort or based on solidaristic principles and whether access to public provision and services was to be rendered by right or favor. Political party views on these matters among 15 The assumption that the postwar expansion of the welfare state was geared towards the interest of the median voter is implicit in most major approaches to welfare reform and is often assumed to be the driving force behind the behavior of major collective actors such as labor unions. For liberal and other parties on the right side of the political spectrum, it is often viewed as a major constraint that forced them to either support the introduction and expansion of welfare state programs (see, for instance, the depillarization thesis described below) or refrain from imposing austerity measures (see further below). In reality – and as we will see in this book – most postwar welfare arrangements have contained either income or wage limits as well as other features that limited vertical redistribution to lower- and middle-class groups.

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others depended on the extent to which parties attached value to personal responsibility and solidarity, as well as how they valued the (perceived) consequences of particular welfare initiatives for the functioning of the labor market, existing private welfare schemes (especially in the case of old-age pensions), and the distribution of income in society. In many countries, resistance to the redistributive consequences of generous welfare provision has proven a particularly important obstacle towards attempts to expand the postwar boundaries of the welfare state.16 The fact that this was not the case in the Netherlands may largely be attributed to the pillarized nature of Dutch society and the consequences that this had for voter behavior and the organizational features of the main collective actors involved in socioeconomic policy-making there. Contrary to previous studies on the role of religious forces in the development of modern welfare states, this book argues that Christian-democratic parties do not necessarily seek to maintain existing status differences and other social inequalities.17 It shows that while the main confessional parties in the Netherlands tended to attach great value to preserving personal responsibility, they were much less concerned with the distributional consequences of welfare state expansion for middle-class groups. On the contrary, as large catch-all parties that were ideologically wired to emphasize the importance of social justice, they displayed a genuine concern with the less privileged. As 16 While most continental European countries introduced specific features into their state welfare arrangements to ensure that risk-prone, low-income wage earners and persons in self-employment could also count on adequate protection against labor market risks during the first three decades of the postwar period, they did so to very different degrees. Moreover, in various other countries including the United Kingdom and the United States, welfare arrangements continued to stratify rather than reduce existing social inequalities. The continuation of welfare dualities there among others related to the absence of redistributive features in the contributory social insurance schemes of these countries. See, for instance, Jacob Hacker, The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States (Cambridge: Cambridge University Press, 2002) 134; Dan McGill, Kyle N. Brown, John J. Haley, and Sylvester J. Schieber, Fundamentals of Private Pensions (Oxford: Oxford University Press, 2005) 45; Dennie Oude Nijhuis, “Labor Divisions and the Emergence of Dual Welfare Systems”, Journal of European Social Policy 26:1 (2016) 66-79. 17 In most studies on Christian democracy and the welfare state it is assumed that Christiandemocratic parties prefer to maintain existing status and class differences, which translates into a much more generous treatment of more privileged compared to lower-income, more risk-prone groups. See for instance Evelyne Huber, Charles Ragin, and John D. Stephens, “Social Democracy, Christian Democracy, Constitutional Structure, and the Welfare State”, American Journal of Sociology 99:3 (1993) 711-49; Van Kersbergen, Social Capitalism, 152; Philip Manow and Kees van Kersbergen, “Religion and the Western Welfare State – The Theoretical Context”. In Van Kersbergen and Manow, Religion, 2; Stathis N. Kalyvas and Kees van Kersbergen, “Christian Democracy”, Annual Review of Political Science 13 (2010) 198.

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a result, they proved increasingly willing to sacrifice the actuarial principles on which the social insurance system was based in favor of a more solidaristic approach, despite the consequences of this for both contributors’ sense of personal responsibility and the distribution of income and risk in society. That they could do so without the risk of alienating middle-class voters, who would after all bear the brunt of these distributional consequences, had to do with the fact that they could count on the loyalty of all income groups in their respective denominations.18 As a result of the vertical organization of Dutch society among pillar lines and with the exception of the liberal People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie, or VVD) – which up to the early-1970s never received more than twelve percent of the vote – no parties in the Netherlands catered specifically for middle-class and higher-paid voters. This certainly made it easier to create a truly inclusive welfare state that not only provided adequate protection and services to middle-class groups, but also to groups with a less comfortable position on the labor market. This book will outline the redistributive consequences of the inclusive nature of the Dutch welfare state in detail. By doing so it emphasizes the need to move beyond the popular dichotomy between flat-rate and earnings-related contributory systems; after all, and as we will see, the defining feature of inclusive welfare states that offer adequate levels of protection against labor market risks for all citizens is that they combine elements of both. The gradual transformation of confessional views on social insurance was by no means limited to parliament. Confessional union federations – and to a much lesser extent confessional employer federations – also increasingly came to accept the need to redistribute risk and income to ensure that less privileged wage earners – and the self-employed – could also count on adequate protection against labor market risks. Take for instance the Protestant Christian Union Federation (Christelijk Nationaal Vakverbond, henceforth CNV). Guided by a strong emphasis on personal responsibility, which translated into strictly adhered to actuarial principles, this federation remained an important conservative force in the debate over welfare state reform until the 1940s. However, it had dramatically reversed 18 As late as 1956, 84 percent of all Catholics voted for the KVP, while 80 percent of all Calvinists voted for the ARP. By 1970, these percentages had dropped to 60 and 70 percent, respectively. This decrease in the confessional voting share benefited parties on both the left and right flanks of the political spectrum. The CHU had always been somewhat less successful than the KVP and ARP in securing the loyalty of voters from its own denomination. Warren E. Miller and Philip C. Stouthard, “Confessional Attachment and Electoral Behavior in the Netherlands”, European Journal of Political Research 3 (1975) 226.

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its position less than two decades later. By the 1960s, it fought side-to-side with its socialist and Catholic counterparts, the Dutch Association of Trade Unions (Nationaal Verbond van Vakverenigingen, henceforth NVV) and Netherlands Catholic Trade Union Federation (Nederlands Katholiek Vakverbond, henceforth NKV)19 to introduce minimum benef it levels and abolish income and contribution limits, as well as for several other measures that would result in a more redistributive system of contributions and benef its. The CNV’s transformation from a force that emphasized personal responsibility to one that emphasized broad worker solidarity was thus at least as radical as that of its closest ideological counterpart in parliament, the ARP. This brings us to another – generally overlooked – explanation for the peculiar postwar trajectory of Dutch welfare state development. Despite its strong reputation as a corporatist state, existing writings on the Dutch welfare state have overwhelmingly looked at its development as being mainly driven by the electoral considerations of political parties. The popularity of the (de-)pillarization thesis as an explanation for the late – and subsequently rapid – growth of the Dutch welfare state testifies to this. Counter to this popular view of policies being mainly driven by the electoral implications associated with them stands the view that policies are decisively influenced by the involvement of powerful interest groups.20 The latter has definitively been the case in the Netherlands, where the main union and employer federations have traditionally played an important formal role in socioeconomic policy formation, and played a key role in the implementation of social programs until the 1990s. A major purpose of this book is to illustrate the striking degree to which parliament followed organized industry’s preferences during the period of welfare state expansion that lasted until the late-1970s, as well as its remaining influence in subsequent years. In doing so, it shows how this affected the course of Dutch welfare state development. 19 The NKV had from 1945 to 1964 been known as the Catholic Workers’ Movement (Katholieke Arbeidersbeweging, or KAB). Before the war it was known as the Roman Catholic Workers’ Union (Rooms Katholieke Werkliedenverbond, or RKWV). On this see for instance Jan Roes (ed.) Katholieke Arbeidersbeweging (2 volumes) (Baarn: Arbor, 1993). 20 The American political scientists Jacob Hacker and Paul Pierson distinguished between writings that analyze US politics as an “electoral spectacle” and those that view it as a form of “organized combat”. The latter term may be less suitable to describe interest groups’ involvement in policy development in the Netherlands and many other European nations, where the relationship between organized business and labor-based or “progressive” interest groups has been far less “combative”. Jacob Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned its Back on the Middle Class (New York: Simon & Schuster, 2010).

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Unions, Employers, and the Importance of Broad Worker Solidarity In the comparative literature on welfare state development, the Dutch case has long been viewed with curiosity. The main reason for this is that its postwar trajectory presents a major challenge to the so-called power resources perspective on welfare state development, which dominated this literature from the late-1970s until the first decade of the 21st century. As a derivative of class analysis, the power resources perspective argued that generous welfare states emerged where the political “balance of power” favored left-wing parties and labor unions over capitalist forces and their bourgeois allies.21 These claims obviously conflicted with the course of Dutch welfare state development. The problems here were not just the Dutch welfare state’s relatively slow development under the leftist governments of the 1940s and 1950s, its rapid development under confessional-liberal governments in subsequent decades, and the continual importance of confessional political parties in the Netherlands, which are all addressed by the aforementioned (de)pillarization thesis. The emergence of welfare generosity in the Netherlands in the presence of a labor union movement, which – according to conventional measures – was considered to be organizationally weak and a particularly well-organized employer community, also constituted a major problem.22 On top of this, this employer community on the whole seemed to have been quite supportive of the Dutch welfare state’s postwar expansion.23 21 For some prominent examples of this perspective over the years, see John D. Stephens, The Transition from Capitalism to Socialism (London: Macmillan, 1979); Walter Korpi, The Democratic Class Struggle (London: Routledge, 1983); Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990) 22-26; Alex Hicks, Social Democracy and Welfare Capitalism (Ithaca: Cornell University Press, 1999); Huber and Stephens, Development and Crisis; Duane Swank, Global Capital, Political Institutions and Policy Change in Developed Welfare States (Cambridge: Cambridge University Press, 2002); Walter Korpi, “Power Resources and Employer-Centered Approaches in Explanations of Welfare States and Varieties of Capitalism”, World Politics 58:2 (2006) 176-206. 22 Conventional measures of union strength emphasize its organizational density. In this respect, Dutch unions are indeed relatively weak. From some 40 percent in the immediate postwar period, Dutch labor unions now organize little over 20 percent of all wage earners. Most of their European counterparts have fared much better. See Jelle Visser, European Trade Unions in Figures (Deventer: Kluwer, 1989); Idem, “Union Membership Statistics in 24 Countries”, Monthly Labour Review 129 (2006) 38-49. 23 This has been noted among others in Therborn, “‘Pillarization’ and ‘Popular Movements’”, 215. See also Jan Bruggeman and Aart Camijn, Ondernemers verbonden: 100 jaar centrale ondernemingsorganisaties in Nederland (Wormer: Inmerc, 1999) 75, 110.

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In sum, the Dutch postwar welfare trajectory clearly illustrated the limits of an analytical perspective that emphasized class conflict. In the past decade, a new scholarship on the role of business groups and labor unions in welfare state development has succeeded in defining these limits. 24 While acknowledging that welfare state development is often accompanied by distributive conflict between wage earners and employers, this new scholarship has emphasized that the introduction and expansion of public protection against labor market risks also involves strong potential for distributive conflict among different categories of employers and among different categories of wage earners. There is no doubt that the introduction of – for instance – a public unemployment insurance program holds great potential for risk reapportioning among firms operating in different industries and of different sizes.25 Moreover, there is also no doubt that such risk reapportioning has strong consequences for the distribution of income among different categories of wage earners. These consequences will strongly increase when this insurance program also operates under a system of contributions and benefits that works to the advantage of poorer wage earners, which – as we will see – was increasingly the case in the Netherlands. Therefore, a common denominator of the new scholarship of the past decade is that the course of welfare state development is crucially affected by how labor unions and employer interest groups view – or deal with – these redistributive consequences. The willingness of Dutch unions to accept these consequences has undoubtedly occupied major importance in ensuring that the Dutch welfare state came to provide adequate levels of protection against labor market risks for all citizens, including the less privileged. Throughout the postwar period, the three major union federations in the Netherlands pushed for more lenient eligibility rules, broader coverage principles, and increases in or even the abolition of income limits – all of which increased the scope for redistribution between more and less risk-prone wage earners. In addition, they pushed hard for the introduction of a redistributive system of contributions and benefits. This eventually resulted in a public pension that combined flat-rate benefits with earnings-related contributions and 24 See, for instance, Peter Swenson, Capitalists Against Markets: The Making of Labor Markets and Welfare States in the United States and Sweden (Oxford: Oxford University Press, 2002); Isabela Mares, The Politics of Social Risk: Business and Welfare State Development (Cambridge: Cambridge University Press, 2003); Dennie Oude Nijhuis, “Revisiting the Role of Labor: Worker Solidarity, Employer Opposition, and the Development of Old-Age Pensions in the Netherlands and the United Kingdom”, World Politics 61:2 (2009) 296-329. 25 See, for instance, Mares, The Politics of Social Risk, 21-41.

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the introduction of minimum benefit levels into those social insurance programs that previously operated completely along earnings-related lines. The Dutch labor union movement’s consistent support for redistributive welfare solutions – which often benefited a small group of low-paid, relatively risk-prone wage earners at the expense of either middle-class groups or all other wage earners – has been truly remarkable. Its willingness and ability to do so can be attributed to the largely industrial nature of labor unionism in the Netherlands, which emphasized the importance of broad worker solidarity. Recent research on the role of labor unions in welfare state development has shown that such displays of broad worker solidarity cannot be taken for granted and depend on labor’s internal organizational blueprint.26 The powerful employer federations were on the whole much more reluctant to accept deviations from actuarial principles – unless it worked to limit welfare costs or the scope for decommodification. This book consequently provides no evidence for what will be referred to as the business interest scholarship, which has argued that the postwar expansion of the welfare state crucially rested on active support from powerful business groups that had an active interest in the introduction and expansion of social programs because they expected to derive certain benefits from these programs. This claim has two main variants. According to the first variant, which originates in a broader study of production regimes known as the “varieties of capitalism” approach, businesses operating in high-skill economies may have appreciated certain social policies because of their role in convincing workers to invest in specific skills.27 This scholarship relies on the problematic assumption that the prospect of higher wages and generous occupational insurance schemes were insufficient to convince future workers to invest in the type of skills that were relevant for firm production.28 The second variant 26 Such displays are most unlikely to emerge when higher-paid, less risk-prone wage earners largely operate separately from less privileged wage earners, which is normally the case when labor union movements are characterized by strong occupational divisions. See, for instance, Oude Nijhuis, “Revisiting the Role of Labor”, 296-329. 27 See, for instance, Margarita Estévez-Abe, Torben Iversen, and David Soskice, “Social Protection and the Formation of Skills”. In Peter A. Hall and David Soskice. Varieties of Capitalism. The Institutional Foundations of Comparative Advantage (Oxford: Oxford University Press, 2001) 148; Torben Iversen, Capitalism, Democracy, and Welfare (Cambridge: Cambridge University Press, 2005) 10-11; Cathie-Jo Martin and Duane Swank, The Political Construction of Business Interests: Coordination, Growth, and Equality (New York: Cambridge University Press, 2012) 7-8. 28 On this see also Oude Nijhuis, “Revisiting the Role of Labor”, 296-329; and Thomas Paster, “Business and Welfare State Development: Why did Employers Support Social Reforms?” World Politics 65:3 (2013) 416-451.

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rests on the more limited and plausible assumption that some businesses have displayed an interest in the introduction and expansion of social insurance programs to prevent competition over labor with fringe benefits or to off-load costs onto competitors or society as a whole. This scholarship among others highlights the importance of differences in interests between firms operating in tradable and sheltered sectors, between large and small firms, and between firms operating in high-skill and low-skill sectors. Other scholars have however questioned the importance of these sectoral interests, especially for countries where the most influential business organizations were organized on a national level.29 As a result of various factors including the pillarized nature of Dutch society and long survival of the guided wage policy, the most powerful business organizations in the Netherlands, the employer federations, were also without exception highly centralized and organized on a national basis.30 As we will see, they were also quite apt at suppressing sectoral cleavages among firms, and consistently opposed welfare outcomes that benefited more risk-prone firms or sectors to the disadvantage of other firms or society as a whole. They furthermore seldom responded in a proactive manner to demands for the introduction and expansion of social insurance and related schemes, and generally only did so when this served to prevent the coming about of more generous or in other ways more threatening alternatives. 29 As illustrated in Peter Swenson’s seminal work on capitalist welfare interests and preferences in Sweden and the United States, the situation was decidedly different in countries where the business landscape was more fragmented or specific economic circumstances worked to reinforce the importance of sectoral cleavages, for instance between sheltered and exposed firms. See Swenson, Capitalists Against Markets. For other works that highlight the importance of sectoral cleavages, see Colin Gordon, New Deals: Business, Labor and Politics in America, 1920-1935 (Cambridge: Cambridge University Press, 1994); Mares, The Politics of Social Risk; and G. William Domhoff and Michael J. Webber, Class and Power in the New Deal: Corporate Moderates, Southern Democrats, and the Liberal-labor Coalition (Stanford: Stanford University Press, 2011). For studies that have taken a skeptic view regarding the importance of sectoral interests and the possibility for the emergence of durable cross-class alliances, see Jacob Hacker and Paul Pierson, “Business Power and Social Policy: Employers and the Formation of the American Welfare State”. Politics and Society 30:2 (2002) 277-325; Mathieu Leimgruber, Solidarity Without the State? Business and the Shaping of the Swiss Welfare State (Cambridge: Cambridge University Press, 2008); Paster, “Business and Welfare State Development”, 416-451. 30 The guided wage policy (in Dutch: geleide loonpolitiek) was a strict policy to control wage and prices that was introduced in 1945 in order to restore international competitiveness. The policy functioned with great success up to the late 1950s when a tight labor market forced an increasing number of employers to offer higher wages than were permitted. The system finally broke down in 1964 under a confessional-liberal government. For an excellent overview of the policy see Herman de Jong, Catching Up Twice: the Nature of Dutch Industrial Growth During the 20th Century in a Comparative Perspective (Berlin: Akademie Verlag, 2003).

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Finally, they always displayed a preference for welfare solutions that were the least costly, decommodifying or threatening to the existence of private pension funds. In sum, the employer federations in the Netherlands were just as conservative in their welfare outlook as their counterparts in most other countries were. Nonetheless – and as previously mentioned – compared to many of these foreign counterparts, they undoubtedly proved quite conciliatory and receptive to demands for increases in the level and scope of public protection against labor market risks.31 This relatively cooperative stance may be explained in two different ways. First, the employer community strongly valued the relatively harmonious nature of labor relations in the Netherlands, which rested upon an elaborate system of institutionalized consultation between the top representatives of organized labor and the employer community. To preserve this system, it was imperative to take a compliant stance on one of labor’s most important postwar demands, namely the creation and preservation of an adequate system of social protection for all wage earners. At the same time, it should be noted that this system of institutionalized consultation also provided employers with an effective instrument to stall unwanted outcomes. Their ability to do so is among others illustrated by the long-standing negotiations in the Social-Economic Council over union demands for an increase in the level and duration of the unemployment insurance benefit during the 1950s and 1960s, which will be described at length in this book. Another explanation for the overall supportive stance of the Dutch employer community towards demands for welfare state expansion can be found in the broad acceptance of the notion of the “social wage” in the Netherlands. Compared to its counterparts in many other Western countries, the Dutch union movement has been remarkably willing to accept that public provision against labor market risks – like private provision against such risks – constituted a form of deferred pay, which consequently had to be financed out of the general room for wage increases. As we will see, this acceptance did not extend to labor market risks like (involuntary) 31 The question concerning the degree to which organized employers have supported the postwar development of welfare state in advanced industrial countries has proven highly contentious over the years. Nonetheless, most scholars agree that organized employers in European countries have been more supportive of this development than their “Anglo-Saxon” counterparts. Compare for instance Peter Swenson’s analysis of events in Sweden and the United States in his Capitalist Against Markets. The following analysis suggests that much of this difference can be attributed to differences in union behavior: a point that has received little attention in the literature to date.

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unemployment and work-related sicknesses and disabilities, which unions viewed as the sole responsibility of employers.32 Nonetheless, since the first decades of the postwar period, there has generally been a strong consensus in the Netherlands concerning the need to finance the maintenance and expansion of social insurance programs out of the “wage space” (in Dutch: loonruimte). The long perseverance of the guided wage policy – which was accompanied by several decades of centralized bargaining aimed at reducing total labor costs – greatly facilitated the establishment of this practice in the Netherlands. At the same time, it should be noted that the absence of organized opposition against the redistributive consequences of public provision by privileged groups of wage earners made it relatively easy for labor unions to view such provision as deferred pay.33 Their willingness to do so greatly affected the course of postwar welfare state development in the Netherlands. It led to a situation in which many of the improvements made to these programs originated from the agenda of wage negotiations. This not only further increased the influence of organized industry over the content of social insurance programs, but it also greatly reduced employer concerns over the financial consequences of these improvements. While the employer federations certainly often voiced their objections to union demands for such improvements, they seldom motivated these objections primarily by referring to the costs of these demands.34 Instead, they preferred to point out that these demands increasingly conflicted with actuarial principles and – in the case of the public old-age pension – left less room for improvements at the level of private provision, a problem that we will explore at length below. Nonetheless, given the willingness of labor unions to accept that the expansion of social insurance programs had to be financed out of the margin for pay increases and were thus to be financed by workers themselves, it proved very difficult to prevent this expansion from occurring. This willingness thus functioned as a double-edged sword: it not only reduced employer 32 On the controversial nature of public insurance against unemployment and its link to political deliberations over the causes of unemployment, see, for instance, Stephan Leibfried, “Die Institutionalisierung der Arbeitslosenversicherung in Deutschland”, Kritische Justiz 10:2 (1977) 189-201; Michael Piore, “Historical Perspectives and the Interpretation of Unemployment”, Journal of Economic Literature 24:4 (1987) 1934-1950. 33 See, for instance, Dennie Oude Nijhuis, “Incomes Policies, Welfare State Development and the Notion of the Social Wage”, Socio-Economic Review 13:4 (2015) 1-26. 34 As illustrated in the following chapters, this would rapidly change during the 1970s when a massive inflow of workers into the social insurance system led to a strong increase in welfare spending.

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concerns over the costs of welfare state expansion, but it also made it more difficult for employers to prevent this expansion. The firm establishment of the principle that public protection against labor market risk constituted a form of deferred pay – and that the maintenance and expansion of social insurance programs consequently needed to be financed out of the margin for pay increases – thus greatly facilitated the process of postwar welfare state expansion in the Netherlands. Yet it did not do so immediately. By contrast, in the first decades of the postwar period, this principle constituted a major brake on Dutch welfare state development. After all, these decades were characterized by a strong consensus concerning the need to reduce the growth of labor costs, of which social insurance costs were an integral part. Realizing this, Dutch labor unions during the 1940s and 1950s not only moderated their wage claims, but they also tempered their social insurance demands. It was not until after the guided wage policy broke down during the 1960s that union leaders demanded much more generous wage increases and improvements in the level of both public and private provision against labor market risks. The long survival of the guided wage policy – and its collapse during the 1960s – thus explain a lot about both the slow development of the Dutch welfare state during the 1940s and 1950s and its rapid expansion in subsequent decades. The first chapters of this book will provide a lengthy description of this relationship, which has received little attention in the literature on the Dutch welfare state and which to date is widely misunderstood elsewhere.35 35 Much of the literature that focuses specifically on the development of the Dutch welfare state does not even mention this relationship. By contrast, comparative historians and political scientists have devoted strong attention to the importance of the guided wage policy for efforts to improve the system of social protection in the Netherlands during the 1940s and 1950s. Based on a rather superficial reading of events taking place in this period, an appreciable number of them have argued that rather than presenting a major obstacle to these efforts, the guided wage policy greatly facilitated them. This misconception can largely be attributed to the misguided belief that the long-standing success of the guided wage policy was the result of a political bargain in which “wage restraint was secured in return for […] new extensions in state welfare.” The first and second chapters of this work will show that this was clearly not the case. For the quote, see Noel Whiteside, “Adapting Private Pensions to Public Purposes: Historical Perspectives on the Politics of Reform”, Journal of European Social Policy 16:1 (2006) 47. For similar views, see Van Kersbergen and Becker, “The Netherlands”, 488; Van Kersbergen, Social Capitalism, 130; Visser and Hemerijck, “A Dutch Miracle”, 130; Harold Wilensky, Rich Democracies: Political Economy, Public Policy, and Performance (Berkeley: University of California Press, 2002) 114; Barry Eichengreen, The European Economy Since 1945. Coordinated Capitalism and Beyond (Princeton: Princeton University Press, 2007) 34; Erik Nijhof, “Pensions and Providence: Dutch Employers and the Creation of Funded Pension Schemes”, Enterprise and Society 10:2 (2009) 294.

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The New Politics of Welfare Reform in the Netherlands The subsequent chapters will explain how the broad acceptance of the notion of the social wage has also proven a powerful insurance policy against pressure for welfare state retrenchment in recent decades. Beginning in the late1960s, when employers first voiced their concerns over the generous nature of social insurance provision in the Netherlands, the union movement has consistently held the position that it would only abandon “acquired rights” in exchange for “full wage compensation”, thereby defending the view that “reductions in social insurance provision cannot produce macroeconomic improvements”.36 The ongoing need to obtain labor union support for wage moderation – which is as important for Dutch macroeconomic performance today as it was in the first decades of the postwar period – has ensured that labor unions can still use this position as a powerful instrument to influence the agenda of welfare state reform. The following chapters of this book will illustrate how they used this need to counter demands for welfare state retrenchment. A major purpose of these chapters is to show how this has affected organized employer and political party views regarding welfare state reform in recent decades. Nonetheless, union efforts to preserve “acquired rights” have by no means been completely successful. Although less so than in many other advanced industrial countries, the system of social provision in the Netherlands has been subjected to substantial retrenchment since the 1980s.37 After a long period in which welfare state reform was viewed as more or less synonymous with welfare state expansion, it is now seen as tantamount to retrenchment. In recent decades, all of the major social insurance programs in the Netherlands have been subjected to measures that either lowered benefit levels or limited entitlement to them by tightening eligibility criteria, lowering the duration of benefits or making it more difficult to reject suitable work. In addition, they have been subjected to various measures that 36 Historical Documentation Center of Dutch Protestantism (Historisch Documentatiecentrum voor het Nederlandse Protestantisme, henceforth HDP), FCWV, 19: Notitie inzake het in te nemen werkgeversstandpunt met betrekking tot het advies over de programmering sociale verzekeringen, 1968. 37 Retrenchment has generally been greatest since the 1980s in countries where public provision against labor market risks was already less generous. See, for instance, Desmond King and Stewart Wood, “Neo-Liberalism and the Conservative Offensive: Britain and the United States in the 1980s”. In Herbert Kitschelt, Peter Lange, Gary Marks, and John D. Stephens, Continuity and Change in Contemporary Capitalism (Cambridge: Cambridge University Press, 1999) 371-379; Kathleen Thelen, “Varieties of Labor Politics in the Developed Democracies”. In Hall and Soskice, Varieties of Capitalism, 75-103.

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served to partially restore the relationship between benefit entitlement and individual contributory effort. Most related forms of state provision and services have been subjected to similar retrenchment measures. In recent decades, the Dutch system of social protection has certainly also expanded social rights for some groups – most notably women and part-time workers – and extended to new areas such as family policies. Yet overall, and as we will see, the period since the 1980s has been characterized by a state of permanent austerity. Contrary to popular views, this state of permanent austerity has had little to do with concerns over the need to preserve national competitiveness in an increasingly globalized economy.38 Instead, as we will see, most retrenchment measures have revolved around the perceived need to increase labor market participation levels and thus preserve the welfare state’s financial sustainability. This first became a major issue during the so-called “inactivity crisis” of the 1970s and 1980s, when a long period of economic upheaval prompted a massive inflow of workers into the social insurance system. The decrease in labor market participation levels and increase in costs that followed from this provoked a series of measures that aimed to reduce the dependency on state benefits in the Netherlands. When these measures became increasingly successful during the 1990s, new concerns over an impending “ageing crisis” prompted further reform to increase participation levels. These reforms partly followed what had become a familiar recipe of limiting entitlement to social insurance programs and reducing their benefit levels. However, policy-makers also increasingly experimented with various “activation” strategies such as in-work benefits as well as training and job-creation programs. The second half of the book analyzes both the reforms to which the Dutch welfare state has been subjected since the 1980s and the socioeconomic challenges that prompted them. The latter involves a lengthy exploration of one of the most controversial episodes in the postwar history of the Dutch welfare state, when two of the most important social insurance programs in 38 While “globalization” is still identified as a major threat to the existence of generous welfare states in both the popular literature and the writings of economists, political scientists have long showed that most of the pressures on welfare states since the 1980s have had little to do with globalization. See, for instance, Geoffrey Garrett and Peter Lange, “Internationalization, Institutions and Political Change”, International Organization 49:4 (1995) 627-655; Herbert Kitschelt, Peter Lange, Gary Marks, and John D. Stephens, “Convergence and Divergence in Advanced Capitalist Democracies”. In Kitschelt et al., Continuity and Change, 427-460; Herman Schwartz, “Round Up the Usual Suspects! Globalization, Domestic Politics, and Welfare Change”. In Paul Pierson, The New Politics of the Welfare State (Oxford: Oxford University Press, 2001).

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the Netherlands – the disability and unemployment insurance programs – developed into de facto early exit pathways for redundant and mostly older workers in the 1970s and 1980s. Both the inactivity crisis that followed from this and the move away from actuarial principles that made it possible have made this development highly controversial in the Netherlands. In the case of the disability insurance program, it also entailed a clear misuse of the social insurance system. In the early-1990s, a parliamentary inquiry investigated this misuse, and concluded that the employer and union representatives who had been responsible for the system’s administration had “neglected” their task of controlling the inflow of disability benefit recipients in previous decades.39 This conclusion set the stage for a radical overhaul of the social insurance administration system during the mid-1990s, which among others limited employer and union control over the assessment of benefit claims. The use of the disability insurance program to circumvent dismissals and “buy” worker consent for redundancy has naturally received much attention in both the academic and more popular literature. For some, this practice merely constituted an example of moral hazard under which attempts to improve protection against the financial consequences of labor market risks can have the unintended side-effect of making it easier for employers to dismiss workers. Others have argued – or suggested – that the measures that rendered this practice possible were at least partly motivated by the desire to facilitate the use of the disability insurance program for redundancy purposes. 40 This allegation fits neatly with recent writings on the role of employers in welfare state development, some of which have argued that the use of social insurance programs for redundancy purposes should be seen as an example of the way in which social policies can provide “productive” benefits and improve the operation of markets. 41 In this book, I 39 Jan F. Buurmeijer, Parlementaire Enquête Uitvoeringsorganen Sociale Verzekeringen: Rapport Enquetecommissie (Den Haag: Sdu, 1993). 40 See, for instance, Willem Velema, “De kroongetuige. Hoe het WAO-drama voorkomen had kunnen worden”. In J.G. Hibbeln and Willem Velema, Het WAO-debacle. De fatale missers van wettenmakers en uitvoerders (Utrecht: Van Arkel, 1993) 22; Bert de Vroom and Martin Blomsma, “The Netherlands: an extreme case”. In Kohli et al., Time for Retirement. Comparative Studies of Early Exit from the Labor Force (Cambridge: Cambridge University Press, 1991) 109; Duco Bannink, “Het Nederlandse stelsel van sociale zekerheid. Van achterblijver naar koploper naar vroege hervormer”. In Trommel and Van der Veen, De herverdeelde samenleving, 67; and Romke van der Veen, De sociale grenzen van beleid. Een onderzoek naar de uitvoering en effecten van het stelsel van sociale zekerheid (Leiden: Stenfert Kroese, 1990) 77. 41 See, for instance, Peter Hall and David Soskice, “An Introduction to Varieties of Capitalism”. In ibidem, Varieties of Capitalism, (Oxford: Oxford University Press, 2001) 50; Bernhard Ebbinghaus, Reforming Early Retirement in Europe, Japan and the USA (Oxford: Oxford University Press, 2006) 3;

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strongly argue against these views by providing an in-depth analysis of the measures that made the development of the disability and unemployment insurance programs into early exit pathways possible. As I will show, these measures were instigated by the labor union movement against a reluctant employer community that was well aware of – and tremendously worried about – their financial consequences. Another problem that will be addressed in this book is how various governments have managed to implement welfare retrenchment measures since the 1980s. Following Paul Pierson’s influential study titled The New Politics of the Welfare State, it has become popular for scholars to argue that the dynamics of welfare state retrenchment fundamentally differ from the politics of welfare state expansion in at least one major way: whereas welfare state expansion involved the enactment of popular policies that expanded social rights, welfare state retrenchment requires governments to withstand the consequences of pursuing unpopular policies that concentrate losses on specific groups in exchange for dispersed and often insecure gains. 42 Emphasizing the need for political parties to win elections, scholars initially referred to the electoral risks associated with retrenchment policies to explain the absence of truly radical retrenchment in most advanced industrial countries during the 1980s and early-1990s. 43 When reform eventually Isabela Mares, “Enterprise Reorganization and Social Insurance Reform: the Development of Early Retirement in France and Germany”, Governance, 14:3 (2001) 295-317. 42 Another major difference according to Pierson is that welfare state expansion involved the enactment of popular policies “in a relatively undeveloped interest-group environment”, while retrenchment required governments to withstand the scrutiny of voters as well as “wellentrenched networks of interest groups”. Pierson, “The New Politics of the Welfare State”, World Politics 48:2 (1996) 143-144. However, given the strong role of labor union and employer interest groups in the enactment and expansion of the welfare state programs during the first decades of the postwar period in both the Netherlands and abroad, it is highly doubtful whether the process of welfare state expansion can be viewed as having taken pace in a “relatively undeveloped interest-group environment”. In addition, various other powerful interest groups, such as those representing the elderly, also played an important role in the debate over social welfare reform during the first decades of the postwar period. 43 “Conservative corporatist” welfare regimes like that of the Netherlands were widely viewed as most resistant to change at the time because high levels of spending there ensured that “the cards are very much stacked in favor of the status quo”. Scholars like Gøsta Esping-Andersen thus spoke of the “frozen continental landscape”. See Gøsta Esping-Andersen, “Welfare States without Work: The Impasse of Labour Shedding and Familialism in Continental European Welfare States”. In Esping-Andersen, Welfare States in Transition. National Adaptions in Global Economies (London: Sage, 1996) 66-67. See also Fritz Scharpf and Vivien Schmidt, Welfare and Work in the Open Economy (Oxford: Oxford University Press, 2000); and Paul Pierson, “Coping with Permanent Austerity: Welfare State Restructuring in Affluent Democracies”. In Pierson, The New Politics of the Welfare State, 410-55. See also Huber and Stephens, Development and

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became more substantial, scholars consequently raised the question of how governments had been able to enact unpopular retrenchment policies. 44 One way of answering this question is by pointing out that governments have found it increasingly easy to convince voters and interest groups that despite being unpleasant, such policies are inevitable. There is no doubt that even left-wing parties and labor unions have increasingly come to accept the need for reform in the face of current demographic and financial pressures. In addition, recent decades have witnessed the emergence of an ever-broader consensus that certain features of traditional welfare systems are ill-suited to promote employment growth. Of course, this consensus should not be overstated and – more importantly – it has not been accompanied by broad agreement on the extent to which reform has been inevitable or the type of reform that this necessitates. Whereas left-wing parties have always been more willing to consider increases in taxation and contribution levels as alternatives to cutbacks in benefit entitlement, and have continued to emphasize the importance of maintaining solidarity, their conservative counterparts have renewed their emphasis on personal responsibility and the need to increase the duties of benefit claimants. Wide differences also persist on whether and how to enact active labor market policies, which often demand both increases in public spending and retrenchment measures. It is for this reason that the politics of welfare state retrenchment may not be as fundamentally different from the “old” politics of welfare state expansion as it is often made out to be. Like in the first decades of the postwar period, the course of Dutch welfare state development remains largely driven by political conflict between those who emphasize broad social solidarity and the need to provide adequate social provision for all citizens and those who emphasize the need to limit financial costs and the scope for redistribution. This conflict translates into continual disagreement Crisis; John D. Stephens, Evelyne Huber, and Leonard Ray, “The Welfare State in Hard Times”. In Kitschelt et al., Continuity and Change, 164-193. 44 For some recent contributions on this, see Klaus Armingeon and Nathalie Giger, “Conditional Punishment: A Comparative Analysis of the Electoral Consequences of Welfare Retrenchment in OECD Nations 1980-2003”, West European Politics 31:3 (2008) 558-580; Bruno Palier (ed.), A Long Goodbye to Bismarck? The Politics of Welfare Reform in Continental Europe (Amsterdam: Amsterdam University Press, 2010); Vis, Politics of Risk-taking; and Silja Häusermann, The Politics of Welfare State Reform in Continental Europe. Modernization in Hard Times (Cambridge: Cambridge University Press, 2010); Nathalie Giger and Moira Nelson, “The Electoral Consequences of Welfare State Retrenchment: Blame Avoidance or Credit Claiming in the Era of Permanent Austerity?, European Journal of Political Research 50:1 (2011) 1-23; Gijs Schumacher, Barbara Vis, and Kees van Kersbergen, “Political Parties’ Welfare Image, Electoral Punishment and Welfare State Retrenchment”, Comparative European Politics 11:1 (2013) 1-21.

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over the relative merits of public versus private solutions for insurance against labor market risks as well as related services, “broad” versus “strict” eligibility rules, universal or more limited coverage principles and more or less redistributive systems of contributions and benefits. As voter attitudes towards these issues depend on a great variety of factors, including their (perceived) financial and redistributive consequences, it is by no means certain that attempts to expand the generosity of social provision and services are always popular among the broad majority of voters, nor do retrenchment measures necessarily have to be unpopular. As a result, the direction of reform continues to depend on electoral party strength as well as the attitudes and strength of major interest groups towards reform.

The Organization of the Book From an empirical point of view the book’s purpose is to offer a comprehensive history of the Dutch welfare state’s postwar development, explaining both its transformation from a long-time welfare laggard to welfare leader as well as its following transformation from a passive into a more active system of social protection. The book provides an exhaustive overview of the development of the major social insurance programs, their private counterparts and related services during both the era of welfare state expansion – which lasted until roughly the late-1970s – and the following period of recalibration and retrenchment. Although the emphasis lies on income maintenance programs, the book also pays attention to important areas such as housing policies, personal services, and family policies. In addition, and to illustrate the often complex relationship between the overlapping domains of “work” and “welfare,” the book also investigates how the development of public and private welfare programs related to general wage developments, the introduction of the minimum wage and the growth of employment placement policies. Finally, and following various recent studies on this, it devotes strong attention to the development of health insurance programs, whose importance gradually increased as the postwar period progressed. 45 45 See Karel Veraghtert and Brigitte Widdershoven, Twee eeuwen solidariteit: De Nederlandse, Belgische en Duitse ziekenfondsen tijdens de negentiende en twintigste eeuw (Amsterdam: Aksant, 2001); Karel-Peter Companje, Tussen volksverzekering en vrije markt: Verzekering van zorg op het snijvlak van sociale verzekering en gezondheidszorg 1880-2006 (Amsterdam: Amsterdam University Press, 2008); and Karel-Peter Companje, Ruud Hendriks, Karel Veraghtert, and Brigitte Widdershoven, Two Centuries of Solidarity. German, Belgian and Dutch Health Insurance 1770-2008 (Amsterdam:

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The book’s main theoretical goals are to identify the solidaristic foundations of the Dutch welfare state, and to explain why it has been so successful in providing adequate care and insurance against labor market risks for all citizens. For reasons that will be explained in the following chapter, the willingness and ability of Dutch policy-makers to create and maintain such an inclusive welfare state are surprisingly difficult to explain through the lens of the main theoretical perspectives on welfare state development. The main reason for this is that more inclusive welfare systems not only (seemingly) undermine economic incentives and people’s sense of personal responsibility to a larger extent and are furthermore much more costly than welfare systems that rely more strongly on market principles; compared to the latter they also redistribute resources from middle-class groups and other affluent groups towards low-income and otherwise vulnerable economic groups in a much larger manner. Chapter 2 focuses specifically on these redistributive consequences, which in my view constitute the most important obstacle to the coming about of truly generous and inclusive programs of social care and protection. Together with the current chapter it forms the first, theoretical, part of the book. The second part of the book deals with the period of welfare state expansion. Chapters 3 and 4 cover the immediate postwar period, during which the expansion of the Dutch welfare state proceeded quite slowly. As we will see, this slow development was not merely the result of “conservative”, “confessional”, or “corporatist” efforts to block reform, nor was it the inevitable outcome of a “fundamental and ongoing” conflict about the organization of the social insurance system. 46 At least as important was the long survival of the guided wage policy, which functioned as a major brake on social insurance development throughout the 1940s and 1950s. The chapters will illustrate how the preoccupation with labor costs in this period led all involved parties – including the governing Labor Party (Partij van de Arbeid, or PvdA) and the major union federations – to emphasize the need to limit the size of the “social wage.” Yet crucially, this did not prevent them from moving away from a strict emphasis on the need to maintain actuarial principles at a relatively early stage, thus removing a major obstacle towards the onset of welfare generosity in later years. Chapters 5 and 6 explain how Aksant, 2009); Kees-Jan van Klaveren, Het onafhankelijkheidssyndroom. Een cultuurgeschiedenis van het naoorlogse Nederlandse zorgstelsel (Amsterdam: Wereldbibliotheek, 2016). 46 On this see, for instance, Therborn, “‘Pillarization’ and ‘Popular Movements’”, 215; Cox, The Development of the Dutch Welfare State, 59; and Romke van der Veen, “De ontwikkeling en recente herziening van de Nederlandse verzorgingsstaat”. In Trommel and Van der Veen, De herverdeelde samenleving, 34-45.

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the Netherlands consequently succeeded in creating the most extensive system of cradle-to-the-grave care and protection against labor market risks in the world. Chapter 5 explains how the collapse of the guided wage policy in the 1960s and the wage explosion that followed facilitated the rapid expansion of the Dutch welfare state in these decades. Both chapters highlight the crucial role played by the union movement and employer community in bringing about this expansion. They also illustrate that this expansion was accompanied – or made possible – by a host of measures that were specifically designed to improve matters for the lowest paid. In addition, they show that the redistributive consequences of this were fully appreciated at the time. The third part of the book deals with the period of retrenchment, which started during the early 1980s and lasts up to the present day. Chapter 7 explains how the Netherlands slowly developed into a society that offered welfare without work during the 1970s, and how this made substantial retrenchment inevitable. It does so by describing the events that led to the transformation of the disability and unemployment insurance programs into early exit pathways, as well as by describing the introduction and increased popularity of early retirement schemes. The chapter also describes the financial and redistributive consequences of this. Chapter 8 then explains why reform remained limited during the 1980s, and acquired pace during the first half of the 1990s. The chapter also deals with the reorganization of the social insurance system that came about in this period, and which among other things limited employer and union control over the assessment of benefit claims. Chapters 9 and 10 explain how concerns over an impending ageing crisis and the persistence of long-term unemployment prompted further reform in more recent decades. It shows that the measures taken in this period differed from earlier reform in two major ways: first, the governments of this period increasingly began to experiment with activation policies to improve labor market participation rates; and second, reform has been much more radical, especially since the advent of the new millennium. Chapter 9 focuses on the reforms that took place under the “purple” or social-liberal coalitions that governed the Netherlands from 1994 to 2002, before Chapter 10 deals with the more radical reform agendas of the Christian-democratic and then liberal-dominated governments of the first two decades of the 21st century.

2

The Politics of Social Solidarity

During the f irst decades of the postwar period, all Western countries managed to strongly increase the generosity of social programs aimed at providing social care and protection against risk and ill fortune. At the same time, they did so in very different ways and – as a result – to a very different extent. Modern welfare states can be classified in a variety of ways, but most scholars would probably agree that the most salient distinction lies in the extent to which they are able to provide adequate social care and security against labor market risks for all members of society, including the least privileged. This distinction has occupied a central role in the scholarship on the political economy of the rich democracies for at least four decades. Today, this scholarship no longer finds it difficult to explain why overall levels of care and protection have at some point in time, and more so in some countries than in others, come to surpass the degree that is functionally required for modern economies to perform optimally. Yet it continues to struggle with the question of why they have taken on a much more equitable and solidaristic form in some countries compared with others. In other words, it remains unclear why some countries have managed to create relatively inclusive welfare states while citizens’ ability to obtain adequate levels of social care and protection in other countries continued to much more strongly depend on their position on the labor market. While scholarly views of the development of social care and protection programs in the latter group of countries are – as we will see below – by no means without their problems, their more limited nature does make it easier to explain them. Compared to more inclusive welfare regimes, the welfare systems in these countries tend to allow for less overall risk collectivization and horizontal redistribution over the life span. Often – but not always – they also strongly rely on private forms of welfare provision. However, their defining feature is that they do little to alter the distribution of labor market income or spread the risk of contingencies among social groups that differ in their exposure to major labor market risks such as disability, sickness, and unemployment. For this reason, they are often referred to as “dual” or “divided” welfare regimes.1 By stratifying rather than reducing 1 This is also why such regimes tend to more strongly rely on private welfare programs: compared to public programs, private forms of welfare provision are much more limited in their ability to alter the distribution of labor market income or redistribute labor market risks among different social groups. It is precisely for this reason that many politicians and interest

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existing social inequalities, they ensure that access to adequate levels of social care and protection against labor market risks remains limited to only part (albeit generally the majority) of their population. Those with a particularly unfavorable risk profile or a level of income that is too low to create sufficient savings to insure themselves in an actuarial manner (these two often go together as they generally depend on a person’s skill level, occupation, and industry of work) are generally left behind. There can be no doubt that such systems tend to be greatly preferred over more inclusive systems of care and protection by those who emphasize the importance of economic incentives, people’s sense of personal responsibility, and the need to minimize public spending. After all, given that they require lower levels of collectivization and tend to maintain stricter eligibility criteria, they are also less likely to promote “idleness” and undermine citizens’ realization that they are themselves responsible for insuring themselves against economic risk and ill fortune. To create more equitable and solidaristic welfare systems that also provide adequate levels of care and protection to society’s weakest and most vulnerable members, a much looser relationship between benefit entitlement and individual contributory effort is required, which significantly increases the scope for moral hazard. Moreover, it also results in much higher levels of risk and income redistribution among different societal groups, which can lead to strong resentment among and consequently resistance from those groups that stand to lose from this. One of the main arguments put forward in this book is that these groups foremost comprised of middle-class and skilled workers with a relatively strong position on the labor market. Such groups – which over time have come to include most skilled manual professions as well as traditional whitecollar occupations and the majority of self-employed workers – certainly have an interest in risk pooling and other forms of reciprocal solidarity. Yet they do not necessarily have an interest in the necessary measures to ensure that the least fortunate can also obtain access to adequate levels of care and protection. On the contrary, given that such measures result in significant redistribution of income and risk down the income ladder, they have a strong material interest in preventing them from coming about. In many countries, they have consequently set out to do so, and with considerable success. Indeed, the inability or unwillingness of policy-makers there to create more inclusive systems of welfare protection during the first decades groups tend to favor such approaches. On this, see for instance, Hacker, The Divided Welfare State, 49-51; Oude Nijhuis, “Labor Divisions”, 66-79.

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of the postwar period can often be largely attributed to middle-class and skilled manual worker opposition to redistributive welfare initiatives.2 Therefore, the vexing question is why some countries have succeeded in creating more inclusive systems of care and protection. In other words, why have the fortunate in these countries ever agreed to more than reciprocal acts of solidarity that emerged as a result of a common interest in insuring themselves against labor market risks? The main problem here is not simply to explain asymmetrical acts of solidarity that worked to redistribute income and risk in favor of the less privileged; it is also that many of these acts benefited an electorally small group of socially disadvantaged citizens at the expense of a much larger majority of wage earners and voters, who – as a result of their stronger position on the labor market – can also be expected to have had more economic leverage. Indeed, as illustrated at length in this book, the generosity of the Dutch welfare state can largely be attributed to measures specifically designed to ensure that a relatively small group of low-paid workers and self-employed persons with above-average levels of exposure to labor market risks could also receive adequate levels of care and protection against these risks. It was this goal that primarily motivated policy-makers to reduce the strictness of eligibility criteria, introduce redistributive contributory systems and opt for (partial) tax financing, as well as take various other measures that worked to sever the link between benefit entitlement and individual contributory effort. They did so despite being well aware of the redistributive consequences of this. Both the scope and direction of these consequences make it difficult to explain the success of these measures in terms of the needy’s ability to wrest concessions from the more fortunate by mobilizing in favor of redistribution. On most occasions – and as we will see – they simply lacked both the numbers and the economic clout to do so. Furthermore, is it also not possible to explain such forms of redistribution by exploring the possibility for political alliances between low-income and middle-class groups.3 The reason 2 As a result of the long-standing dominance of the power resources and other class-oriented approaches, much of the welfare state literature has failed to realize the central role played by middle-class groups in the persistence or coming about of welfare dualities. While many studies have noted instances of labor union opposition to redistributive welfare state development, they have often attributed this to either the tradition of “voluntarism” or business strategies that aimed to divided wage earners. Later on in this chapter, I explain why such explanations are often insufficient. 3 According to Torben Iversen and David Soskice, there once existed “economic complementarities” between skilled and unskilled workers that – under certain political constellations (including the presence of systems of proportional representation) – enabled them to “impose the costs of redistribution on the higher-income earners represented by rightist parties”. In

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for this is that their interests were completely at odds with one another in this respect. Indeed, as illustrated at length in the following chapters, it was the middle-classes that bore the brunt of the costs of government measures aimed at ensuring that low-paid and otherwise precarious groups could also obtain adequate levels of care and insurance, rather than the truly privileged or rich. Relatively low-income thresholds to compulsory membership over which no contributions were levied made sure of this. In this respect, the Netherlands was no exception. 4 Therefore, the main question is why these groups failed to mobilize against these measures in a successful manner in the Netherlands. This book answers this question by showing that the system of consociational politics and sectoral nature of labor union organization there prevented them from doing so.

Welfare Reform and the Logic of Solidarity The issue of risk and income redistribution as well as the question of how much of it occurs and who benefits and loses from it have always been central to the debate on welfare state development. Collectively organized insurance programs and other cash and personal care services tend to have strong redistributive consequences, whereby their introduction and maintenance thus require significant levels of group solidarity. Much of this solidarity is reciprocal and thus can be explained in terms of rational self-interest. In its most limited form, the social insurance merely serves as an instrument that enables citizens to moderate the effects of natural and man-made misfortune based on certain agreed-upon principles of fairness. By pooling recent years, these complementarities were then “undermined” by the rise of the knowledge economy, deindustrialization and the decline of Fordism. See Torben Iversen and David Soskice, “Democratic Limits to Redistribution: Inclusionary versus Exclusionary Coalitions in the Knowledge Economy,” World Politics 67:2 (2015) 185-225. This argument often overlooks the notion that European governments during the “Fordist” phase consistently took redistributive measures that favored low-paid unskilled workers at the expense of skilled workers in the middle of the earnings redistribution. This fact is also overlooked in Peter Baldwin’s otherwise excellent work in the involvement of middle-class groups in the postwar development of various European welfare states. See Peter Baldwin, The Politics of Social Solidarity. Class Bases of the European Welfare State 1975-1975 (Cambridge: Cambridge University Press, 1990). 4 The consequences of income and wage limits for the scope for redistribution was already recognized by the sociologist T.H. Marshall in 1949. See for instance T.H. Marshall, “Citizenship and Social Class”. In Christopher Pierson and Frances Castles, The Welfare State Reader (Cambridge: Polity Press, 2006) 37-38. For their pervasiveness in western European societies, see for instance Flora, Growth to Limits, references per country.

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risks, the participants in social insurance programs no longer have to face uncertainty alone, but rather as part of a larger group. Despite problems relating to moral hazard, it is not difficult to see why such programs would hold broad electoral appeal and why a majority of workers may express an interest in joining them, even though this means that they have to pay for the benefits of those who are currently disabled, sick, unemployed, or too old to work: after all, one day these labor market risks may also prevent them from being able to work. As a result, it is not difficult to explain why all modern societies have developed rather generous levels of protection for the majority or electoral “core” of voters. However, it is much more difficult to explain why some of them have gone beyond this by constructing more inclusive systems of welfare provision that also provide adequate and sometimes even rather generous levels of care and protection to society’s weakest and most vulnerable members. For this purpose, they needed to initiate a host of measures that redistributed risk and income between more and less affluent societal groups. To ensure that workers with above-average levels of exposure to risk could also obtain access to social insurance schemes, they – for instance – introduced universalist programs that pooled resources among groups that strongly differed in their exposure to labor market risks. Furthermore, as large groups of wage earners and self-employed workers not only lacked the risk profile to obtain adequate levels of protection but also lacked the necessary income to finance this, they also introduced (partial) tax financing and redistributive contributory systems that worked to the advantage of the lowest paid contributors of social insurance schemes. They also greatly expanded tax-financed care and social provision programs that either specif ically targeted the poor or were simply most heavily used by them. Finally, as they reduced the strictness of eligibility criteria of social insurance schemes to ensure that more risk-prone contributors also qualif ied for benef its, these benef its also became more heavily geared towards this group. Such acts of asymmetric solidarity under which the affluent are asked to protect the interests of the weak or other vulnerable members of society are surprisingly difficult to explain through the lens of the main theoretical perspectives on welfare state development. This is most clearly the case for the once-dominant “power resources approach” to the welfare state, which emphasizes the importance of workers’ ability to mobilize against capital and consequently pays little attention to the question of the circumstances under which groups of wage earners with a stronger position on the labor market are more likely willing to share their resources with their more

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risk-prone and lower-paid counterparts.5 Yet other theoretical perspectives also tend to view solidarity as an expression of common group interest and consequently explain successful welfare initiatives according to these groups’ ability to mobilize or otherwise exert political influence, whether these are wage earners, self-employed persons, or even firms.6 As a result, much of the literature on the welfare state either altogether neglects the importance of asymmetrical forms of solidarity under which the strong protect the interests of the weak for the coming about of inclusive welfare systems or downplays the need for this.7 Indeed, this in turn has not only made it difficult for this scholarship to explain the coming about of inclusive welfare systems; moreover, it has also led to a flawed understanding of other countries’ inability to construct similar systems. For instance, take the United Kingdom and the United States, which constitute two of the best-known examples of countries where many high-risk and low-paid workers have continued to lack proper insurance and access to care throughout the postwar period.8 Despite recent criticisms of 5 While this class-based orientation is implicit in most works, this is not always the case. For instance, according to Walter Korpi, “we can distinguish three socio-economic classes: employers, employees, and the self-employed. Although internally quite heterogeneous, these broad categories define similarities in actors’ opportunities and constraints, resources, and risks”. Korpi, “Power Resources”, 174. Such views obviously fail to capture differences in interests among workers when it comes to welfare state development. 6 This does not necessarily mean that they view these groups as heterogeneous; in fact, many of them explicitly do not. Nonetheless, neither the power resources approach, recent writings on employers or institutionalist writings that also pay attention to middle-class groups have paid much attention to asymmetrical forms of solidarity. All of them tend to view interest-group policies as the outcome of an aggregated form of individual means-end rationality and pay little attention to normative orientations. For an excellent criticism of this tendency, see for instance, Peter Swenson, Fair Shares: Unions, Pay, and Politics in Sweden and West Germany (Ithaca: Cornell University Press, 1989); 7 As recently stated, the welfare state literature has not “attended in any depth to the role of solidarity, either as a precondition or an outcome. Relatively little has been written about the extent to which the welfare state […] presupposes solidarity, creates solidarity, or erodes solidarity”. See Will Kymlicka, “Solidarity in Diverse Societies: Beyond Neoliberal Multiculturalism and Welfare Chauvinism”, Comparative Migration Studies 17:3 (2015) 8. For other scholars who have noted the “curious absence” of this, see Paul Reynolds, “Introduction”. In Scott Boyd and Mary Ann Walter, Cultural Differences and Social Solidarity: Solidarities and Social Function (Newcastle: Cambridge Scholars Publishing, 2014); Sally Scholz, Political Solidarity (University Park: Penn State University Press, 2008); Jeffrey Alexander, “Morality as a Cultural System: On Solidarity Civil and Uncivil”. In Vincent Jeffries, Palgrave Handbook of Altruism, Morality and Social Solidarity (London: Palgrave, 2014), 303-310; Steinar Stjernø, Solidarity in Europe: The History of an Idea (Cambridge: Cambridge University Press, 2004). 8 On the “divided” American welfare state, see for instance, Hacker, The Divided Welfare State; Marie Gottschalk, The Shadow Welfare State: Labor, Business, and the Politics of Health Care in

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the power resources approach and other class-oriented perspectives, most studies on this have failed to appreciate the importance of skilled manual and white-collar opposition to the redistributive consequences of attempts to create a more equitable and redistributive welfare system there, and have instead emphasized the importance of business opposition to this. Those who have noted instances of such opposition have attributed this to the emergence of generous private insurance programs, which over time worked to “reorient labor’s interests […] leading many unions to prefer private-sector solutions over public-sector ones”.9 In this view, such instances were the outcome of deliberate business strategies that aimed to “divide wage-earners” by “creating new invidious cleavages that are difficult to bridge”.10 The problem with such explanations is that they neglect the notion that divisions of interests among different groups of workers are intrinsic and an outcome of the very different position that they have on the labor market: not all workers have an interest in joining collective forms of insurance against labor market risks and among those who do, most do not have an interest in joining programs that systematically redistribute risk and resources in favor of particular low-paid and risk-prone groups. As a result, in the past many of them preferred to join more limited groups schemes over joining programs that redistributed risk in a broader manner, opposed the United States (Ithaca: Cornell University Press, 2000); Jennifer Klein, For All These Rights: Business, Labor and the Shaping of America’s Public-Private Welfare State (Princeton: Princeton University Press, 2003); Colin Gordon, Dead on Arrival: The Politics of Health Care in TwentiethCentury America (Princeton: Princeton University Press, 2003). On the United Kingdom, see for instance, Oude Nijhuis, “Labor Divisions,” 66-79; Baldwin, The Politics of Social Solidarity; Helen Fawcett, “The Beveridge Strait-jacket: Policy Formation and the Problem of Poverty in Old Age”, Contemporary British History 10 (1996) 20-42; Hugh Pemberton, “The Failure of ‘Nationalization by Attraction’: Britain’s Cross-class Alliance Against Earnings-related Pensions in the 1950s”, The Economic History Review, 65:2 (2012) 1428-1449. 9 Gottschalk, The Shadow Welfare State, 2. The idea here is that the structure of welfare provision creates either solidarity or divisions between “insiders” and “outsiders” depending on whether it is, respectively, either public and encompassing or tilted towards higher-wage earners through a mixture of public and private benefits. See for instance, Hacker, The Divided Welfare State, Gordon, Dead on Arrival; Pemberton, “The Failure”; David Rueda, Social Democracy Inside Out: Partisanship and Labor Market Policy in Advanced Industrialized Democracies (Oxford: Oxford University Press, 2007); Leimgruber, Solidarity Without the State; Christine Trampusch, “The Welfare State and Trade Unions in Switzerland: an Historical Reconstruction of the Shift from a Liberal to a Post-liberal Welfare Regime”, Journal of European Social Policy 20:1 (2010) 58-73. 10 Gøsta Esping-Andersen and Walter Korpi, “Social Policy as Class Politics in Postwar Capitalism: Scandinavia, Austria, and Germany”. In John Goldthorpe, Order and Conflict in Contemporary Capitalism (Oxford: Clarendon Press, 1984) 184. See also Gøsta Esping-Andersen, Politics Against Markets: The Social-Democratic Road to Power (Princeton: Princeton University Press, 1985) 245.

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the inclusion of groups with unfavorable risk profiles in social insurance schemes, and resisted the introduction of redistributive contributory systems that benefited low-paid contributors. For instance, in the United Kingdom, skilled manual and white-collar workers consistently opposed Labour’s attempts to improve the generosity of the public welfare system in such a way that semi- and unskilled workers could also obtain adequate care and protection against labor market risks. They did so whether these initiatives threatened to replace existing private programs or not, being primarily motivated by the goal of preventing additional risk and income redistribution from coming about.11 Many of their foreign counterparts have behaved in a similar manner at some point in time, albeit more often in some countries than in others and with very different levels of success.12 When their efforts were successful, the outcome was that welfare dualities persisted. In other words, the ongoing inadequacy of public welfare programs and heavy reliance on private benefits in some countries can be explained through both the unwillingness of middle-class and other affluent groups there to accept signif icant levels of risk and income redistribution in favor of lower-paid and more risk-prone groups. This is not to say that the expansion of private insurance programs did not complicate efforts to expand the boundaries of the welfare state in an independent manner in these countries; indeed, it very well may have. Once affluent groups have obtained adequate levels of protection against labor market risks through a combination of private and public benefit entitlement, they may be even more likely to oppose attempts to share risk in a broader manner or expand the generosity of public benefits through the introduction of a more redistributive contributory system, if only because they will be more aware that this presents a bad deal for them. Nonetheless, a heavy reliance 11 In fact, the only exception to this was when these initiatives did not threaten to redistribute risk and income among different groups of workers. See Oude Nijhuis, “Labor Divisions”, 66-79. 12 For instance, in Denmark, craft unions representing skilled manual workers resisted various redistributive welfare proposals. See for instance, Baldwin, The Politics of Social Solidarity, 147-157; Asbørn Sonne Nørgaard, The Politics of Institutional Control: Corporatism in Danish Occupational Safety and Health Regulation and Unemployment Insurance, 1870-1995 (Aarhus: Politica, 1997) 189-190. In Switzerland, they also did so although studies of this have failed to point to the distributive motivations for this and have instead attributed this to the voluntarist inclinations of labor unions there. See for instance, Leimgruber, Solidarity Without the State; and Trampusch, “The Welfare State and Trade Unions in Switzerland”, 58-73. The fact that these voluntarist inclinations were always strongest among craft unions and white-collar associations has received little attention. On this, see Gary M. Fink, “The Rejection of Voluntarism”, Industrial and Labor Relations Review 26:2 (1973) 805-819. On the United States see Hacker, The Divided Welfare State; and Gottschalk, The Shadow Welfare State.

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on private provision by no means necessarily has to conflict with the goal of obtaining more equitable and solidaristic levels of care and protection. The Netherlands serves as an excellent example of this. Despite the existence of a powerful pension industry whose further expansion received top priority by all major political parties, the Dutch old-age pension system came to be known for its generous treatment of society’s poorest members.13 It largely did so because the public pension diverted a large share of middle-class savings to pay for the benefits of low-paid workers. Over time – and as we will see – the other social insurance programs also came to do so. Accordingly, in the Netherlands, it had been possible to impose asymmetric forms of solidarity on middle-class and other affluent groups in a major way. In fact, with the possible exception of the Nordic countries – where direct income redistribution largely came about through tax financing – the Netherlands probably went further in this than any other European country.14 Therefore, why did Dutch governments of various political persuasions throughout the postwar period consistently adopt welfare initiatives that not only reapportioned risk in a major way, but also redistributed income among different groups of workers through the introduction of redistributive contributory systems? Moreover, why did those who stood to lose from these initiatives fail to organize against them in a more successful manner? This book explains their inability to do so by looking at the two main avenues through which middle-class groups could have exerted political influence: by having their voices heard in the voting booth and forming interest groups aimed at influencing government policy in a more direct manner. It argues that they failed to use these avenues successfully for two reasons: while the dominance of Christian democracy and system of consociational politics prevented them from maximizing their influence as voters, the sectoral nature of labor union organization prevented them from exerting direct pressure on the government in a successful manner. 13 See for instance, Julia Lynch, Age in the Welfare State. The Origins of Social Spending on Pensioners, Workers, and Children (Cambridge:, Cambridge University Press, 2006) 145. 14 While data on this is scarce as most studies have focused on general spending patterns, it is worth noting that following the introduction of the net-net link minimum benefit levels were among the highest in the Western world, equaling over 80 percent of average wages in manufacturing industry at some point. Coen Tuelings, Romke van der Veen, and Willem Trommel, Dilemma’s van sociale zekerheid: een analyse van 10 jaar herziening van het stelsel van sociale zekerheid (Amsterdam: VUGA, 1997) 161. Moreover, as overall generosity was also among the highest in the world, risk redistribution was also immense. On this generosity, see Esping-Andersen, The Three Worlds, 52; Lyle Scruggs, “Welfare State Generosity across Space and Time”. In Jochen Clausen and Nico A. Siegel, Investigating Welfare State Change (Northampton: Edward Elgar Publishing, 2007) 133-166.

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Christian Democracy and the Political Foundations of Social Solidarity Two of the leading scholars on Christian democracy – the political scientists Kees van Kersbergen and Uwe Becker – once aptly summarized the challenge that the Netherlands posed for existing theories of the welfare state by describing it as a “passive social democratic welfare state in a Christiandemocratic-ruled society”.15 Of course, what they meant by this was that the Netherlands displayed most of the features of the social democratic welfare states that could be found in the Nordic countries (in particular, their inclusive character), while the political landscape was largely dominated by Christian-democratic forces. This dominance was particularly high during the first three decades of the postwar period, which roughly corresponds with the Dutch welfare state’s expansive phase. For instance, up to the late-1960s, the three main confessional parties – the Catholic People’s Party (Katholieke Volkspartij, henceforth KVP), the aforementioned ARP and the Christian Historical Union (Christelijk Historische Unie, henceforth CHU) – consistently held a majority of parliamentary seats, with the Catholic KVP alone occupying about one-third of all parliamentary seats and the Protestant ARP and CHU each holding just under one-sixth.16 When their electoral appeal finally started to decline during the late-1960s, these three parties responded by merging into a single party, the Christian-Democratic Appeal (Christen-Democratisch Appèl, henceforth CDA), which subsequently came to dominate the Dutch political scene for another three to four decades. On top of that, many employer organizations and labor unions also displayed a distinct Christian-democratic identity. Up to the mid-1970s, when the Catholic and socialist union federations merged into the Federation of Dutch Labor Unions (Federatie Nederlandse Vakbeweging, henceforth FNV), the Protestant and Catholic union federations had represented more members than their socialist counterpart.17 The reason for this dominance can be found in the strong loyalty of Catholic and Protestant voters, workers and (to a somewhat lesser extent) 15 Van Kersbergen and Becker, “The Netherlands”, 477-499. 16 The ARP was founded by orthodox reformed Protestants who had split from the main Dutch Reformed Church, whose members tended to vote for the CHU. In terms of voter strength, the two parties were roughly similar in the postwar period. 17 The FNV formed in 1976 when the NVV and KAB reached an agreement on intensive cooperation. The two federations formally joined FNV in 1981. See Ernest Hueting, Frits de Jong, and Rob Neij, Naar groter eenheid: De geschiedenis van het Nederlands Verbond van Vakverenigingen, 1908-1981 (Amsterdam: Van Gennep, 1983).

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employers to their own religious denominations. In turn, this loyalty was reinforced by the pillarized nature of Dutch society during this period, which meant that almost all forms of social organization – including broadcasting companies, sports clubs, schools, universities, hospitals, cemeteries and social welfare organizations as well as labor unions, employer organizations, and political parties – were divided along religious and ideological lines.18 While this process of pillarization was by no means unique to the Netherlands – Austria, Belgium, and Switzerland were characterized by similar societal divisions in the past – it did seem to go further there than in other European countries and also seems to have had a stronger religious foundation.19 According to most historians, the pillarization of Dutch society along religious and ideological lines peaked just before the Second World War. Nonetheless, a major decline did not set in until the second half of the 1960s, when voters, workers, and consumers quite suddenly started to desert to secular organizations in mass numbers. A good example of this can be found in the KVP’s dwindling electoral appeal in this period, with a voting share that peaked in 1963 when it received 50 out of the 150 seats in parliament, as compared to only 27 in 1972. This meant that in less than ten years its voting share had almost halved.20 The process of pillarization occupies a central explanatory role in the literature on the postwar development of the Dutch welfare state, perhaps more so than the ideology of Christian democracy, which is mainly viewed as having provided an obstacle to its development. The reason for the latter lies in the aforementioned confessional preoccupation with preserving citizens’ sense of personal responsibility, as well as the resulting aversion 18 For the origins of this process, see for instance, Rudolph Steininger, Polarisierung und Integration. Eine vergleichende Untersuchung der strukturellen Versäulung der Gesellschaft in den Niederlanden und in Österreich (Meisenheim am Glan: Hahn, 1975); Jaak Billet, Tussen bescherming en verovering. Sociologen en historici over zuilvorming (Leuven: Leuven University Press, 1988); Harry Post, Pillarization: An Analysis of Dutch and Belgian Society (Aldershot: Avebury, 1989); Staf Hellemans, Strijd om de moderniteit, Sociale bewegingen en verzuiling in Europa sinds 1800 (Leuven: Leuven University Press, 1990). For the loyalty of voters to confessional political parties, see footnote 18 in Chapter 1. 19 See for instance, Luc Huyse, Passiviteit, pacificatie en verzuiling in de Belgische politiek (Antwerpen: Standaard Wetenschappelijke Maatschappij, 1970); Steiniger, Polarisierung und Integration. 20 Voting shares of CHU and ARP had remained somewhat more stable: whereas the CHU experienced a slight loss, the ARP’s voting share remained quite stable. The main reason for this difference was that the process of secularization proceeded much more swiftly among Catholic citizens and thus voters. On the dilemma that this created for the KVP, see Hans Bornewasser, Katholieke Volkspartij 1945-1980. Band II Heroriëntatie en integratie (Nijmegen: Valkhof Pers, 1995).

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of confessional forces (including – for a long time – many Catholic and Protestant labor unions leaders) to government-mandated solutions, and an emphasis on the need to adhere to actuarial principles. As mentioned in the previous chapter, most studies on the postwar development of the Dutch welfare state view this as the main reason for its initial slow rate of expansion in this period.21 Furthermore, they have attributed its more rapid rate of expansion in later years – as well as the supportive stance of various confessional-dominated governments for this – to the process of depillarization, which they viewed as mainly having led to increased competition over the working-class vote and thus with the left. In other words, as voter loyalty decreased, the Christian-democratic parties supposedly came under stronger pressure to support the expansion of popular social insurance and allied programs and consequently did so despite their reservations about this.22 The previous chapter already highlighted why this (de-)pillarization thesis – while not completely without its merits – on its own cannot explain either the Dutch welfare state’s peculiar postwar trajectory (let alone its inclusive outcome) or the confessional transformation on welfare during this period. As we will see in the following chapters, this transformation started long before the main confessional parties experienced a major decline in their voting shares; indeed, by the time that they began to do so, they had long come to pursue a more solidaristic welfare course that attributed a key role to the government in providing a “shield for the weak”. They had done so despite it being by no means clear that the confessional preoccupation with self-help and personal responsibility had actually reduced their overall electoral appeal in a major way. After all – and as we will see – it did not prevent them from supporting the introduction of compulsory, pay-as-you-go-financed and rather generous (if actuarially sound) public insurance programs for workers when discussions over a major overhaul of the welfare system began in the immediate postwar period. This stance probably corresponded quite well with the material interests of most voters, who had an interest in obtaining more generous levels of protection against labor market risks but did not necessarily depend on a major loosening of the link between benefit entitlement and individual contributory effort to obtain benefit adequacy. They certainly did not have an interest in loosening the link between benefit entitlement and individual contributory effort when this not only 21 For an alternative view, see Hoogenboom, Standenstrijd en zekerheid. 22 See footnote 12 on this.

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resulted in more risk sharing among individuals with similar levels of risk exposure or horizontal redistribution of resources over the life course, but also – or primarily – imposed asymmetric forms of solidarity on affluent voters in favor of low-income and particularly risk-prone workers and self-employed persons. As we will see in the following chapters, this would increasingly be the case. In fact, as we will also see, the confessional transformation on welfare during the first decades of the postwar period can largely be attributed to the aim of ensuring that low-income and otherwise economically vulnerable groups could also obtain adequate levels of care and protection against labor market risks. Accordingly, contrary to what is often believed, many of the welfare initiatives of confessional-dominated governments in this period not only presented opportunities for credit claiming; indeed, given that they increasingly imposed asymmetric forms of solidarity on middle-class and other key voter groups, they often also presented a clear electoral risk. This makes it difficult to attribute their willingness to support these initiatives to electoral competition; instead, it suggests that they at least partly did so because Christian-democratic ideology placed a strong emphasis on the importance of social justice, which manifested itself in a genuine concern with the less privileged. The Christian-democratic emphasis on social justice and solidarity with the less privileged has received much attention in the broader literature on the welfare state. There is good reason for this, as it is just as firmly founded in Christian-democratic thinking as the emphasis on self-help and personal responsibility. In Catholic teaching, it is actually much more important.23 There can be no doubt about the formative impact of this on the behavior of Christian-democratic parties. The Christian-democratic concept of solidarity is certainly based on a very different worldview and ethical conceptions than the social-democratic notion of solidarity, with one of the major differences being that Christian-democratic parties do not assign as much importance to obtaining formal and material equality among citizens.24 Nonetheless, this does not mean that Christian-democratic parties are necessarily opposed to measures that reduce market-generated inequalities. In fact, existing research has long shown that the tendency to view the welfare states of Christian-democratic dominated societies as “conservative” welfare states 23 On differences between Catholic and Protestant teachings and the consequences of this for welfare state development, see for instance, Van Kersbergen and Manow, Religion, Class Coalitions and Welfare States. 24 For an elaborate treatment of this, see for instance, Steinar Stjernø, “The Idea of Solidarity in Europe”, European Journal of Social Law 3 (2011) 156-176. See also Van Kersbergen and Manow, Religion, Class Coalitions and Welfare States.

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with high levels of stratification can be quite misleading. While it is true that many of these “Bismarckian” systems originated in nineteenth-century attempts to preserve existing status hierarchies, in subsequent decades all of these systems have become quite redistributive across income groups, albeit much more so in some countries compared with others.25 The following chapters will illustrate how solidarity with the less privileged motivated Christian-democratic parties in the Netherlands to push for welfare initiatives that not only conflicted with the goal of preserving citizens’ sense of personal responsibility, but also redistributed income and risk in a major way. An excellent example of this is the aforementioned 1956 reform of the public pension system. As we will see, the decision to adopt a scheme that combined flat-rate benefits with earnings-related contributions up to a threshold that equaled just under twice the average wage in manufacturing and also exempted low-paid self-employed persons from having to pay contributions was clearly taken because a fully “Beveridgean” system could not provide adequate benefits to the lowest paid. It obviously did so at the expense of middle-class groups, who would have fared much better under a completely flat-rate system. Many other welfare initiatives also benefited low-paid groups at the expense of middle-class groups and often a much larger majority of citizens, either because they expanded programs that mostly catered to small groups of economically vulnerable citizens (such as the 1960s decision to transform the social assistance scheme from a mostly privately organized charity system into an exceptionally generous entitlement-based system) or because they resulted in a direct redistribution of resources (such as the 1960s introduction of minimum benefit rates into the “Bismarckian” social insurance programs and subsequent decision to link these to the minimum wage and through this to general wage advances). Of course, this does raise the question of why these middle-class groups failed to organize against the redistributive consequences of progressive welfare reform in a more effective manner. Why, for instance, were they so much less successful in this than similar groups in other countries? Why did they for example fail to successfully press for a less redistributive public pension initiative, which – despite presenting a rather bad deal for 25 The tendency to view the (mostly continental European) welfare states that came about under Christian-Democratic dominance as “conservative” can to some extent be attributed to Esping-Andersen’s typology. See Esping-Andersen, The Three Worlds. However, in reality, these welfare states are quite diverse, in fact more so than its liberal and social-democratic counterparts. On this, see Huber and Stephens, Development and Crisis, 87; Nick Ellison, The Transformation of Welfare States (New York: Routledge, 2006) 17; Thomas R. Cusack and Pablo Beramendi, “Taxing Work”, European Journal of Political Research 45 (2006) 68.

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a large number of voters – passed parliament with support from almost all parliamentary groups? The fact that only one of these groups – the VVD – catered specifically to middle-class voters certainly held strong importance in this respect. Moreover – and as noted earlier – up to the early-1970s this party never received more than twelve percent of the vote. Of course, the reason for the latter was that the fragmentation of Dutch society into ideological and vertically integrated networks of societal and political organizations not only sheltered the confessional parties from competition from the “left”, but also against competition from the “right”. Their sheltered position made it much easier for these parties to display solidarity with the least fortunate, many of whom could be found within their own religious denominations. In other words, one of the reasons why affluent groups were less successful than many of their foreign counterparts in blocking attempts to impose asymmetric forms of solidarity upon them is that they displayed a stronger loyalty to the parties responsible for these attempts.

Organized Labor and the Question of Inclusiveness Like in all other advanced industrialized economies, these affluent groups largely comprised of wage earners. Whether they worked as administrators, professionals, managers, foremen, or skilled manual workers, their strong position on the labor market not only ensured that reciprocal forms of solidarity often sufficed for them to obtain adequate levels of care and protection against labor market risks; moreover, it also gave them strong potential economic leverage. In various countries, they exploited this leverage by forming separate organizations that specifically catered to their own narrow occupational interest. These craft unions (which exclusively catered to skilled manual workers) and occupational white-collar associations tended to strongly resist any attempt to redistribute resources away from their members in favor of workers with a weaker position on the labor market, often doing so with considerable success.26 However, such associations were much less common in other countries. For instance, in the Netherlands, they have never been particularly strong, which means that relatively well-paid workers in secure professions mostly tended to organize themselves with less fortunate unions in vertically structured labor unions. Indeed, this 26 See Henry Pelling, A History of British Trade Unionism (London: Macmillan, 1971); Peter Dorey, Wage Politics in Britain: The Rise and Fall of Incomes Policies since 1945 (Brighton: Sussex Academic Press, 2001); Oude Nijhuis, “Labor Divisions”, 66-79.

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constitutes another major reason for their inability to successfully resist attempts to impose asymmetrical forms of solidarity upon them. Just as the main Christian-democratic parties were catch-all parties that aimed to represent both higher- and lower-income members within their own denominations, the Dutch labor unions have always mainly been organized along sectoral lines, catering to members with very different risk profiles and income levels. As a result of the country’s late industrialization, the subsequent power of socialist ideals during the formative period of the labor union movement and the impact of religious cleavages, skilled manual workers in the Netherlands never organized separately from their semi-and unskilled manual counterparts in large numbers, for instance. Furthermore, while separate white-collar unions existed, these gradually also grew to become more inclusive. By the start of the postwar period, this move towards further unity – which had largely been a top-down and at times remarkably painful process – was almost complete.27 By then, all of the three main union federations – the socialist NVV, Protestant CNV, and Catholic Workers’ Movement (Katholieke Arbeidersbeweging, henceforth KAB) – only represented union affiliates that organized workers regardless of skill levels. The result was a degree of centralization and inclusiveness that was almost without parallel in the Western world.28 As a result, the union federations did not have to deal with powerful affiliates that were primarily concerned with the interests of higher-paid and relatively secure members, nor did they have to pay much consideration to those unaffiliated unions that mostly represented higher-paid workers in more secure professions, given that these only represented a fraction of the organized workforce and – perhaps even more importantly – were not represented in the country’s main corporatist institutions. In this respect, they strongly differed from most of their foreign counterparts, particularly those in the so-called “Anglo-Saxon” part of the world, where both skill 27 The process started in the early twentieth century and was not completed up to the late 1950s. While most unions eventually accepted the logic behind the need to reorganize on an industrial basis, some were discharged from membership or left on a voluntary basis. On this, see Hueting et al., Naar groter eenheid, 194-196; Ger Harmsen and Bob Reinalda, Voor de bevrijding van de arbeid: beknopte geschiedenis van de Nederlandse vakbeweging (Nijmegen: Socialistiese Uitgeverij Nijmegen, 1975) 102-104; Bob Reinalda, Bedienden georganiseerd. Ontstaan en ontwikkeling van handels- en kantoorbedienden in Nederland van het eerste begin tot in de Tweede Wereldoorlog (Nijmegen: Socialistiese Uitgeverij Nijmegen, 1981) 302-304. 28 While it is difficult to establish “inclusiveness”, one very useful indicator of this is the voting share of occupationally organized unions. For an excellent overview of this for almost all western European countries in the postwar period, see Bernhard Ebbinghaus and Jelle Visser (eds.) The Societies of Europe: Trade Unions in Western Europe since 1945 (London: Macmillan, 2005).

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divisions and collar divisions were the norm rather than the exception, although their counterparts in many continental European countries were also familiar with the divisive force of occupational unionism.29 In turn, this made it much easier for them to defend the stance that lower-paid and otherwise economically vulnerable groups should also be able to obtain adequate wages and protection against labor market risks, despite the redistributive consequences of this. There can be no doubt of these consequences. For instance, take the general wage distribution in the Netherlands, which consistently grew to become more egalitarian during the first four decades of the postwar period, and largely retained its equal features in subsequent years. The solidaristic stance of the three union federations played a central role in this. For instance, when confronted with pleas for wage moderation to facilitate the country’s reconstruction in 1945, they immediately made it clear that they would only do so if the government agreed to take specific measures for the lowest paid, arguing that it was “reasonable that [a] sacrifice will be made by the better situated to prevent hardship for the most deprived”.30 As a result, the government quickly agreed to introduce a general wage floor and with the exception of a short interlude during the mid-1950s all wage agreements during the first fifteen years of the postwar period raised the relative level of the wage floor and set maximum ceilings on the level of wage increases.31 While the main union federations consistently pushed for these wage floor increases, they did not always support the practice of setting maximum ceilings. The reason for the latter is that the process of reorganizing the labor union movement along industrial lines had not yet been completed at this time, and the CNV and KAB in particular still had various white-collar affiliates that mostly represented higher-paid professions.32 As these affiliates were forced to open up their membership to lower-paid workers or were disbanded and their membership divided over different 29 Ibidem. 30 International Institute for Social History (Internationaal Instituut voor Sociale Geschiedenis, henceforth IISG), Archief NVV, doos 21, Notulen Hoofdbesturenvergadering, 19 July 1945, 22. 31 See Noé van Hulst, De effectiviteit van de geleide loonpolitiek in theorie en praktijk (Amsterdam: Wolters-Noordhof, 1948) 256-260. 32 On the instigation of one of its white-collar affiliates named Mercurius – a union for clerks and administrative personal – the NVV investigated the matter in 1956, subsequently concluding that the wage compression had indeed become somewhat more equal, which led to much internal discussion. See NVV, Wenkend Perspectief. Studie over de inkomens- en vermogensverdeling (Amsterdam: NVV, 1957).

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sectoral organized unions, it gradually became easier for the three union federations to develop a broader egalitarian agenda. With the collapse of the guided wage policy during the early-1960s and the subsequent decentralization of the wage bargaining process, the practice of setting maximum ceilings first became less common, although the labor unions successfully insist upon the introduction of a statutory national minimum wage, which promptly developed into a vehicle for a further sharp increase in the relative wages of the nation’s poorest workers as it gradually came to be set at an exceptionally high level. Subsequently, during the late-1960s the union movement launched a much more radical onslaught on wage differentials by insisting upon fixed-amount rather than percentage wage increases and the incorporation new wage ceilings. This resulted in a further compression of the wage distribution, which lasted up to the early-1980s. By then, the Netherlands had become one of the most equal societies in the Western world. Furthermore, despite experiencing a slight increase in wage inequality in subsequent decades – especially in the upper half of the wage distribution – this would continue to be the case.33 The union federations’ egalitarian wage policies were certainly never free from internal criticism. Just as some of their white-collar affiliates had frequently complained about the practice of setting wage ceilings under the guided wage policy, labor unions operating in more competitive sectors had frequently complained about the limits that the centralized system of wage bargaining imposed upon them.34 Indeed, as the three union federations came to pursue a broader solidaristic agenda during the 1970s, many of their higher-paid members spoke against this, as did various non-affiliated labor unions that represented relatively high-paid workers.35 Nonetheless, 33 To fully understand the labor union movement’s success in doing so, it is also important to note that the collective bargaining rate has – as a result of the guided wage policy – been quite high since the beginning of the postwar period. Contrary to many other Western countries, collective bargaining has not collapsed in recent decades: close to 85 percent of the workforce is now covered by collective bargaining. It is within this group that wage compression has been most severe and stable. See for instance, Robert van de Wijngaert, Trade Unions and Collective Bargaining in the Netherlands (Amsterdam: Tinbergen Institute Research Series, 1994); Roger Blanpain, Collective Bargaining and Wages in Comparative Perspective: Germany, France, the Netherlands, Sweden and the United Kingdom (The Hague: Kluwer Law International, 2005); Maarten van Klaveren, Denis Gregory and Thorsten Schulten, Minimum Wages, Collective Bargaining and Economic Development in Asia and Europe (Basingstoke: Palgrave, 2015). 34 Some of these white-collar unions would be disbanded later. 35 See for instance, Bob Reinalda, De Dienstenbonden. Klein maar strijdbaar (Baarn: AMBO, 1985) 88-89 and 126-129; and John D. Windmuller, C. De Galan, and A.F. van Zweeden, Arbeidsverhoudingen in Nederland (Utrecht: Het Spectrum, 1983) 327.

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this resistance did little to dissuade the main union federations and their affiliates from pursuing their solidaristic course. Moreover, contrary to Anglo-Saxon countries where – as we have seen – higher-paid workers mostly organized separately from their semi- and unskilled counterparts, there never was an organized movement to restore wage differentials that were eroded over time.36 As a result, the wage distribution among workers covered by collective bargaining agreements remained remarkably stable in subsequent decades, whereby most of the increase in wage inequality that came about in recent years can be attributed to relative gains at the very top of the wage distribution.37 In sum, there can be no doubt about the ability and willingness of the Dutch union federations to redistribute income among different groups of wage earners. As we will see, this willingness extended to the area of welfare development. To be sure, and as mentioned in the earlier chapter, the CNV was initially somewhat hesitant to push for solidaristic welfare initiatives, although – as we will see – this was mostly due to its preoccupation with the Protestant virtues of self-reliance and personal responsibility. But as we will also see, by the early 1950s these reservations had largely disappeared. By then, the three union federations consistently joined forces in pursuit of generous and solidaristic levels of care and protection against labor market risk. This did not change as the economic crisis of the 1980s created new cleavages between “active” workers and a rapidly growing group of (long-term) benefit claimants. Whereas the resulting inactivity crisis slowly prompted the sole main Christian-democratic party that still remained at the time – the CDA – to shift towards the right and develop increasingly radical retrenchment plans, the main union federations strongly opposed any attempts to reduce what they viewed as existing social rights. Despite occasional differences in pursued tactics, which were not inconsequential, the main union federations and their affiliates were in full agreement on the overall goal of defending the welfare state’s generous and inclusive nature. Given that all of the affiliates of these union federations continued to represent large groups of high-paid workers operating in relative secure 36 The United Kingdom is an excellent example of a country where – due to the strength of occupationally organized unionism there – attempts to impose centralized bargaining to moderate wage demands often collapsed because they tended to reduce wage differentials, which were consequently restored by craft unions and occupationally organized white-collar unions. See for instance, Peter Dorey, Wage Politics in Britain, 31; Fritz Scharpf, Crisis and Choice in European Social Democracy (Ithaca: Cornell University Press, 1991) 83-85. 37 See for instance, Stefan de Groot and Henri de Groot, “Wage Inequality in the Netherlands: Evidence, Trends, and Explanations”, CPD Discussion Paper 186 (2011) 1-28.

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positions, their solidaristic welfare stance by no means benefited all of their members, let alone workers at large. In fact, one can even question whether it benefited a majority of union members or workers. As the Netherlands grew increasingly affluent during the first decades of the postwar period, an increasingly large group of skilled white-collar and manual workers with middle-class or higher standards of living were able to obtain adequate levels of care and protection against labor market risks through programs that collectivized risk but did not transfer resources between lower- and higher-paid and more and less risk-prone groups in a major way. However, as we will see, this transformation has had no bearing on labor union policy, with the main union federations continuing to insist upon the need to display broad worker solidarity. So how are we to explain this? Why was there so little internal discussion over the solidaristic welfare stance of the main union federations and why did the higher-paid and more secure members of these organizations fail to put up more effective resistance to this stance; for instance, by breaking up and forming separate, occupationally structured organizations? Part of the answer to this question may lie in the formative effect of the organizational views of the main union federations on those of their members. It only makes sense that individual union member views varied depending on whether the unions to which they belonged consistently defended the need to display broad worker solidarity or the narrow interests of particular occupational groups. In addition, many of their members may not even have been aware of the distributive consequences of their unions’ solidaristic stance. After all, individual union members were seldom closely involved in wage negotiations or discussions over socioeconomic policy. In fact, by reducing the central role of political parties and – by extension – the role of elections in shaping welfare outcomes, the corporatist tradition of policy-making under which parliament often largely adopted the proposal of corporatist bodies may have also made welfare outcomes less visible to voters. Finally, it may be noted that even when affluent workers were aware of the redistributive consequences of advances in welfare generosity, they may not have known how this affected them personally. After all, the workings of social insurance schemes are complex and most citizens find it quite difficult to assess their own position on the income scale.38 38 For some excellent studies on this, see for instance, Thomas Piketty, “Social Mobility and Redistributive Politics”, Quarterly Journal of Economics 110:3 (1995) 551-585; Roland Bénabou and Efe Ok, “Social Mobility and the Demand for Redistribution: The POUM Hypothesis”, Quarterly Journal of Economics 115:2 (2001) 447-487; Roland Bénabou and Jean Tirole, “Belief in a Just World and Redistributive Politics”, Quarterly Journal of Economics 121:2 (2006) 699-746.

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At the same time, there can be no doubt that large numbers of affluent wage earners were fully aware of and resented the solidaristic stance of their union representatives. Yet rather than organizing against this by forming their own associations, many of them seem to have responded by not joining a union at all. In 1974, various existing white-collar associations did manage to form their own union federation, the Federation for Middle- and Higher-Level Personnel (Vakcentrale voor Middelbaar en Hoger Personeel, henceforth MHP), which was even awarded a seat in the Social-Economic Council two years later.39 However, it never managed to represent more than eight percent of all organized workers. In other words, the sectorally organized union federations have continusouly dominated the industrial landscape in the Netherlands during the postwar period. Up to the 1970s, they were to some extent sheltered against competition from occupationally structured unions as a result of the pillarized nature of Dutch society. Nonetheless, in subsequent years they continued to represent over 80 percent of all organized workers. 40 Part of the reason for this may have been that existing wage-bargaining instutions, corporatist bodies, as well as the administration of the social insurance system, all followed a mostly sectoral logic that worked in favor of the existing union federations. 41

Solidarity in the Age of Retrenchment In addition to illustrating how these underlying political forces enabled the Netherlands to create one of the most generous and inclusive welfare states in the world by the 1970s, this book also shows how they helped to preserve its solidaristic features in subsequent decades. By doing so it suggests that societal 39 To compare, the industrially organized union federations occupied ten seats and continued to do so following the coming about of the FNV. 40 Among the remaining 20 percent of organized workers, about half do so in non-affiliated unions that are often also organized on a sectoral basis. Moreover, the main (sectorally organized) federations have always represented the vast majority of white-collar workers. See Jelle Visser, “The Netherlands”. In Bernhard Ebbinghaus and Jelle Visser, The Societies of Europe. Trade Unions in Western Europe since 1945 (London: Macmillan, 2005) 481-482. 41 This can largely be seen as a mutually reinforcing process. During the middle of the twentieth century, the three union federations worked actively and successfully to reorganize their union members along sectoral lines. Their appeals for “broad worker solidarity” were not only reinforced by the need to strengthen labor’s position against capital; moreover, they were also reinforced by the pillarized nature of Dutch society in this period as well as the largely sectoral nature of wage bargaining and social insurance administration. For some excellent references to this process, see for instance, Hueting et al., Naar groter eenheid, Reinalda, Bedienden georganiseerd.

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solidarity may be less fragile than is often suggested. In recent years, many studies have painted rather gloomy pictures of Western – and in particular European – societies’ ability to maintain generous and inclusive systems of social care and protection against labor market risks in the wake of new challenges that rooted or accelerated in the post-1970s period. These challenges included the decline in growth rates that Western countries experienced since the 1970s, the increase in benefit dependency that accompanied it, the process of globalization that accelerated since the 1980s, the slowly evolving problem of population ageing, and the shift from manufacturing to services that gradually took place in Western countries in the postwar period. According to these studies these challenges have undermined old solidarities by placing financial pressure on Western welfare states and creating new cleavages among contributors that are more difficult to bridge than the cleavages of the past.42 A major problem with much of this literature is that it tends to take these old solidarities for granted. In fact, many recent studies implicitly assume that the interests of Western societies’ largest societal group, wage earners, were more homogeneous during the first decades of the postwar period or that it was simply easier to invoke solidarity in this period because “the overall direction of welfare development was expansive”. 43 Based on this logic, some studies have even gone so far as to argue that the emergence of new insider-outsider divisions among wage earners have given left-wing parties an incentive to neglect the interests of society’s weakest members and pursue policies that favored relatively high-paid and secure workers. 44 This claim obviously not only overlooks that divisions of interests among different groups of wage earners were as severe during the golden age of welfare state expansion as they are now; it also neglects that left-wing parties have throughout the postwar period consistently initiated measures that benefited a small group of precarious workers at the expense of a much 42 For some examples see Schwartz, “Round Up the Usual Suspects!”, 17-44; Christopher Pierson, Hard Choices: Social Democracy in the Twenty-first Century (Cambridge: Polity Press, 2001); Richard Disney, “Population Ageing and the Size of the Welfare State: Is There a Puzzle to Explain?” European Journal of Political Economy 23 (2007) 532-553; Palier, A Long Goodbye; Patrick Emmeneger, Silja Häusermann, Bruno Palier, and Martin Seeleib-Kaiser (eds.) The Age of Dualization: Structure, Policies, Politics (Oxford: Oxford University Press, 2011); Kathleen Thelen, Varieties of Liberalization and the New Politics of Social Solidarity (Cambridge: Cambridge University Press, 2014). 43 Hanna Schwander and Silja Häusermann, “Who is In and Who is Out? A Risk-based Conceptualization of Insiders and Outsiders”, Journal of European Social Policy 23:3 (2013) 248-269; Silja Häusermann, “Solidarity with Whom? Why Trade Unions are Losing Ground in Continental Pension Politics”, European Journal of Political Research”, 227. 44 See David Rueda, Social Democracy.

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larger group of wage earners or voters at large. As we will see in the following chapters, they have continued to do so in recent decades. At the same time, there can be no doubt that the developments observed in this literature have placed economic pressure on European welfare states, and that this has also affected their ability to produce equitable solutions. The Netherlands has been no exception to this. Indeed, as benefit dependency, and with that the collective burden, increased much more rapidly in the Netherlands during the 1970s and 1980s than in nearly all other Western countries, governments of various political persuasions were eventually forced to implement rather harsh retrenchment measures that often disproportionally affected the lowest paid. The latter consequence – which will be illustrated at length later on in the book – can to some extent be attributed to growing concerns over the consequences of benefit generosity on work incentives, which according to many were most severe among low-paid workers. In addition, the increase in benefit dependency and rising collective burden that accompanied it resulted in strong pressure for a partial restoration of the link between benefit entitlement and individual contributory effort and this – for reasons that have been described earlier – inevitably had particularly strong consequences for low-paid workers and workers with an unfavorable risk profile. Finally, right-wing governments in particular had an electoral incentive to focus their retrenchment efforts on small electoral groups that made heavy use of social care and protection, and these tended to be society’s most fragile members. 45 The latter was even more so as the process of depillarization, which preceded the large-scale increase in benefit dependency and resulting need to introduce austerity measures by only a few years, led to increased competition over the middle-class vote. As we will see, this not only made it more difficult to launch new welfare initiatives that redistributed income and risk among different societal groups in a major way; it also provided the confessional parties with an electoral incentive to spare middle-class voters from the consequences of retrenchment. And indeed, as policymakers looked for ways to reduce social spending levels during the 1970s, it did not take long for a major cleavage to emerge over the need to reduce minimum benefit levels between left-wing parties on the one hand and 45 It has often been noted retrenchment measures often focused on programs that catered mostly to precarious workers. See, for instance, Paul Pierson, Dismantling the Welfare State? Reagan, Thatcher and the Politics of Retrenchment (Cambridge: Cambridge University Press, 1994); Dean Baker and Mark Weisbrot, Social Security: The Phony Crisis (Chicago: The University of Chicago Press, 1999); Martin Schuldes, Retrenchment in the American Welfare State. The Reagan and Clinton Administrations in Comparative Perspective (Münster: LIT Verlag, 2011).

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their confessional and liberal counterparts on the other hand. Their very different views on this severely complicated coalition forming between the two largest parties in parliament, the Labor Party and CDA, up to the early 1990s when the two parties finally settled on a compromise. In the meantime, consecutive confessional-liberal governments had gradually decreased the real value of these benefits (see Chapter 8 on this). Yet while this and other policy measures certainly had strong consequences for low-income benefit recipients, Dutch social insurance and related programs continue to be broadly accessible and offer replacement rates that are quite high for low-income earners. In other respects – as we will see – Dutch social care and protection programs also continue to rank among the most equitable and inclusive in the Western world. 46 As a result, the poverty rate among disabled, elderly, sick, and unemployment groups continues to be quite low in the Netherlands. A major reason for this is that most reform-minded governments have, rather than working to undermine social solidarity, gone at great lengths to compensate low-paid and otherwise vulnerable groups for their retrenchment measures. This included those that were dominated by the only major Christian-democratic party that remained after 1980, the CDA. As we will see in Chapter 8, the CDA-VVD governments that decreased minimum benefit levels during the 1980s by refusing to apply the wage indexation mechanism for instance partially compensated low-paid workers through targeted tax-deductions and occasional spending increases in other areas. This further suggests that electoral considerations are not alone in shaping government behavior. At the same time, it confirms the crucial importance of the Dutch labor union movement’s solidaristic stance for the country’s overall welfare trajectory. Indeed, in addition to providing a powerful counterweight to general retrenchment by strongly resisting initiatives that reduced existing worker rights, the union federations would nearly always respond to retrenchment and general austerity measures by demanding compensatory measures for society’s most fragile groups. And as we will see in the following chapters, they were generally quite successful in this. Given their crucial role in maintaining the Dutch welfare state’s inclusive features, the last part of this book will continue to pay much attention to the labor unions. But first, we turn to the immediate postwar period.

46 See, for instance, OECD, OECD Employment Outlook 2009. Tackling the Jobs Crisis (Paris: OECD 2010) 233; OECD, Pensions at a Glance 2013. OECD and G20 Indicators (Paris: OECD, 2014) 67.

Part II The Politics of Welfare State Expansion

3

Welfare Reform in the Age of Austerity

Approximately halfway through the Second World War, on 7 April 1943, a group of Dutchmen convened in London to be installed by their governmentin-exile as members of a committee charged with the task of devising general guidelines for a future overhaul of the Dutch social insurance system. Named after its chairman, the senior government off icial and CHU-politican Aart van Rhijn, this so-called “Van Rhijn-committee” was to focus on two problems in particular.1 The first of these was the disorderly administrative structure of the Dutch social insurance system, which placed responsibility for its implementation in the hands of both private and public agencies, with partly overlapping tasks. The second was the strong inadequacy in the level and duration of Dutch social insurance benefits and the degree to which the population was covered by them. As was widely acknowledged, this inadequacy was more severe in the Netherlands than in many other nations. The decision to create the Van Rhijn-committee was at least partly inspired by the enthusiastic reception of a British report on social insurance reform – by both the general public and the British war cabinet – some four months earlier. Popularly known as the “Beveridge report”, this document would prove very influential in directing the course of postwar welfare reform in the United Kingdom.2 The Van Rhijn report would prove much less important. Its main recommendation of creating a universal and unified social insurance system that would be largely administered by the state was discarded almost immediately after its publication in 1945. Unlike in the United Kingdom, there was to be no major overhaul of the Dutch social insurance system in the immediate postwar period; instead, the system would expand on a piecemeal basis and – at least initially – at an agonizingly slow pace. Those reforms that did take place in the immediate postwar 1 The committee was mostly composed of department officials of the Ministries of Social Affairs, Finance, Foreign Affairs, and Trade, Industry and Shipping, but also included some industry representatives and social insurance experts. For a more extensive overview see Ton Kappelhof, “Omdat het historisch gegroeid is: De Londense Commissie-Van Rhijn en de ontwikkeling van de sociale verzekeringen in Nederland (1927-1952)”, Tijdschrift voor Sociale en Economische Geschiedenis 2 (2004) 71-91. 2 The report’s off icial name was The Report on the Inter-Department Committee on Social Insurance and Allied Services. It was published on 2 December 1942. Its popular name was derived from its chairman William Beveridge, a major authority of unemployment insurance from early in his career. On the impact of the Beveridge report in the United Kingdom and abroad see, for instance, John Hills, John Ditch, and Howard Glennerster, Beveridge and Social Security: An International Retrospective (Oxford: Oxford University Press, 1994).

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period did little to reduce its complexity. Moreover, they only reaffirmed the Dutch welfare state’s conservative reputation, because they left large holes in its social safety net and they closely followed actuarial principles. The limited nature of welfare reform in the immediate postwar period can partly be attributed to a fundamental conflict over the organization and scope of the social insurance system. Almost immediately after its publication, the Van Rhijn report triggered a fierce debate over whether to include the self-employed in the social insurance system, as well as whether the state or industry should be responsible for its implementation. The latter question proved particularly controversial. Pitting social-democrats against confessional forces, the issue was only truly resolved with the introduction of the 1952 Social Insurance Organization Act (Organisatiewet Sociale Verzekeringen, or OSV), which will be discussed at length in this chapter. Somewhat earlier, a consensus had also emerged concerning the need to grant old-age insurance coverage to the self-employed, although this consensus did not extend to other social insurance programs. For instance, it was not until the introduction of the 1976 General Disability Act (Algemene Arbeidsongeschiktheidswet, or AAW) that the self-employed were subjected to compulsory insurance against disability. However important these two issues were to the slow and piecemeal development of the Dutch welfare state in the immediate postwar period, another factor held much greater importance, namely the disastrous state of the economy, as well as the resulting decision to embark on an incomes policy that aimed to moderate the growth of Dutch labor costs. While most other European countries instituted similar incomes policies in the immediate postwar years, none of these would be as successful – and survive for as long – as the Dutch guided wage policy, which continued to function in various forms until the mid-1960s. Its long survival certainly explains much of the extraordinary success of the Dutch economy during the first decades of the postwar period. Nonetheless, the policy also posed a major obstacle to attempts to expand the social insurance system in these years. After all, any attempt to improve this system naturally conflicted with the main aim of the guided wage policy, namely to reduce total labor costs, of which social insurance costs were an important part. The guided wage policy thus called for an approach to welfare state development that emphasized frugality. The dramatic influence of the guided wage policy on the process of welfare state reform during the first decades of the postwar period has received little attention in the literature on the Dutch welfare state. Moreover – and as noted earlier – it has been widely misunderstood elsewhere. Over the years, a surprising number of comparatively oriented historians

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and political scientists have argued that rather than presenting a major obstacle to efforts to improve the scope and generosity of social insurance programs in the Netherlands, the guided wage policy greatly facilitated these efforts. Many of such views are based on the misguided belief that these improvements often came about in “exchange” or as a “quid pro quo” for union support for wage moderation.3 Aside from being founded upon a rather superficial reading of events taking place during the 1940s and 1950s, these views also reflect a flawed understanding of the guided wage policy’s main goal, which was to reduce the growth of total labor costs. Existing historic research has long shown that the support of the union movement for this restraint resulted from its realization that it was in their own interest to boost exports and achieve a balance of payments equilibrium. 4 To facilitate this – as we will see – union leaders lowered their direct wage and social insurance demands. This chapter will investigate the impact of the guided wage policy on immediate postwar efforts to improve the system of social protection in the Netherlands in a careful manner. Accordingly, it will emphasize that the socialist NVV and its confessional counterparts very well realized that social insurance costs constituted an integral part of total labor costs and consequently proved quite willing to moderate their “social wage” demands in line with general wage demands. They would continue to do so throughout the 1940s and 1950s. The restrictions that this imposed on the process of welfare state reform were most severe from 1945 to 1953, when wages were only allowed to increase to keep up with general price development. This obviously left little – if any – room for improvements in the social insurance system and related services. The events described in this chapter roughly overlap with this first phase of the guided wage policy.5 3 For the citations, see respectively Wilensky, Rich Democracies, 114 and Eichengreen, The European Economy, 114. For more references, see footnote 33 of the introduction to this book. 4 On this see, for instance, Th.B.C. Mulder, Loonvorming in overleg. Gedragingen van het georganiseerde bedrijfsleven in Nederland na de tweede wereldoorlog (Assen: Van Gorcum, 1956) 24-26; Hueting et al., Naar groter eenheid, 148-152; Reinalda, De Dienstenbonden, 35. 5 The period in which the guided wage policy dominated wage bargaining events in the Netherlands can be divided into three phases. From 1945 to 1953, wages were only allowed to increase in line with general price developments, as a result of which labor’s share of national income declined substantially. From 1954 to 1959, wage increases were tied to general productivity increases. During the last phase of the guided wage policy, which lasted from 1959 to 1963, some variation based on productivity developments in individual industries was made possible. For an excellent English-language overview, see John P. Windmuller, Labor Relations in the Netherlands (Ithaca: Cornell University Press, 1969).

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Immediate Postwar Measures During the first thirteen years of the postwar period, all governments in the Netherlands comprised various coalitions that always included the two largest parties in Parliament, the Labor Party, and KVP. The austere economic climate of the time naturally presented these progressive “RomanRed” governments with quite a dilemma. On the one hand, they were all severely constrained by the economic demands for reconstruction and the accompanying need to reduce the growth of labor costs. On the other hand, they were also well aware of the shortcomings of the existing system of social protection and the resulting urgency of reform. Within the newly founded Labor Foundation (Stichting van de Arbeid, or STAR) – a private consultative body set up by the major employer and union federations in May of 1945 to deal with labor-related matters – there was also a broad consensus concerning the need to improve the social protection system. While its employer representatives may have agreed to this in a grudging manner, even they admitted that some kind of reform was unavoidable.6 The deplorable state of the social insurance system and related service simply rendered this the case. At the time, the social insurance system essentially comprised four programs, which provided most workers with some form of protection against the financial consequences of old-age, invalidity and disease. The most generous of these was the industrial injuries insurance program (ongevallenverzekering), which provided high replacement rates to all workers suffering from disability and disease, albeit only if they incurred their injury or illness at work. Workers who suffered from a non-work-related disease were initially entitled to an evenly generous benefit under the sickness insurance program (ziekteverzekering), but only if they operated in an “enterprise”, which obviously excluded many male – and almost all female – workers.7 When a worker was sick for longer than six months, was unable to work 6 The employer federations did warn that social insurance costs constituted an integral part of total labor costs, which left little room for improvements in the immediate postwar period. VNO, F15(3) Sociale Verzekeringen 1923-1971: Standpunt CSWV met betrekking tot het rapport d.d. Maart 1948 inzake de herziening van de Sociale Verzekering. 7 The industrial injuries insurance offered a benefit that equaled 80 percent of the previous wage during the f irst six weeks of a worker’s injury. After that, the benef it was reduced to 70 percent. The sickness insurance offered a benefit that equaled 80 percent of the previous wage. Regarding the limitation in coverage that resulted from the use of the term “enterprise”: it among others excluded domestic staff (which was one of the most important professions for women at the time) and those who worked as staff for the so-called “free professions” such as lawyers, dentists, and so forth.

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owing to a disability rather than disease, or did not work in an enterprise, he or she could only hope to receive a benefit under the invalidity and old-age insurance program (invaliditeits- en ouderdomsverzekering). This program covered all workers, although contrary to the sickness insurance program entitlement to a benefit depended on a minimum contribution period of at least three years. Moreover, the level of the benefit was strictly tied to the number of contributions paid. This meant that only those workers whose disability occurred when they were close to retirement could count on an above-subsistence carrying benefit. Unlike the industrial injuries pension, the invalidity and old-age insurance program did not grant benefits to the partially disabled. However, it provided benefits to all workers over the age of sixty-five, who were automatically regarded as “disabled”. Finally, workers who were covered under the sickness insurance program were also insured against medical expenses under the health insurance program (ziektekostenverzekering). This system left many injured workers without adequate benefits and led to much bickering over whether or not an injury was work-related and the result of a disease or disability.8 With a retirement age set at the age of seventy and a benefit that was not inflation-proof, the industrial injuries and old-age insurance program naturally also proved inadequate in catering to the elderly. To make matters worse, few retired workers had access to private benefits or savings at the time, while those who did had generally seen their savings depleted after the war. Even worse off were the unemployed, with the problem here being that there was simply no state unemployment insurance program. Some employers did offer so-called “reduced pay schemes” (wachtgeldregelingen), but they generally only did so for skilled workers. Before the war, the state had also subsidized union-run unemployment funds. However, these funds – which had been abolished during the occupation – were not reinstated after the war. Finally, there were the self-employed, who were arguably worst off as they found themselves 8 An additional problem was that case law was quite inconsistent regarding the questions of whether an injury was work-related (which resulted in a generous, non-contributory benefit that could be granted for an indefinite period) and was the result of a disease (which, although only for six months, granted an equally generous non-contributory benefit). This Sickness Act, for instance, did not define what a “disease” was and case law defined merely as a development that was subject to change. This meant that a worker was not entitled to a sickness benefit when his or her disability would be permanent. Of course, this led to a lot of bickering over the question of whether or not a disability could be regarded as permanent. On this see, for instance, J. van Bruggen and B.C. Slotemaker, Commentaar op de Ziektewet. Handboek voor de practijk (Deventer: Kluwer, 1935) 80-83.

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without any form of (compulsory) public protection against economic misfortune. The self-employed were allowed to join the public pension scheme on a voluntary basis, although few had done so. Moreover, those among them who had been able to acquire private savings before the war had since then witnessed a dramatic reduction in their savings. These shortcomings were described at length in several reports written by government committees, the newly founded Labor Foundation and various other bodies in the immediate postwar years. All of these reports proposed various ways of achieving a wholesale reform of the social insurance system or individual social insurance and related services.9 Most of them were in broad agreement on the need to preserve the system’s insurance character, the necessity of somehow bringing fragile groups such as the self-employed and lower-paid workers into the system and the need to focus on improving matters for the elderly first. Nonetheless, they strongly differed in terms of how this should be achieved. A major problem here was obviously that proper provision for vulnerable groups such as the self-employed and lower-paid workers could not be achieved under a purely actuarial approach. Not only did these groups often possess insufficient income to finance proper provision against labor market risks, but – as will be explained later in this chapter – the inclusion of such groups into an insurance-based system also raised many practical problems. Moreover, echoing the very different views in Parliament and industry on this, the reports also strongly differed on the sensitive question of how the social insurance system could best be implemented. Realizing that major reform would consequently be a lengthy affair, the first two postwar governments mostly limited themselves to the introduction of some minor legislative measures. In March 1946, a provisionary government first increased the coverage levels of the existing sickness, invalidity and old-age and health insurance program by raising their wage limits. This relatively uncontroversial measure was merely designed to make up for the consequences of several years of high inflation during the war. In the same year, the first elected government of the postwar period reintroduced state subsidies for employers who offered reduced pay schemes. As had been the case before the war, these subsidies covered at most fifty percent of all 9 Most influential among these was a report written by a committee consisting of representatives from the Department of Social Affairs and Labor Foundation. Also chaired by Van Rhijn, the report of this second “Van Rhijn-committee” came out in March 1948. See Aart van Rhijn, Rapport inzake de herziening van de Sociale Verzekering uitgebracht door een Commissie, bestaande uit vertegenwoordigers van de Minister van Sociale Zaken en van de Stichting van den Arbeid (Den Haag, 1948).

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costs and employers were not required to offer redundancy pay schemes. Following the hitherto dominant view of the male breadwinner’s principle, the government did not grant subsidies for benefits for female workers.10 In anticipation of the introduction of a permanent public unemployment insurance program, the government introduced a temporary scheme for workers who were not covered by reduced pay schemes in the following year. The scheme was financed from general revenues and granted a means-tested benefit of at most 80 percent of the previous wage for a maximum period of thirteen weeks. To compensate for the scheme’s very short duration, it also introduced a social assistance scheme that handed out fixed benefit rates in September 1947. Despite not being bound to a predetermined maximum period, the social assistance scheme was criticized in Parliament as being insufficient owing to its low benefit rate (which differed per municipality) and because it presented a far cry from an insurance-based program that granted benefits based on earned rights.11 In the same year, the government also increased the maximum duration of the sickness benefit from six to twelve months. In the following year, it increased state subsidies to the invalidity and old-age insurance program, whose fund had been depleted during the War. In addition, it increased the coverage level and broadened entitlement to the child benefits and health insurance programs, which had been introduced just before and during the war, respectively.12 10 The model of the male breadwinner’s principle continued to dominate thinking on social insurance reform during the first decades of the twentieth century. On its slow disappearance in later decades, see I.P. Asscher-Vonk, “Het kostwinnerbeginsel 1970-1990”. In A.Ph.C.M. Jaspers, F.M. Noordam, W.J.H. van Oorschot, and F.J.L. Pennings, “De gemeenschap is aansprakelijk…” Honderd jaar sociale verzekering 1901-2001 (Den Haag: Koninklijke Vermande, 2001). 11 See C.M.J. Ruijters, “Sociale Zaken”. In Melchior Bogaarts, De Parlementaire Geschiedenis van Nederland na 1945. Deel 2: De periode van het cabinet Beel 1946-1948. Band B (Nijmegen: Centrum voor Parlementaire Geschiedenis, 2004) 1421. 12 Created in 1939, and effective from 1941 on, the child benefits program initially only catered to (gainfully employed) workers. In 1941, benefits were also granted to those in receipt of an industrial injuries insurance benefit. In 1948, recipients of an invalidity and old-age insurance benefit were also included. In 1951, the self-employed were granted entitlement to a benefit through a temporary emergence act. Initially benefits were only given to families with three or more children. In 1946, benefits were given to families with one child as well. The 1951 emergency act for the self-employed remained limited to families with more than two children. In 1950, the government expanded the coverage of the health insurance program so as to include the elderly, disabled, students, and disabled children. See J.M. Knibbeler, “Heeft de kinderbijslag in Nederland invloed op de gezinsgrootte? Mens en Maatschappij 28:3 (1953) 153-74; Alaine de Gouw, “Van kinderbijslag naar basisinkomen?” In Willem Blockmans and Loes van der Valk, Van particuliere naar openbare zorg, en terug? Sociale politiek in Nederland sinds 1880 (Amsterdam: NEHA, 1992) 92-93; Companje et al., Two Centuries of Solidarity, 252.

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In addition to these minor measures, which mainly benefited the unemployed and disabled, the government also prepared more ambitious legislation for the elderly. Very high levels of poverty among this group ensured that the need for substantial old-age pension reform was widely seen as most urgent. Both the Labor Foundation and the first, provisional, postwar government had made it clear immediately after the war that they viewed old-age pension reform as a major priority. Almost all political parties that ran in the first postwar election held in May 1946 did so on platforms that called for improvements in the level and scope of the old-age pension benefit. These included the two most successful parties, the KVP and Labor Party, which were to form the first elected government of the postwar period. Its minister of Social Affairs Willem Drees – who was also the leader of the Labor Party – was charged with the task of introducing legislation to improve matters for the elderly. Drees realized very well that a major reform of the existing old-age pension system would be a lengthy affair. Not only would such an undertaking likely prove too costly at a time when government policy was dictated by the needs of economic austerity, but it also demanded that he was able to f ind agreement on several questions that had divided confessional parties and their social-democratic and other left-leaning counterparts for decades. One such question was whether the self-employed were to be included in the new old-age pension program on a compulsory basis and – if so – how, given that it would be very diff icult to collect benef its from this extraordinarily diverse group. 13 It would be easy to include the self-employed into the new program if it was to take the form of a tax-financed state pension, as there would be no need to collect contributions then. Nonetheless, any suggestion of a state pension was unacceptable to the KVP and the other confessional parties. Since the beginning of the twentieth century, social-democratic backbenchers and the NVV had argued for a state pension as the only way of providing an adequate income in old-age to those workers and self-employed whose low wages and income did not allow them to acquire adequate provision on their own. For just as long, confessional backbenchers had condemned 13 This group includes such diverse professions as small shopkeepers, agricultural laborers, entrepreneurs of small and mid-scale businesses, and practitioners of the so-called free occupations (e.d. dentists, lawyers). Many of these groups themselves rejected compulsory old-age pension coverage. On this see, for instance, C.E.M. van den Boom, De zelfstandige en zijn sociale zekerheid (Deventer: Kluwer, 1983). See also Abram de Swaan, Zorg en de staat: Welzijn, onderwijs en gezondheidszorg in Europa en de Verenigde Staten in de nieuwe tijd (Amsterdam: Bert Bakker, 1987) 21.

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a state pension as a “system of despair” that would undermine personal responsibility and self-help.14 In their resistance to state help, the confessional parties had always received full support from the powerful employer federations as well as the confessional part of the labor union movement. If anyone needed to be reminded of this, a letter sent to Drees by the Labor Foundation on July of 1946 must have effectively done so. In this note, the Foundation merely recommended increasing existing social insurance benefits, without making any suggestions for improving matters for the self-employed. Of all the Foundation’s members, only the NVV strongly disagreed with the report’s limited scope. In a bold move in which it strongly distanced itself from its two confessional union counterparts, the NVV consequently approached department officials with a separate letter, urging them to create a universal scheme for old-age pensioners over the age of 65.15 Whereas the Protestant CNV and Roman Catholic Worker Federation (Rooms-Katholiek Werkliedenverbond, or RKWV) still took a worker-only approach and emphasized the need to maintain the actuarial principles on which the existing social insurance system was based, the NVV thus already defended a broader, solidaristic approach. The legislation eventually proposed by Drees conflicted with confessional party views in several ways. First, it was to introduce a completely taxfinanced old-age pension that granted benefits regardless of contributory record, thus creating the “free” state pension that confessional forces had always despised. Second, this state pension was to be means-tested (up to 50 percent of personal income was to be deducted from the benefit), which to confessional backbenchers meant that it essentially punished those who had been responsible enough to save for their own age. The Emergency Old Age Provision Act (Noodwet Ouderdomsvoorziening) was to grant a tax-financed old-age benefit to all men and unmarried women over the age of 65, provided that they had lived in the Netherlands for the last six years, were not self-sufficient and had not regularly neglected to support themselves before reaching the retirement age: a clause that was merely intended to exclude vagrants and other “antisocial” types. The Act was to function for a period of three years and benefit levels were to depend on 14 The statement that a state pension amounted to a “system of despair” (“systeem van wanhoop”) comes from the Catholic politician Wiel Nolens, who chaired the KVP’s predecessor, the Roman-Catholic State Party (Rooms-Katholieke Staatspartij, or RKSP) from 1910 to 1931. For a lengthy treatment of confessional views on the state pension and compulsory social insurances in the prewar period, see Hertogh, “Geene wet”, 55-254. 15 See Cox, The Development of the Dutch Welfare State, 108.

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both marital status and the type of municipality in which claimants lived. Drees estimated that the Act would cost some 200 million guilders and would provide for some half a million old-age pensioners.16 The proposal encountered much resistance, both from within parliament and from the employer and confessional labor union federations. Several government members also voiced their fear that the proposal would result in a “bonus on malpractice and carelessness”. Within parliament, the Protestant ARP and CHU were the most critical, describing the Act as an example of “humiliating poor relief”.17 Like the governing KVP, the confessional union federations and all employer federations, they also spoke out fiercely against its means-tested nature. Nonetheless, despite these objections, the Act passed parliament without major difficulties. Its temporary nature and the urgent need to relieve financial hardship among the elderly made it acceptable to almost all backbenchers, including those of the major confessional parties. While a KVP attempt to partially exempt occupational pension savings from means-testing could count upon strong sympathy in parliament and among industry representatives, it was rejected by Drees as being financially infeasible. The Act passed Parliament in May 1947 and came into operation in October of that year. Contrary to expectations, it would continue to function for almost ten years. Of all the measures taken in the immediate postwar period, the introduction of the emergency old-age provision clearly held the most importance in terms of improving the Dutch social safety net. Within one year after its introduction, the provision catered to some 400,000 retirees, many of whom now received a state benefit for the first time in their lives. The fact that the benefit was rather meager and means-tested must have mattered little to them.18 Nonetheless, it greatly mattered to those in Parliament. Despite being supported by a broad parliamentary majority and being immensely popular among retirees, the program was loved by none in Parliament. To progressive backbenchers, the main problem with the program was its below-subsistence benefit level. To confessional and liberal backbenchers, 16 The Act also granted benefits to some non-nationals if they had lived in the Netherlands for at least twenty years. It was means-tested because 50 percent of a claimant’s personal income was subtracted from the benefit while the sum of personal income and the state benefit was tied to a maximum level. It was estimated that some 50 percent of all persons over the age of 65 would be entitled to a benefit under the Emergence Old Age Provision Act. 17 For a lengthy description of this resistance, see Ruijters, “Sociale Zaken”, 1401-1402. 18 The provision was to grant different benefit levels to different regions. The minimum and maximum levels for married couples were set at 744 and 936 guilders per year. Unmarried old-age pensioners were to receive at least 432 and at most 528 guilders per year.

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the main problem was that it undermined the social insurance system and the growth of occupational and other pension funds. For all of these reasons, both the labor union movement and the employer federations also disliked the program. In sum, the provision was deemed inadequate as a permanent solution by almost all involved parties. To achieve such a solution, it remained necessary to solve a problem that had divided left, liberal, and confessional forces for decades, namely how to create a program that was able to provide adequate benefits for all old-age pensioners while maintaining individual responsibility. This problem was only solved with the introduction of the General Old Age Act (Algemene Ouderdomswet, or AOW) in 1957. Given its importance, the next chapter will deal with this Act at great length, including the long history leading up to its introduction.

The First Major Reform: The Introduction of the Unemployment Insurance Act However important they were in relieving hardship among the population, the measures taken in the first postwar years offered nothing comparable to the reform envisaged by the Van Rhijn-committee during the war. They merely offered limited and temporary improvements that enabled governments to postpone the much costlier exercise of major reform until later years. The f irst of these major reforms came about in 1949, when the Unemployment Insurance Act (Werkloosheidswet, or WW) passed Parliament. The Act’s introduction was accompanied by vast disagreement between the labor union movement and the employer federations. Partly as a result of this, it did not come into operation until 1952. From then onwards, the first-ever public unemployment insurance program to operate in the Netherlands offered a relatively generous benefit for a modest period in exchange for relatively strict entitlement rules. Despite immense labor union pressure, its duration and the level of the benefit were not increased until the mid-1960s. There are several reasons why the first major postwar social insurance reform in the Netherlands dealt with the area of unemployment. Most important among them was the absence of any form of public insurance against this labor market risk. Accordingly, the introduction of the Unemployment Insurance Act must have seemed long overdue to many. In 1939 – and despite strong confessional reservations – the first government to include social-democratic ministers succeeded in bringing a bill to introduce a state unemployment insurance program through parliament.

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Nonetheless, as a result of the outbreak of the war, the bill had never been implemented. When the postwar Catholic-socialist coalition set out to reform the social insurance system, it thus naturally considered this an area of unfinished business. The government’s decision to give priority to the introduction of a state unemployment insurance program also seems to have been partly motivated by the economic situation of the early postwar period. The low level of unemployment at the time made the introduction of an unemployment insurance program somewhat less acute. Moreover – and holding much greater importance to a government that emphasized the need to moderate labor costs – it also made the program less costly to introduce and even presented an opportunity to build up reserves.19 However, at the same time the government must have been aware of the many obstacles standing in the way of reform. These included finding broad agreement on the program’s benefit levels (which could be of a flat-rate or earnings-related nature, set at various levels, and could or could not be supplemented by private benefits), coverage levels (the program could cater to all workers or exclude specific groups), contribution levels (which could be uniform or vary among different workers and firms), duration (how long were workers entitled to a benefit?), and contributory and other requirements (how long did workers have to contribute to qualify for a benefit? Did benefit recipients have to accept all or merely “suitable” jobs?). The room for agreement on these issues not only depended on normative considerations but also on their distributive consequences. An additional complicating factor was that employers and conservative backbenchers were quite hesitant to support the introduction of a state unemployment insurance in the first place, as they tended to view unemployed workers as being unwilling – rather than unable – to work.20 Then there was the issue of who would pay for the program’s costs. Finding agreement on this was greatly complicated by the tendency of left-wing parties and labor union leaders to view unemployment as the result of the labor-shedding behavior and thus as the responsibility of employers. 19 Some of Drees’ considerations can be found in Willem Drees, “Sociaal Beleid”, Sociaal Maandblad (1 July 1946) 3. 20 This tendency was by no means exceptional to the Netherlands though. See, for instance, Leibfried, “Die Institutionalisierung der Arbeitslosenversicherung”, 189-201; Jens Alber, “Government Responses to the Challenge of Unemployment: The Development of Unemployment Insurance in Western Europe”. In Peter Flora and Arnold Heidenheimer, The Development of Welfare States in Europe and America (New Brunswick: Transaction Books, 1981) 151-186. references by Mares.

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Another problem that needed to be resolved was how the new unemployment insurance program was to relate to existing private schemes offered by employers. As noted above, many employers currently offered “reduced pay” benefits to unemployed workers, if only because the government largely paid for them. Many members of parliament and business leaders viewed such benefits as an indispensable way to “bind” unemployed workers to a company or industry and consequently they wanted to preserve them. This obviously raised the question of how this could best be achieved. Many felt that the easiest way was by devising an act that created two different yet related schemes. Accordingly, unemployed workers would first be entitled to a reduced pay benefit for a short maximum period and thereafter to a “general” unemployment benefit. However, this solution raised the problem of how these benefits would subsequently relate to each other exactly. Indeed, it brought policy-makers back full-circle to the question of what the new unemployment program – which would now comprise two separate schemes – would look like in terms of benefits levels, coverage levels, contribution levels, duration, contributory, and other requirements. In addition, it obviously raised the question of who would pay for the two schemes. In resolving each of these issues, the government could no longer disregard the interests of the labor union movement and the employer federations. While preparing his Emergency Old-Age Provision Act, the responsible minister, Drees, had largely ignored the powerful Labor Foundation to act quickly. Despite repeated requests to do so, he had not once met up with representatives of the Foundation to discuss the Act in person. He had even left it up to the secretary-general of his department, Aart van Rhijn (who had previously chaired the Van Rhijn-committee), to respond to the Foundation’s previously mentioned letter on old-age pension reform. This had earned him a strong rebuke from the Foundation’s founder, Dirk Stikker, as well as from several union and employer representatives. Various backbenchers likewise criticized his failure to involve the Foundation in the scheme’s preparation. In response to this criticism, Drees had simply pointed out that a corporatist approach would have seriously delayed matters, especially since discussions in the Foundation were moving in a very different direction. Indeed, he deemed such a delay unacceptable given the acute need to improve matters for the retired.21 21 On this, see A.C.M. van de Ven, “Noodregeling Ouderdomsvoorziening”, Arbeid 1 (1946) 161-166. See also CNV, 21e jaarverslag CNV, “Noodvoorziening Ouden van Dagen,” 45-46.

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At the time, Drees had been able to get away with this for two reasons: first, the Old-Age Provision Act was tax-financed and temporary; and second, it also catered to the self-employed. The creation of a compulsory unemployment insurance program for workers was obviously an altogether different matter. After all, such a program would largely be financed by worker and employer contributions, which made it impossible to ignore their collective interests and thus their representatives. In addition – albeit of much less importance – many employers currently offered private unemployment insurance programs. These programs would surely be greatly affected by the creation of a public unemployment insurance program, which gave their members a very real “stake” in its creation. As a result, the Labor Foundation would have to be involved in the preparation of the program. Therefore, over the course of 1947 and upon Drees’ request, representatives of the Labor Foundation and Department of Social Affairs worked closely on a bill regarding the introduction of a compulsory “reduced pay and unemployment insurance program” (wachtgeld- en werkloosheidsverzekering). For much of this period, this work mainly comprised lengthy negotiations between union and employer representatives, who thoroughly disagreed over many of the program’s features. Some of these features were of relatively minor importance but involved principled disagreement or related to broader conflicts between labor and capital. An excellent example of the former was the question of the degree to which benefit recipients were to be allowed to reject “unsuitable” jobs, which led to a conflict that was clearly won by labor.22 A good example of the latter was the question of whether workers who were willing yet unable to work due to strike activity or a lockout were entitled to an unemployment benefit.23 22 The absence of a clear definition of what constituted “suitable labor”, combined with (shared) responsibility of labor unions for the Act’s implementation, made it quite easy for unemployed workers to reject “unsuitable” work. From the start, this led to much bickering between labor and employer representatives. It was not until the 1960s before the first norms on the proper usage of the suitable labor condition was created. And it would take several more decades before it would become much more difficult for workers to reject “unsuitable” labor. For more on this see J.M. van Buul, Richtlijn passende arbeid: evaluatie van de toepassing van de richtlijn door uitvoeringsorganisaties (Den Haag: VUGA, 1994). 23 The Unemployment Insurance Act did eventually contain a clause that could provide reason to deny reduced pay benefits to workers who had become unemployed because of strike activity or a lockout. Although it was up to the joint decision of labor and employer representatives to determine whether or not a benefit should be denied in such circumstances, the clause was severely criticized because of its possible affect on labor relations and because it conflicted with the principle that all workers who had become unemployed at no fault of their own, and who were willing to look for suitable work, were entitled to unemployment benefits.

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The explosive nature of these questions meant that they received much more attention than their importance warranted. Much of the remaining disagreement over the program’s features revolved around the redistributive consequences of public unemployment insurance development. These consequences were strongly disliked by the main employers federations, which consequently attempted to limit them as much as possible. Their efforts were mostly opposed by the labor union movement. Nonetheless, while the three union federations emphasized the need to display broad worker solidarity, some of their members also found it quite difficult to accept the new program’s redistributive consequences. For employers, a major problem with public unemployment insurance development was that different types of workers – and different types of industries – were exposed to the risk of unemployment to very different degrees. This meant that the introduction of a public unemployment insurance program could be accompanied by a massive amount of risk redistribution. After all, when all workers were to be forced to join a common risk pool on equal terms, “good” risks would effectively subsidize “bad” risks. Such risk reapportioning could adversely affect workers in relatively secure positions (who would end up subsidizing more risk-prone workers) and firms operating in relatively stable industries (which would end up subsidizing firms in industries with higher levels of labor turnover). To make sure that the program would not result in “excessive” risk redistribution among workers, the employer representatives to the Labor Foundation first tried to exclude “uninsurable” workers from membership of the unemployment insurance program.24 When they failed to achieve this, they insisted that membership of the program would be limited to workers earning below a certain wage limit, given that higher-paid workers were generally also much less likely to become unemployed. To limit risk redistribution among f irms, the employer representatives insisted on premium differentiation between different industries. Their insistence was also partly based on the moral hazard that might accompany uniform contribution levels.25 24 In as late as 1947, the largest union federation in the Netherlands, the socialist NVV, still complained about employer efforts to limit the coverage of reduced pay schemes to the industrial core of highly skilled manual workers, thereby depriving them of their “broader purpose”. IISG, Archief NVV, doos 21, Notitie voorontwerp wachtgeld- en werkloosheidsverzekering bij Hoofdbesturenvergadering, 26 June 1947, 213. 25 National Archives of the Netherlands (Nationaal Archief, henceforth NA), CSWV, 2.19.103.06, 3: Algemeen Bestuur, circulaires 1948/49: Standpunt van het CSWV met betrekking tot de aanhangige plannen tot invoering ener wachtgeld- en werkloosheidsverzekering.

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Within labor union circles, there was also some resistance against the redistributive consequences of the new unemployment insurance program. For example, the public official unions – whose members enjoyed relatively secure positions – took serious issue with their inclusion in the program, let alone on an equal basis.26 In addition, many within the union movement were concerned about the inclusion of groups like agricultural workers. These often engaged in seasonal work, which meant that they would likely come to make much use of the unemployment benefit. Their inclusion into the program might thus prove rather costly. To protect other workers against the redistributive consequences of this, many labor representatives consequently argued in favor of premium differentiation within different industries. Especially within the NVV, many argued in favor of premium differentiation – and continued to do so for long after the program came into operation.27 Their insistence on premium differentiation also seems to have been partly based on the fear that individual firms might be more likely to shed workers when the financial consequences of this could partly be passed on to other firms. Others obviously disagreed, and instead emphasized the solidaristic principles on which their union federation was based.28 The latter view eventually prevailed, albeit only barely. All three union federations entered negotiations on the program’s outline with the stance that no specific occupational groups should be excluded and that the insurance premium was to be made uniform for all industries. Moreover, while accepting the need for a wage limit, the union federations wanted to set its level at a much higher rate than proposed by employers. The eventual outcome of setting the wage limit at double the average wage in manufacturing industry was clearly a hard-won compromise.29 Despite their initial insistence on uniform contribution levels, the union federations eventually agreed to allow contribution levels to vary among industries. Moreover, they also voiced their support for the creation of a separate scheme for agricultural workers. Apparently, the broad solidarity advocated by the unions was thus 26 NA, CSWV, 2.19.103.06, 130: Kort verslag van de vergadering van de Kring voor Sociaal Overleg, 14 October 1947. 27 See, for instance, IISG, Codelijsten van het NVV-Commissiearchief 1945-1967, 322, Socialecie 1956-1961, Kort verslag van de 42e vergadering van de Sociale Commissie van het NVV, 24 June 1954. 28 IISG, Archief NVV, doos 21, Notulen van de Hoofdbesturenvergadering, 4 January 1947, 148. 29 The employer federations had initially insisted on the exclusion of all workers that earned over 4,500 guilders per year. The compromise was to set the wage limit at 6,000 guilders – which was about double the average wage in manufacturing history. The employer federations later complained that the agreed-upon limit was much too high. NA, CSWV, 2.19.103.06, 130: Kort verslag van de vergadering van de Kring voor Sociaal Overleg, 14 October 1947.

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not without its limits. Nonetheless, to the sheer frustration of employers and probably at least some union representatives, Parliament eventually disagreed with the Foundation’s advice on both points. There was to be no separate scheme for agricultural workers and only the premiums for the reduced pay scheme were to vary among industries.30 Many other issues proved much less controversial, including the question of the appropriate benefit level. Union and employer representatives of the Foundation found it easy to agree on a reduced pay and general unemployment benefit that offered 80 percent of the previous wage to married men and breadwinners, 70 percent of the previous wage to unmarried men and women as well as non-breadwinners aged eighteen years and older, and 60 percent to all other unemployed workers. The ease with which they agreed on this can be explained by pointing out that most existing reduced pay schemes also offered these rates. Efforts by Labor Party backbenchers to raise the level of the benefit were deemed infeasible by a majority in Parliament.31 It also proved relatively easy to find agreement on the maximum duration of the benefit, contributory requirements and the degree to which private supplements were to be allowed. The outcome of negotiations of this went as follows: when workers had worked for at least 156 days in the twelve months leading up to unemployment, they were first entitled to a reduced pay benefit for a minimum of eight weeks.32 After this, a contributory record of at least 78 working days in the last twelve months entitled them to a regular unemployment benefit for at most another thirteen weeks (or 21 weeks if a worker had not obtained a reduced pay benefit first). Employers 30 The Labor Party was particularly opposed to contribution levels that differed between industries, as workers should not be punished for the failures of management. As a result, and contribution levels for the reduced pay scheme were to differ between industries, while those for the general unemployment insurance scheme were to be uniform. See P.G.T.W. van Griensven, “Het sociale beleid van minister Joekes”. In P.F. Maas, De Parlementaire Geschiedenis van Nederland na 1945. Deel 3: Het kabinet Drees-Van Schaik, 1948-1951. Liberalisatie en sociale ordening. Band A (Nijmegen: Centrum voor Parlementaire Geschiedenis, 1991) 660. 31 A broad majority in parliament had voiced its preference for a single benef it level for all worker categories, but could not agree on whether the benef it would then be set at 70 or 80 percent. The Labor Party consequently proposed benef it levels that amounted to 80, 75, and 70 percent for each category. A majority in Parliament felt that this would make the new program too costly though. On this, see Ruijters, “Sociale Zaken”, 1424; and Van Griensven, “Het sociale beleid”, 660. 32 As will be explained below, responsibility for the administration of the unemployment insurance program was given to so-called industrial insurance associations (bedrijfsverenigingen), which were controlled by representatives of unions and employers in a particular industry. It was up to these associations to decide whether or not to grant reduced pay for more than eight weeks.

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were allowed to supplement reduced pay benefits, although “in principle” they were not allowed to do the same with regular unemployment benefits.33 The final – and most controversial – matter to be resolved concerned who would pay for the program’s costs. The unwillingness of labor union leaders to even consider partial worker financing made it very difficult to find agreement on this. This unwillingness was in turn partly the result of the recently instituted guided wage policy. Under this policy – which had been in operation since late 1945 – the wages of workers were only allowed to increase to compensate for increases in the costs of living. During the first years after the war, they hardly even kept up with inflation.34 Under these circumstances, even partial worker financing of the new unemployment insurance program would bite deeply into workers’ wage pockets. Being well-aware of this – as well as the fact that profits had been increasing at a much faster rate than wages in recent years – the labor unions were thus determined to take a tough stance on the issue of who was to bear financial responsibility for the new program. Nonetheless, they might have agreed on partial worker financing if not for another, even more important consideration. This consideration rested on the view that employers – not workers – were responsible for involuntary unemployment, which meant that employers – and not workers – should also bear responsibility for the costs of insurance against the financial consequences of involuntary unemployment. The employer federations naturally disagreed with this view, and instead proposed to divide the new program’s costs between workers and employers on a fifty-fifty basis. Among other things, they attempted to strengthen their demands for partial worker financing by referring to the yet unsettled question of who was to be responsible for the new program’s implementation.35 However, this strategy failed to convince labor union 33 If individual employers decided to grant private supplements to the regular unemployment benefit, these in principle had to be subtracted from the state benefit. Yet the industrial insurance associations that were responsible for the operation of the unemployment scheme were allowed to make exceptions to this rule. As we will see later in this book, these exceptions would be made quite frequently. 34 For the dissatisfaction among individual workers and labor unions over this, see Mulder, Loonvorming in overleg, 38. 35 Discussions on the creation of the Act on Unemployment Insurance for a long time moved parallel with general discussions on the question of who was to be responsible for the implementation of social insurance programs. The Foundation’s advice on the implementation of the unemployment insurance program also provided a blueprint for the organization of the other social insurance programs that only operated for workers. See, Stichting van de Arbeid, De toekomstige organisatie der Sociale Verzekering: Een tweetal nota’s (Den Haag: Stichting van de Arbeid, 1946).

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leaders. The Protestant CNV briefly toyed with the idea of offering to share the new program’s costs between workers and employers on an equal basis to strengthen union demands for co-partnership in its administration. In early 1948, CNV representatives even voiced their thoughts on this in the Council of Trade Union Federations (Raad van Vakcentralen, or RVV), a platform created by the main union federations in 1945 to achieve labor unity on social insurance and other labor-related matters. Nonetheless, when the representatives of the other two union federations rejected this idea, the CNV immediately fell into line.36 The disagreement over who was to bear responsibility for the new program’s costs certainly lent an air of explosiveness to the negotiations, which would not be present during subsequent negotiations over the creation and expansion of other social insurance programs. Part of the difference can be attributed to the growing ability of workers to bear the costs of such programs. From 1953 onwards, the guided wage policy allowed wages to increase in line with improvements in productivity levels. In the following decade, the policy collapsed completely. As a result, workers’ wages were to increase much more rapidly in subsequent years.37 However, as we will see, it was at least as important that the labor union movement proved much more willing to accept that workers themselves were responsible for improved protection against the financial consequences of labor market risks such as old-age, disability, and (non-work-related) sicknesses. As a result, they were also more willing to view these improvements as part of the “social wage” that had to be financed by workers themselves. It would nevertheless take many years before all parties accepted the principle that improvements to the social insurance system had to be primarily financed from the margin for pay increases. The stalemate was only resolved after the employer federations lobbied Parliament to delay its introduction, out of concerns over the Act’s impact on the competitive position of Dutch industry. In a country where low labor costs were equated with competitiveness, this move made quite an impression.38 It 36 IISG, Archief NVV, doos 21, Notulen van de Hoofdbesturenvergadering, 16 March 1948, 339. 37 For an excellent explanation of this collapse and the consequences for wage growth in the Netherlands, see Windmuller et al., Arbeidsverhoudingen in Nederland. 38 Above, I already mentioned that the Act passed Parliament in 1949, but only came into operation in 1952. Part of the delay can be attributed to the conflict between labor and capital over how to f inance the Act’s costs. Another major factor was the need to create industrial insurance associations, which were to be responsible for its implementation. Then, finally, there was the outbreak of the Korea War and resulting concerns over the inflationary consequences of this, which meant that a delay suited the government quite well. On this, see Van Griensven, “Het sociale beleid”, 666-667.

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possibly also helped that Parliament increased the state’s contribution to the regular unemployment insurance from one-third to half of the costs.39 These moves – as well as the absence of support from the Labor Party – finally prompted unions to accept partial worker financing. Nonetheless, to the sheer dismay of the employer federations, they immediately demanded full wage compensation in exchange. When the employer federations rejected this demand, the issue was referred to the newly created Social-Economic Council, a tripartite body comprising representatives from the three union federations, the main employer federations and the state, which was to advise the government on major areas of socioeconomic policy. A small majority there (which excluded most employer representatives) eventually agreed on a rather peculiar solution, whereby the union movement was to obtain its wage compensation, which employers were subsequently allowed to pass on through price increases. During subsequent negotiations between worker and employer representatives in the Labor Foundation, the latter also came to support this outcome. 40

The Organization of Social Insurance With some important exceptions, mostly limited to areas where labor and employer representatives had thoroughly disagreed, Parliament had closely followed the Labor Foundation’s views on the creation of the new state unemployment insurance program. In future years, the “social partners” were to continue to play an important role in the preparation of social insurance legislation. The fact that the Labor Foundation had to give way 39 It is unclear to what extent this move helped to persuade the unions to give in on the demand of partial worker f inancing though, as their principled opposition to worker contributions was most severe with regards to the reduced pay scheme, to which the government would not contribute. The remaining costs of the general unemployment scheme, and all of the costs of the reduced pay scheme, would be shared between workers and employers on an equal basis. On this, see Van Griensven, “Het sociale beleid”, 659. The government eventually broke its commitment on this in 1957, when it brought its contribution to the general unemployment fund back to one third. To assuage the union and employer federations, which had protested severely against this, the government also reduced the contribution level from 1.6 to 1.2 percent of the gross wage. This way, the contribution levels of workers and employers could remain at 0,4 percent of the gross wage. For an extensive treatment of this, see Jan Willem Brouwer and Peter van der Heiden (eds.), Parlementaire Geschiedenis van Nederland na 1945. Deel 6: Het kabinet-Drees IV en het kabinet-Beel II, 1956-1959. Het einde van de rooms-rode coalitie (Den Haag: Sdu, 2004) 193-196. 40 NA, CSWV, 2.19.103.06, 130: Kort Verslag van de vergadering van de Kring voor Sociaal Overleg, 17 June 1952.

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to the tripartite Social-Economic Council as the most prominent advisory council on social and economic matters mattered little to this. 41 The main outline of much social insurance reform would continue to be decided in discussions between labor union and employer representatives, which took place in either the Labor Foundation or the Social-Economic Council. In the latter case, the involvement of state representatives was often limited to facilitating agreement between union and employer representatives. The union movement and employer federations achieving such a prominent role in the development of social insurance was the result of several mutually reinforcing factors. Of major importance to this was the guided wage policy. From the early 1950s onwards, this policy operated on the principle that annual increases in labor costs had to follow improvements in productivity levels. As a result of organized labor’s growing willingness to accept that “social costs are an integral part of the total wage sum, which should therefore be considered as an integral part the development of wages and prices”, 42 the further expansion of the social insurance system was increasingly tied to wage negotiations. The purpose of these negotiations was no longer simply to agree on the margin for pay increases; increasingly, union leaders and employer representatives also bargained over which part of the “wage space” was to be reserved for direct wage increases and which part was to be used for improvements in the social sphere. The establishment of this practice meant that most initiatives for social insurance reform came from the social partners, which consequently also bargained over its costs and main features. As we will see, this practice continued after the guided wage policy collapsed. Their ability to take the initiative on so much of this reform was in turn greatly facilitated by the introduction of institutions such as the Labor Foundation and the Social-Economic Council. The pillarized nature of Dutch society also strongly helped, having resulted in close bonds between organized labor and capital and the main political parties. Based on a long process of pillarization, the closeness of these bonds was perhaps best embodied by the person of Antoon Stapelkamp, a Protestant parliamentarian 41 For the immediate postwar conflict over government recognition of the bipartite Labor Foundation and subsequent creation of the Social-Economic Council, see Maarten van Bottenburg, Aan den arbeid! In de wandelgangen van de Stichting van de Arbeid, 1945-1995 (Amsterdam: Bert Bakker, 1995). 42 In the immediate postwar period, the employer federations had made it clear that their support for social Insurance reform depended on the acceptance of this principle. VNO, F15(3) sociale Verzekering 1923-1971: Standpunt CSWV met betrekking tot het rapport d.d. March 1948 inzake de herziening van de Sociale Verzekering.

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and politician who had first chaired the CNV for over a decade during the interwar period, before entering Parliament after the war as a representative for the ARP. As we will see, he continued to cultivate his links with the CNV throughout this period. The socialist NVV was in turn closely linked to the Labor Party, while the Catholic NKV and its predecessor – the KAB – were closely linked to the KVP. Despite being somewhat less successful in delivering backbenchers, the employer federations also maintained close bonds with the main political parties. Finally, it is important to note that the prominent role played by organized labor and capital in the development of social insurance fitted well with confessional and socialist thinking at the time. This thinking not only called for the close involvement of organized labor and capital in socioeconomic policy development, of which social insurance was a major part; moreover, it also called for a social insurance system in which the representatives of workers and employers were themselves responsible for its administration. This insistence on industrial self-administration obviously conflicted with the principle that policies with a public function – and to which the state also contributed – needed to be subject to some degree of state control. To achieve a wholesale conflict of the social insurance system, this conflict needed to be resolved. The debate that emerged over this certainly complicated social insurance reform in the immediate postwar period, although its importance for the slow development of the Dutch welfare state during the first two decades of the postwar period should not be overstated.43 For this reason – and because its outcome was to matter so greatly to the system’s operation in future years – it is worth turning our attention to this debate for a moment at this point. The question of who was to bear responsibility for the implementation of social insurance programs was one of the most important and divisive political issues of the immediate postwar period. It was also an issue that went all the way back to the early twentieth century, to the creation of the first compulsory insurance against labor market risks, the industrial injuries’ insurance program. This Act had been introduced by a liberal government in 1901. Although the purpose of the Act had itself been relatively uncontroversial, its introduction was accompanied by much disagreement over whether the program was to be implemented by the state or industry. 43 According to Romke van der Veen, the “fundamental and persistent conflict over the organization of social insurance” was of prime importance to the slow development of the Dutch welfare state. Romke van der Veen, “De ontwikkeling en herziening van de Nederlandse verzorgingsstaat”. In Trommel and Van der Veen, De herverdeelde samenleving, 34.

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Resistance against the centralized nature of the first bill had even led to the creation of the first national-oriented employer association, the Association of Dutch Employers (Vereniging van Nederlandsche Werkgevers, or VNW). 44 Its lobby for a program that allowed for industrial self-administration proved almost immediately successful. Although the program itself was to be implemented by the state, employers were allowed to opt out and form their own industrial insurance associations (bedrijfsverenigingen). They did so in large numbers, which resulted in many complaints about misuse from workers. The compromise paved the way for the creation of a very complex social insurance system that operated under both private and public law. 45 Dissatisfaction with its disorderly nature had led to several failed attempts to reform the system’s administrative structure before the war.46 Therefore, when the members of the Van Rhijn-committee turned their attention to a comprehensive reform of the system during the war, they naturally also turned their attention to the matter of the system’s implementation. Indeed, given their location, it was perhaps also natural that they drew inspiration from the much-admired British social insurance system, which was completely state-administered. The Van Rhijn-committee thus came to argue for a unified social insurance system that was to be administered by regional Social Councils (Sociale Raden). The responsibility for supervision was to be placed in the hands of a Central Social Council (Centrale Sociale Raad). Both the regional Social Councils and Central Social Council were 44 In 1898, the responsible minister, Cornelis Lely, introduced an industrial injuries bill that granted responsibility for its operation to a national insurance bank (rijksverzekeringsbank). This design, as well as the fact that they had not been involved in the bill’s preparation, had led to so much dissatisfaction among a group of industrialists that they created their own employer federation, the Association of Dutch Employers. On this see, for example, Hoogenboom, Standenstrijd en zekerheid, 113-32; Cox, The Development of the Dutch Welfare State, 87-91; B. Barentsen, Arbeidsongeschiktheid. Aansprakelijkheid, bescherming en compensatie (Leiden: Kluwer, 2003) 77-80. 45 Among those responsible for its implementation were private bodies established under private law (e.g. industrial insurance associations), mixed government and private organizations established under private law, social corporations established under public law, and mixed government (e.g. municipal welfare agencies) and private organizations established under public law (e.g. poor councils). For an excellent overview of the system’s complexity, see S.W.C.I.M. Couwenberg, Het particuliere stelsel: de behartiging van publieke belangen door particuliere lichamen (Alphen aan den Rhijn: Samson, 1953). 46 Most important among these were Syb Talma’s attempts in the second decade of the twentieth century to streamline the organization of the social insurance system along corporatist lines and the 1933 attempt to consolidate private-law insurance boards into single public-law “business councils” (bedrijfsraden) for each industrial sector. On this see, for instance, Hoogenboom, Standenstrijd en zekerheid, 151-162 and 253-256.

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to be organized on a tripartite basis, with representatives from the state, organized labor, and the business community. 47 In sum, in its 1945 report, the committee thus argued for a radical break from the old system of partial self-implementation by industry. Immediately after the war, it became clear that the committee had severely underestimated the opposition to government implementation. When approached by Drees on the matter, the Labor Foundation voiced its strong opposition to extensive government involvement. A broad – and largely confessional – majority in Parliament also opposed this. The KVP – which had emerged as the largest party following the first postwar election in May 1946 – immediately made it clear that state implementation conflicted with its subsidiarity principle and thus could not be tolerated. The ARP agreed, adding that the matter was of “great and principled importance”. 48 The backlash against the committee’s proposal was so great that its chairman Van Rhijn changed his views on the matter within one year after the publication of his report. The fortunate side-effect of this move was that he could subsequently come to chair another committee on social insurance reform. Appointed in 1947 by Drees, this tripartite “second Van Rhijn-committee” was to come up with a blueprint for social insurance reform that could count on broader support. In September 1948, the new social-democratic Minister of Social Affairs, Dolf Joekes, asked the committee to translate its recommendations into a social insurance organization bill. The bill proposed to place responsibility for the implementation of the major social insurance programs in the hands of the aforementioned industrial insurance associations, which had been transformed into bipartite organizations during the 1930s. 49 Responsibility for its administration was to be placed in the hands of a Central Administration Office (Centraal Administratiekantoor). The bill deviated from the second Van Rhijncommittee’s proposal in that the industrial insurance associations were 47 Aart van Rhijn, Sociale zekerheid: rapport van de Commissie, ingesteld bij Beschikking van den Minister van Sociale Zaken van 26 maart 1943, met de opdracht algemeene richtlijnen vast te stellen voor de toekomstige ontwikkeling der sociale verzekering in Nederland (Den Haag: Algemeene Landsdrukkerij, 1945). 48 See Ruijters, “Sociale Zaken”, 1395. 49 In 1913, Parliament had passed a Sickness Insurance Act (ziektewet), which granted insurance for loss of earnings because of illness. Contention over its administration delayed the implantation of the Act for another seventeen years. In 1928, it was decided that the sickness insurance program was to be implemented by industrial insurance associations, to which labor unions then also had to be represented. On this, see Bruggeman and Camijn, Ondernemers verbonden, 85; D.P. Rigter and J.C. Burger, Tussen sociale wil en werkelijkheid: een geschiedenis van het beleid van het Ministerie van Sociale Zaken (Den Haag: VUGA, 1995) 50.

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not to be allowed to take responsibility for their administration into their own hands. A tripartite Central Social Insurance Council (Centrale Sociale Verzekeringsraad) was to supervise the operation of social insurance programs. This Council was also to take on an advisory role. In a second major deviation from the second Van Rhijn-committee’s proposal, the Federation of Industrial Insurance Associations (Federatie van Bedrijfsverenigingen) – a hitherto voluntary institution that had facilitated consultation between the industrial insurance associations over the operation of the sickness insurance program – was not awarded a formal role under the bill.50 Given that two-thirds of all seats of the Central Social Insurance Council were awarded to labor union and employer representatives, it was felt that labor and capital were sufficiently represented. The absence of broad agreement on the inclusion of the self-employed into the social insurance system was one of the most important among the many factors standing in the way of the bill’s passage. At the time, such agreement only existed on the creation of a universal or “general” old-age insurance that also included the self-employed. Within the Social-Economic Council, there also was complete consensus concerning the need to create a universal widows and orphans act. In addition, a majority was in favor of the creation of a universal child benefit insurance program. Nonetheless, only the representatives of the NVV and those state representatives who were also members of the Labor Party supported the creation of general health, sickness, and disability insurance programs that also catered for the self-employed.51 During the treatment of the bill in Parliament, various parties thus immediately demanded that any references to the future old-age insurance program and other insurance programs that also catered to the self-employed were scrapped. Joekes consequently removed any references to the (future) old-age insurance program from the bill.52 The Labor Foundation’s dramatic volte face on the matter was equally unhelpful. Just one month before the bill was to be introduced in Parliament, the Foundation published an alternative plan in which it distanced itself from its own representatives in the second Van Rhijn-committee, in a move that enraged Joekes. With the exception of the NVV, all of its members subsequently voiced their objections to the bill. These mainly concerned the exclusion of the 50 At the time, these were still called “Federation of Industrial Insurance Associations for the implementation of sick pay insurance”. See Aart Van Rhijn, Rapport inzake de herziening. 51 See SER, Advies inzake het ontwerp van wet tot regeling van de ziekenfondsverzekering (Den Haag: SER, 1951). 52 On this, see G.M.J. Veldkamp, Inleiding tot de sociale zekerheid en de toepassing ervan in Nederland en België. Deel 1: Karakter en geschiedenis (Deventer: Kluwer, 1978) 100.

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Federation of Industrial Insurance Associations, the inability of the industrial insurance associations to take administration into their own hands, and their relationship with the Central Social Insurance Council. In response, Joekes only voiced his willingness to accept industrial self-administration, whereas he still opposed involving the Federation and weakening the Central Social Insurance Council’s supervisory role. However, it soon became clear that these concessions were insufficient to secure the bill’s passage. In Parliament, only the Labor Party continued to support the bill wholeheartedly. All other parties proposed further changes to reduce the state’s role in the operation of the social insurance system. In close cooperation with the CNV, the ARP was particularly active in promoting the cause of “industrial self-responsibility”. Before the bill was even discussed in Parliament, its spokesman Antoon Stapelkamp had introduced a dozen amendments.53 When the Labor Party’s coalition partner – the KVP – came out in support of most of these amendments, Joekes had to either give in or withdraw the bill altogether. Against the advice of his own party, he opted for the latter.54 After a lengthy debate, Parliament subsequently adopted Stapelkamp’s “great amendment”. Under the revised bill, the industrial insurance associations were free to administer social insurance programs as they saw fit, as long as they were willing to work together in a shared insurance administration office, which was fittingly renamed the Common Insurance Office (Gemeenschappelijk Administratiekantoor, or GAK). The Central Social Insurance Council was renamed the Social Insurance Council (Sociale Verzekeringsraad, or SVR). Its supervisory control over the insurance office was reduced (it could now only advise rather than suspend and annul decisions). In addition, the Federation of Industrial Insurance Associations received a formal advisory role.55 The bill regulated the organization of social insurance programs against industrial injury, sickness, disability, and unemployment, as well as child benefits, passing Parliament in June 1952. 53 See P.G.T.W. Van Griensven, “Sociale Zaken: Spanning tussen het sociaal wenselijke en economisch mogelijke”. In J.J.M. Ramakers, Parlementaire geschiedenis van Nederland na 1945. Deel 4: Het kabinet-Drees II, 1951-1952. In de schaduw van de Korea-crisis (Nijmegen: Centrum voor Parlementaire Geschiedenis, 1997) 218. 54 Severely disappointed by its own minister’s willingness to concede to confessional demands for industrial self-administration, the Labor Party, supported by the Dutch Communist Party (Communistische Partij Nederland, or CPN), consequently voted against the bill. See Van Griensven, “Sociale Zaken”, 220. 55 Although final responsibility was formally awarded to the Social Insurance Council, “certain” daily tasks were to be entrusted to the Federation of Industrial Insurance Associations. On its future importance see, for instance, E. Lyre, 60 jaar Federatie van Bedrijfsverenigingen: van, voor en door de bedrijfsverenigingen (Amsterdam: Federatie van Bedrijfsverenigingen, 1989).

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The introduction of the 1952 Social Insurance Organization Act brought an end to a debate about the organization of the social insurance system that had lasted for over half a century. The outcome presented a clear victory for those who had demanded industrial self-administration. The social partners not only received complete control over the daily operation of several major social insurance schemes, but there was also to be very little state supervision of their activities. Despite being defended by confessional and liberal parties in parliament as the best way to preserve “industrial self-responsibility”, the design in effect created the foundation for a massive misuse of the social insurance system by the social partners in later years. Nonetheless, it would take several decades before this prompted another major reform of the organization of the social insurance system, when an amending law in 1997 established firm government control over the organization of all social insurance schemes. The events leading up to this reform will be treated at length in the following chapters of this book.

4

Welfare State Expansion and the Confessional Preoccupationwith Personal Responsibility and Self-Help

By the early 1950s, the necessity of postwar reconstruction no longer functioned as a major restraint on the social welfare ambitions of Dutch policymakers. Despite the extensive material damage inflicted on the country under German occupation, the postwar recovery of the Dutch economy was more or less completed by the beginning of the decade. By 1948, industrial production had already exceeded prewar levels, while by 1950, exports had increased by one fifth compared to their prewar rate. In subsequent years, the Dutch economy was to grow at a yearly average rate of almost five percent – far exceeding the European average – and it would continue to display impressive growth rates until the early 1970s. As a result – and despite an almost doubling of the labor force in this period – unemployment also remained quite low. With the exception of 1952, when events related to the Korean War created a mild recession in the Netherlands, the average yearly unemployment rate did not exceed three percent up to the mid-1970s.1 In the long term, these economic conditions obviously facilitated the postwar expansion of the welfare state. Like in other European countries, greater prosperity not only permitted but also led to stronger pressure for increases in welfare generosity. However, during most of the 1950s, all major actors – including the labor union movement and most leftist parties – continued to formulate their welfare demands with great caution. One reason for this can be found in the remarkable longevity of the guided wage policy and the resulting preoccupation with wage and price restraint among policy-makers in this period.2 While this policy functioned in a somewhat 1 On the comparative growth rate of the Dutch economy compared to other Western countries in this period, see for instance Charles B. Kindleberger, Europe’s Postwar Growth: The Role of Labor Supply (London: Oxford University Press, 1967) 27; Johan de Vries, The Netherlands Economy in the Twentieth Century (Assen: Van Gorcum, 1978) 63-69; Jan-Luiten van Zanden and Richard Griffiths, Economische geschiedenis in de 20e eeuw (Baarn: Het Spectrum, 1989) 210-221; Eichengreen, The European Economy, 17. 2 Part of its durability can be explained by its extraordinary success, which rested on the upsurge in international trade during this period. Exports were by far the most expansive part of effective demand during the 1950s, with growth rates almost double those of gross domestic product. See Van Zanden and Griffiths, Economische geschiedenis in de 20e eeuw, 210-211; Frans

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less strict manner after 1953 (from then onwards, wage increases were no longer limited to compensation for loss of purchasing power, but rather were tied to productivity increases), there can be no doubt that it continued to limit the scope for increases in the generosity of welfare arrangements in the Netherlands. After all, as pointed out earlier, social costs constituted an integral part of total payroll costs, which meant that the need for austerity also extended to the area of welfare reform. In addition to these material considerations, the expansion of the welfare state was also severely constrained by confessional notions of personal responsibility and self-reliance, as well as the resulting wariness of most confessional forces to state intervention. Indeed, in a country where Christian-democratic parties consistently held a majority of parliamentary seats up to the mid-1960s and a large minority of the labor union movement as well as various employer organizations were also organized on a confessional basis, these beliefs presented a powerful constraint.3 They not only translated into strong confessional opposition to state implementation of the social insurance system – of which the consequences have already been explained in the previous chapter – much more importantly, they also resulted in strong opposition to compulsory membership of social insurance programs, granting tax-financed social provision benefits by right instead of favor and initiatives that undermined the actuarial features of insurance programs. By doing so, they seriously complicated attempts to improve state care and protection against labor market risks for all Dutch citizens. Nonetheless, in time most confessional forces would come to take a much less principled stance on many of these issues. Without this transformation in confessional thinking on social protection, the Dutch welfare state would never have become as generous and successful in providing care and protection for disadvantaged groups as it eventually did. While this transformation Messing, De Nederlandse economie 1945-1980. Herstel, groei, stagnatie (Haarlem: Fibula-Van Dishoeck, 1981) 57-58; Touwen, Coordination in Transition, 34-35. 3 Together with the much smaller Reformed Political Party (Staatkundig Gereformeerde Partij, or SGP), the KVP, CHU, and ARP held a majority of parliamentary seats until the elections of 1967. The KVP was typically larger than the CHU and ARP combined. After their effective merger in 1977, the three parties continued to attract around one third of the popular vote as the Christian-Democratic Appeal (Christen-Democratisch Appèl) for another 25 years. Following its creation in 1906, the socialist NVV has always been larger than its Catholic and Protestant counterparts combined. The NVV and NKV merged in the 1970s to become the Federation of Dutch Labor Unions (Federatie Nederlandse Vakbeweging, FNV). Among employers, liberaloriented interest groups have always been somewhat larger than their Christian-democratic counterparts. For more information on this, see for instance Visser, European Trade Unions in Figures; Bruggeman and Camijn, Ondernemers verbonden.

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had started long before the war, it undoubtedly gathered pace in the immediate postwar period. This is illustrated well by the coming about of the General Old Age Act during the mid-1950s, which will be investigated at length in this chapter. The act created a public old-age insurance program that included the self-employed, was financed by contributions collected by the state and deviated from actuarial principles in that benefit entitlements were not clearly linked to individual contributions. All of these features would have been strongly condemned by most confessional backbenchers, employers and even union leaders before the war.4 However, by the time of its introduction – and as we will see – only the most principled Christian-democrats continued to resist them. The postwar introduction and expansion of various other programs were also made possible owing to this transformation in confessional thinking. This transformation did not come about overnight; rather, it rested upon various political considerations, perhaps including the need to compete with the Labor Party and NVV over the vote and membership of workers, respectively, as various scholars have argued over the years.5 In those instances in which demands for increases in welfare generosity for large groups of workers conflicted with their emphasis on personal responsibility and self-help, the Christian-democratic parties and labor unions obviously had a strong electoral incentive to adopt a less principled stance on welfare reform. The fact that the main Christian-democratic parties (but not their union counterparts, which had encountered fierce competition over worker membership from socialist labor unions from the moment they first began organizing during the beginning of the century) were largely sheltered against electoral competition from the socialists by the pillarized character of Dutch society until the 1960s may not have mattered to this.6 After all, 4 On the resistance of the confessional union federations – and in particular the CNV – to a state pension, see Gerhard Janssen and Theo Berben, De vakbeweging en sociale zekerheid in Nederland na 1945 (Nijmegen: Doctoraalscriptie, 1982) 54-61; Jan-Peter van der Toren, “Van loonslaaf tot bedrijfsgenoot”: 100 jaar christelijk-sociaal denken, medezeggenschap en sociale zekerheid (Kempen: Kok, 1991) 99; Piet Hazenbosch, Voor het Volk om Christus’ wil: een geschiedenis van het CNV (Hilversum: Uitgeverij Verloren, 2009) 308-309. 5 See footnote 11 of the introduction to this work for an overview of these studies. 6 On the origins of the decline of confessional parties in the postwar period, see for instance Therborn, “Pillarization’ and ‘Popular Movements,’” 192-241; Paul Dekker and Peter Ester, “Depillarization, Deconfessionalization, and De-ideologization: Empirical Trends in Dutch Society, 1958-1992”, Review of Religious Research 34 (1996) 325-341; R. Eisinga, A. Felling, and P.H. Franses, “De afbrokkeling van het electoraat van (de voorlopers van) het CDA, 1965-1994”, Sociologische Gids 4 (1997) 77-99; Peter van Dam, “Constructing a Modern Society Through ‘Depillarization’. Understanding Postwar History as Gradual Change”, Journal of Historical Sociology 27 (2014) 1-23.

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socialist attempts to breach existing political structures and seize a larger share of the confessional vote had been an important source of concern for all of the main Christian-democratic parties throughout the postwar period and before.7 However, a more important limitation of this explanation is that the confessional wariness of compulsory membership of social insurance programs (which by the postwar period was mostly limited to the self-employed, of whom many resisted compulsory membership in the first place) and the strong emphasis on the need to adhere to actuarial principles (which mainly had adverse consequences for a relatively small group of low-paid, risk-prone workers) did not necessarily present a major electoral risk to them. In fact, it could very well be argued that future measures to loosen the link between benefit entitlement and individual contribution levels presented much more of an electoral risk, especially since many of these measures focused specifically on granting adequate state care and protection against labor market risks for marginal groups. After all – and as we will see – the redistributive consequences of these measures were largely to be carried by middle-class voters. This and the following chapters will explore these consequences in great detail, starting with the General Old Age Act, which finally came about in 1956. Reform progressed even more slowly in most other welfare areas, largely as a result of the influence of the guided wage policy and confessional preoccupation with personal responsibility and self-reliance in this period.

Slow Progress on Most Fronts While there can be little doubt that the guided wage policy and confessional emphasis on personal responsibility and self-reliance presented powerful obstacles to the postwar expansion of the Dutch welfare state during the late-1940s and 1950s, it is important to bear in mind that the extent to which they did so depended on a great variety of factors, including the political 7 The Labor Party was created in 1946 as the result of a merger between three parties: the Social-Democratic Workers’ Party (Sociaal-Democratische Arbeiderspartij, or SDAP), as well as the much smaller Free-Thinking Liberal League (Vrijzinnig Democratisch Bond, or VDB) and the Christian-Democratic Union (Christelijk-Democratische Unie, or CDU). Various members of the ARP and CHU also joined the Labor Party, making it a true “breakthrough” (doorbraak) party that aimed to challenge the existing system, which had been so thoroughly dominated by Christian-democratic parties. For more information on this, see for instance Hendrik Marinus Ruitenbeek, Het Ontstaan van de Partij van de Arbeid (Amsterdam: De Arbeiderspers, 1955).

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salience of improving matters for specific groups and the financial costs of doing so. For instance, the previous chapter already showed that the necessity of postwar reconstruction did not prevent the Catholic-socialist governments of the late 1940s from making various minor improvements to the social insurance system and related programs, most importantly including the introduction of the emergency old-age pension and state unemployment insurance program. Of course, the need to secure price and wage restraint ensured that these programs remained far from generous. Following the introduction of the 1949 Unemployment Insurance Act, the priority of policy-makers lay with finding a permanent solution for the elderly. As a result, major reforms of the existing invalidity, sickness, and social assistance schemes did not come about until after the collapse of the guided wage policy during the 1960s. In recent years, various studies have suggested that the long-term wage restraint delivered by the labor unions under the guided wage policy rested on a political exchange in which they were compensated by “the promise of social security for all citizens”.8 Given that the need to moderate the growth of labor costs also extended to the area of welfare reform, this seems unlikely. There certainly is no evidence supporting the claim that the Unemployment Insurance Act and General Old Age Act came about as “quid pro quo for wage moderation”.9 On the contrary – and as we have already seen in the case of the former – the introduction of these acts was severely constrained by the preoccupation with wage restraint in this period. To lessen the burden of wage restraint on workers, the governments of the immediate postwar period had other, less costly means at their disposal. The most important of these were general rent and price freezes.10 In addition, all immediate postwar governments heavily invested in social housing, which facilitated the postwar expansion of the economy and consequently occupied an ever-larger share of the national housing market in the postwar period.11 8 Nijhof, “Pensions and Providence”, 194. See also Van Kersbergen and Becker, “The Netherlands”, 488; Van Kersbergen, Social Capitalism, 130; Wilensky, Rich Democracies, 114; Eichengreen, The European Economy, 34. 9 For this claim, see Eichengreen, The European Economy, 34; Van Kersbergen and Becker, “The Netherlands”, 488. 10 From 1945 until 1951, there was a general freeze on rents, followed by a series of differentiated increases that lasted until 1955. From that year onwards, rent levels were related to the difference between costs and “brick-and-mortar” subsidies. See for instance, H.T. Siraa, Een miljoen nieuwe woningen. De rol van de rijksoverheid bij wederopbouw, volkshuisvesting, bouwnijverheid en ruimtelijke ordening (1940-1963) 81-83, 106-114. 11 In 1947, social housing took up some twelve percent of the housing market. By 1956 and 1967, this had increased to almost 25 and 35 percent, respectively. This increase mostly came

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Finally, on the unions’ behest, the lowest paid were often partly exempted from the demands of wage restraint. As a result, the guided wage policy was accompanied by considerable wage compression.12 The possibility of partially compensating workers for wage restraint by increasing the generosity of social insurance and other state transfer programs was discussed at times, albeit only regarding relatively minor programs. Indeed, even in such instances, there was generally strong opposition to such compensation by the labor unions. For instance, when employer representatives to the Labor Foundation in the immediate postwar period explained their support for a government initiative to expand the generosity of the child benefits program by arguing that they felt that it was “their moral and social duty to present their workers with an income that was sufficient to provide sustenance for themselves and their families”, their union counterparts immediately responded by warning that social entitlements should not be used as a substitute for adequate wages.13 Out of fear that it might have a “wage-reducing effect”, the CNV even opposed the measure altogether.14 The other union federations granted their support to the measure, although they warned that it was not to have any influence on the wage bargaining process. They were supported in this position by the then-governing Catholic-socialist government.15 In other words, there is little evidence supporting the claim that the introduction and expansion of state welfare programs played a major role in facilitating the operation of the guided wage policy, or vice versa. By contrast, it is clear that the expansion of fringe benefits at times improved the operation of this policy. For instance, on various occasions during the late 1940s and 1950s, the Board of Government Mediators (College van at the expense of the private rented sector, whose share decreased from some 60 to 30 percent in this period. As national wealth increased, homeownership also expanded massively in this period. See Marietta Haffner, “The Private Rented Sector in the Netherlands”. In Kath Scanlon and Ben Kochan, Towards a Sustainable Private Rented Sector: The Lessons from Other Countries (London: LSE London, 2011) 61-62. 12 On this, see for instance, Johan Delfgauw and Antonius Massizo, De financiële positie van de middengroepen in loondienst (Den Haag: KVP, 1952); NVV, Wenkend perspectief, 89-95; Mulder, Loonvorming in overleg, 21-27; Van Hulst, De effectiviteit van de geleide loonpolitiek, 251. 13 NA, CSWV, doos 31: Brief AKW en RKVW aan de Stichting van de Arbeid, 6 February 1948. 14 NA, CSWV, doos 32: Vergadering Dagelijks Bestuur Stichting van de Arbeid, 27 February 1928, 2. 15 During discussions on the introduction of state child benefits during the late 1930s, the Labor Party’s predecessor – the SDAP – as well as the Liberal Parties had also warned that this measure was not to affect the wage bargaining process. See De Gouw, “Van kinderbijslag naar basisinkomen?” 92.

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Rijksbemiddelaars, or CvR) – which had ultimate authority in wage matters under the guided wage policy – responded to demands for wage increases by allowing firms to increase occupational pension entitlements instead, given that these were deemed to be less inflationary. The board also occasionally forced employers to join industry-wide pension funds to level the playing field within and among industries.16 These measures obviously worked to improve workers’ private pension entitlements. Given the guided wage policy’s main goal of limiting the growth of total labor costs, it certainly also reduced the general margin for increases in the generosity of fringe benefits. As a result, it was only when the guided wage policy collapsed during the early 1960s and wage costs subsequently massively increased that the generosity of private pension entitlements also did so.17 The government’s ability to facilitate the spread of occupational pension coverage by compelling employers and employees to join industry-wide pension funds was given a stronger legal basis under the 1949 Industry Pension Fund Act (Wet Bedrijfspensioenfonds).18 On confessional insistence, the minister’s ability to do so was limited by granting the initiative for this to representatives from industry, while the self-employed were allowed to opt out from participation in these funds.19 In 1952, parliament also passed the Pensions and Savings Funds Act (Pensioen- en Spaarfondsenwet), which set 16 In 1937, parliament had already passed an Act on Statutory Extension and Annulment of Collective Bargaining Outcomes (Wet op verbind en onverbindend verklaren van bepalingen van collective arbeidsovereenkomsten), which also enabled the government to extend and annul agreements on pension entitlements to an entire sector. However, as collective agreements were of limited duration, its ability to do so was limited to a period of five years. The introduction of this act had been partly motivated by the goal of leveling the playing field within industries, although the act was never used to make membership of occupational pension schemes compulsory. The guided wage policy thus held much greater importance for the postwar expansion of occupational pension and is directly responsible for the high coverage rates that can be found today. See for instance Erik Lutjens, De wet Bpf: 50 jaar verplichte bedrijfspensioenfondsen (Deventer: Kluwer, 1999) 14-15. 17 According to a CNV estimate, some 70 percent of all Dutch workers had access to occupational pension funds by the late 1950s. Nonetheless, as a result of the need to moderate the growth of labor costs, workers’ entitlements often did not approach the goal of 70 percent of the previous wage. IISG, CNV, Commissie Sociale Zekerheid, 63, Ouderdomsverzekering, F5, Het vraagstuk van het aanvullende ouderdomspensioen. Uit “De Vakbeweging”, 21 January 1958. 18 The act’s explanatory memorandum specifically mentioned that its introduction had been partly motivated by the goal of “taking away the possibility of obtaining a [wage] advantage on one’s peers by not offering a pension”. Memorie van Toelichting Wet Bedrijfspensioenfonds, Handelingen Tweede Kamer 1947/48, bijlage 785, nr. 3, p. 11. 19 The direct occasion for the act had been the intention of creating a pension scheme in the agricultural sector, which represented some 200,000 wage workers and 300,000 small employers and self-employed workers. See Griensven, “Het sociale beleid”, 639.

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strict criteria for the organization and performance of occupational pension schemes. Both acts passed parliament with overwhelming majorities and received strong support from unions and employers. The union federations supported both acts because they facilitated workers’ ability to obtain adequate pension entitlements. In addition, they greatly appreciated the Pension and Savings Funds Act because it forced employers to accept union membership on the boards of occupational pension funds.20 The employer federations motivated their support by referring to the importance of private pensions for the economy.21 Nonetheless, there can be little doubt that the emergency old-age provision’s means-tested nature and the possibility that a permanent settlement would also subtract individuals’ resources from the public benefit also worked to reduce their natural aversion to regulation. By supporting the introduction of these acts, the employers thus sought to strengthen their opposition to means-testing. The postwar spread of occupational pension entitlements – and the importance given to this by confessional forces and business groups – also affected the debate on public pension reform in another major way, namely by making clear to all involved actors that the public pension – whatever its other features – was to provide a flat-rate benefit that left sufficient room for the expansion of private pension industry. This meant that a “Bismarckian” approach was never considered a viable option. Whereas the public pension was to provide an absolute minimum level of income maintenance in old-age, private pension schemes were to offer the opportunity to obtain more generous income replacement. Despite their ideological preference for a completely public approach, the NVV and the Labor Party’s main predecessor – the Social-Democratic Workers’ Party (Sociaal-Democratische Arbeiderspartij, or SDAP) – had already stated their acceptance of this before the war.22 After the war, the NVV leadership once again confirmed that “although the notion of company pension funds conflicts with our societal view [… ] reality is stronger than doctrine in this 20 Under the act, labor unions and employer groups each provided half of the boards’ members. The act further stated that pension rights were to be maintained when workers switched between employers after they had contributed for at least five years, that not more than ten percent of the pension funds could be invested in one’s own company, and favorable tax treatment required membership of official pension funds. These features also facilitated the government’s goal of reducing the amount of small (individual) pension funds in favor of industry-wide membership. See Lutjens, De wet Bbf. 21 VNO, F119(4) cie Sociale Verzekering RCO 1947-1970: Notulen, 27 April 1948. 22 Willem Velema, “De oudedagsvoorziening in Nederland; toen, nu en in de toekomst”, Jaarboek voor het Democratisch Socialisme 8 (1987) 180.

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matter. A people’s provision for the elderly will have to take account of the existence of company pension funds”.23 If the guided wage policy affected different social programs in a different manner, then so did the confessional preoccupation with personal responsibility and self-reliance in this period. For instance, the previous chapter already mentioned that support for compulsory insurance for the self-employed strongly differed depending on the type of insurance program. While most parties had come to the conclusion by the late 1940s that the problem of destitution in old-age was so severe among the selfemployed that they needed to be included in the state old-age insurance and widows and orphans insurance programs, there continued to be much opposition to the creation of universal insurance programs against the financial consequences of other labor market risks in subsequent years. For instance, it was not until 1975 that a parliamentary majority voted in favor of a universal insurance against the risk of long-term disability as a result of injury or disease, namely the General Disability Act. Opposition to the introduction of compulsory insurance for the self-employed against loss of income due to short-term injury or disease and for medical costs was even stronger, although parliament would eventually complement the existing health insurance program with a separate universal insurance for serious medical risks in 1967. The confessional resistance to the inclusion of the self-employed into the social insurance system not only rested upon principled opposition to compulsory insurance membership for a group that largely comprised small entrepreneurs and the free professions; moreover, a major problem was that it also threatened to lead to stronger state involvement in the operation of the social insurance system. While direct state implementation of social insurance programs could possibly be avoided through the creation of separate industrial insurance associations for the self-employed, it would not be possible to offer social benefits to this group without a considerable state subsidy to the social insurance system. The main reason for this was that over one third of the self-employed lived below or just above the poverty line and thus did not have the means to insure themselves against labor market risks in an actuarial manner.24 The only solution to this – which was to finance these benefits out of general taxation – was problematic 23 IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1951 HB4, Vergadering Commissie Sociale Verzekering NVV, 24 May 1951. 24 This number is based on a NVV estimate from 1951. IISG, NVV codelijsten 1945-1970, 1951 Ec5, Noodvoorziening ouden van dagen: Nota Berger, Ouderdomsvoorzieningen III, 11 June 1951.

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for at least two reasons: first, it conflicted with the confessional goal of preserving personal responsibility; and second, it meant that workers would be at a financial disadvantage compared to the self-employed. After all, in addition to financing their own benefits by paying worker contributions, they would have to cofinance the benefits of the self-employed through the burden of general taxation. The question of whether the self-employed were to be included – and if so, on what terms – was but one among many that needed to be solved to achieve a wholesale reform of the social insurance system. Nonetheless, it was certainly one of the most complicated issues. Even in those instances in which a parliamentary majority was in principle in favor of a universal approach, it led to considerable delay, partly because it reinforced the traditional division between confessional parties on the one hand and socialist and liberal parties on the other hand concerning whether an insurance or state-financed approach was preferable. Beyond the area of old-age pension reform, the consequences of this were clearest regarding attempts to create a permanent child benefit insurance program. Despite the existence of a latent majority in favor of a universal approach throughout the 1950s, which among others rested on the pronatalist interests of the KVP, it was not until 1962 that the temporary measures of the immediate postwar period were replaced by a universal child insurance benefit under the General Child Benef it Act (Algemene Kindergbijslagwet, or AKW). To assuage union fears that workers would be at a financial disadvantage compared to the self-employed, all workers as well as the self-employed under a certain income limit were granted a benefit from their first child onwards. Those self-employed whose earnings were above this income limit received an allowance when they had at least three children.25 In addition to complicating efforts to improve the adequacy of public insurance against labor market risks, the confessional preoccupation with personal responsibility and self-reliance also frustrated attempts to increase the generosity of poverty reduction programs for those who did not qualify for social insurance benefits, the most important of which was the existing 25 The income limit was set at 14,000 guilders per year. Despite their doubts, most Protestant representatives voted in favor of the proposal. The Labor Party – which was in opposition at the time – voted against the act because it felt that it did not go far enough. See Charlotte Brand, Jan-Willem Brouwer, Alexander van Kessel, Johan van Merriënboer, and Jan Ramakers, “Sociaaleconomisch beleid: Een breuk met het brede basisverleden?” In Jan-Willem Brouwers and Jan Ramakers, Regeren zonder rood. Het kabinet-De Quay 1959-1963. Parlementaire geschiedenis van Nederland na 1945, deel 7 (Nijmegen: Centrum voor Parlementaire Geschiedenis, 2007) 302-311.

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poor relief system. Under this system – which was based on the Poor Relief Act of 1912 – responsibility for providing assistance to the poor mostly lay with confessional and other private charities, which largely operated independently from each other. Although local municipalities increasingly subsidized their activities,26 which ranged from providing direct financial assistance to involvement in social rehabilitation and infant welfare work, government supervision remained minimal. While municipalities had the authority to establish so-called poor councils (armenraden), whose main function was to foster coordination among the different charities, their appearance and influence widely varied. There were no clear criteria on the conditions under which charities were licensed to receive municipal subsidies, nor were municipalities particularly concerned with what these subsidies were used for. Moreover, as assistance levels were both low and based on charity rather than entitlement, they were often also quite inadequate. These problems were all broadly recognized in the immediate postwar period, including by the administrators of poor relief.27 However, to solve them, increased state involvement in its operation was inevitable, which strongly conflicted with Catholic and Protestant notions of subsidiarity and sovereignty in its own sphere. In response to increased calls for state involvement, Protestant representatives to the Dutch Council for Social Work (Nederlandse Raad voor Maatschappelijk Werk) – an umbrella organization of private charities that was recognized by the Department of Internal Affairs as the legitimate voice for charity interests – even went as far as arguing that poor relief was a part of church activity that was protected under the legal separation of church and state.28 In a somewhat more subtle manner, this view was echoed by Protestant representatives in parliament. In addition, there was strong confessional resistance to organizing poverty relief based upon entitlement instead of charity, as it was feared that this might adversely affect people’s sense of personal responsibility. Despite its consistent coalition membership with the Labor Party, the KVP was 26 By 1950, public subsidies accounted for about 80 percent of all expenditure on poor relief. See Loes van der Valk, Van pauperzorg tot bestaanszekerheid: een onderzoek naar de ontwikkeling van de armenzorg in Nederland tegen de achtergrond van de overgang naar de Algemene Bijstandswet, 1912-1965 (Amsterdam: Internationaal Instituut voor Sociale Geschiedenis, 1986) 246-247. 27 See Marco van Leeuwen, “Armenzorg 1912-1965: van centrum naar periferie.” In Jacques van Gerwen and Marco van Leeuwen, Studies over zekerheidsarrangementen. Risico’s, risicobestrijding en verzekeringen in Nederland vanaf de middeleeuwen (Amsterdam: NEHA, 1998) 536. 28 See Cox, The Development of the Dutch Welfare State, 114.

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almost as insistent on these two points as the main Protestant parties in parliament, the ARP and CHU.29 As a result – and despite an earlier government promise that it would look into ways to “broaden” the existing Poor Relief Act to “provide an improved basis for social assistance” – comprehensive reform of the poor relief system did not take place for another two decades, when the act was f inally replaced by the 1963 General Assistance Act (Algemene Bijstandswet, or ABW).30 A state committee on the matter comprising department officials and representatives of confessional and other private charities was installed in 1947, although it did not publish its report until 1954, which effectively blocked progress for a period of seven years.31 Despite its exceptionally long duration and on the insistence of its confessional members, the committee merely recommended making some minor changes to the existing Poor Relief Act. Most importantly, it reconfirmed the central role of confessional and other private charities in delivering both material assistance and immaterial care for the poor, while speaking out against granting benefits by right.32 These recommendations obviously did not go far enough for the Labor Party, which made it impossible for the confessional-socialist government of the day to put forward a bill on the matter in the short term. Various governments certainly introduced a number of programs targeted at improving matters for specific groups in need during the immediate postwar period. These included the already-mentioned social assistance scheme for unemployed workers, which was replaced by a somewhat more generous social provisions scheme in 1952, allowances for demobilized soldiers, war and resistance victims and repatriates, as well as special 29 Ibidem, 111-113; Van der Valk, Van pauperzorg tot bestaanszekerheid, 115-116. See also Bornewasser, Katholieke Volkspartij 1945-1980. Band II, 120-123. 30 For the quote, see Staatscommissie Vervanging Armenwet, Eindrapport van de Staatscommissie Vervanging Armenwet (1954) 1-2. 31 The responsible minister, the Catholic Louis Beel – who chaired the Department of Internal Affairs at the time – had initially tried to limit membership of the committee to officials from his own department and representatives of confessional and other private charities. This failed as officials from the Department of Social Affairs – which was chaired by the socialist Drees – as well as representatives from municipal agencies also came to join the committee. As a result, the work of the committee was characterized by profound disagreement among its confessional and socialist-leaning members. See Van der Valk, Van pauperzorg tot bestaanszekerheid, 192-197; Cox, The Development of the Dutch Welfare State, 114. 32 However, somewhat cryptically, it also recommended including a clause stating that the government had a duty to support the needy. See Staatscommissie Vervanging Armenwet, Eindrapport van de Staatscommissie, 35 and 68.

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relief measures for artists, the blind and the partially disabled. In 1950, the first socialist-led government of the postwar period also introduced a small subsidy for municipal social employment programs for the long-term unemployed and disabled workers. From the mid-1950s onwards, these programs also catered for mentally handicapped workers.33 Finally, during the mid-1950s, it introduced a special provision for the self-employed. While these programs often did not provide allowances that were sufficient to live on, they certainly improved matters for these groups. Furthermore, they also ensured that the poor relief system was increasingly limited to those who were not eligible for group-specific assistance schemes and – of course – social insurance entitlements.34 Despite the absence of comprehensive legislative reform, the poor relief system itself also underwent important changes in this period. The most important of these may have been an increasing number of municipalities creating procedures that enabled applicants to submit formal complaints in case their request for assistance was rejected, which meant that they took an important step towards providing relief based on entitlement rather than charity. The Association of Social Services’ Directors (Vereeniging van Directeuren voor Sociale Arbeid, or DIVOSA) reinforced this trend by publishing municipality-broad assistance standards, which were increasingly generous.35 Municipal officials and administrators of private charities also increasingly adopted the view that support should not only cover basic living necessities but also provide a minimum level of social existence. This shift in attitudes was partly the result of an ongoing professionalization of the charities’ staff, which increasingly comprised trained social workers. Compared to traditional church volunteers, these new professionals were more open to increased state involvement in the administration of poor 33 See R. Gosker, “Hoe zal de sociale bijstandswet worden uitgevoerd?” Anti-Revolutionaire Staatkunde 34 (1964) 65-66; Van Leeuwen, “Armenzorg 1912-1965”, 537-538; Van der Valk, Van pauperzorg tot bestaanszekerheid, 160-61. 34 The expansion of the social insurance system also ensured that fewer people depended on poor relief. In 1935, the government spent twice as much on poor relief as on social insurance entitlements (260 to 120 million guilders per year). Despite the slow expansion of the social insurance system in the immediate postwar period, this situation had been completely reversed by 1950. By then, the government spent 450 million guilders per year on poor relief and 800 million guilders per year on social insurance benefits. See Frank van Loo, “‘Den Arme gegeven…’: een beschrijving van armoede, armenzorg en sociale zekerheid in Nederland, 1784-1965 (Meppel: Boom, 1981) 160. 35 Nonetheless, in most municipalities, the practice of allocating assistance continued to display a large degree of arbitrariness. See for instance, Van Leeuwen, “Armenzorg 1912-1965”, 560-563; Van der Valk, Van pauperzorg tot bestaanszekerheid, 156-157.

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relief. Nonetheless, they certainly had less patience with its organizational complexity.36 While all these developments were important in their own right in paving the way for comprehensive reform, they were accompanied by a much more important transformation in confessional attitudes towards welfare provision. Within all three of the main confessional parties as well as their union counterparts, the preoccupation with personal responsibility and self-help slowly gave way to an approach that emphasized the values of social justice and solidarity with the less privileged. Among the main Christian-democratic parties in parliament, the KVP probably came to place most emphasis on solidarity in its political platform from the late-1950s onward. However, as the KVP – in line with Catholic teachings on social justice – had always been more inclined to accept state intervention to assist the less privileged than had been its main Protestant counterparts, the ARP and CHU, the latter’s break with existing party principles may have been more severe.37 This change in confessional attitudes towards welfare reform is best exemplified by the introduction of the General Old Age Act during the mid-1950s, to which we will now turn our attention.

The First Landmark Act: The Introduction of the General Old Age Act When parliament passed the General Old Age Act with near-unanimity in March 1956, it successfully brought an end to a discussion that had divided left and right forces for over half a decade. Since the beginning of the twentieth century, progressive and confessional backbenchers and their political allies outside of parliament had been sharply divided over the question of whether a universal state pension or insurance approach was to be preferred. The answer to this question was to be found in the principle of the universal social insurance, which combined elements of 36 See Cox, The Development of the Dutch Welfare State, 136-137. 37 On the importance of solidarity in socialist teachings, see for instance, Wim Couwenberg, “Op- en Neergang der Christen-democratie”, Politiek Perspectief 1:4 (1972) 2-23. Jos de Beus, “De contractie van sociale zekerheid als politiek strijdpunt”, Beleid en Maatschappij 1 (1982) 39-51; Van Kersbergen and Becker, “The Netherlands”, 489; Van Kersbergen, Social Capitalism, 92-93; Therborn, “‘Pillarization’ and ‘Popular Movements’”, 212; Hans Bornewasser, Katholieke Volkspartij 1945-1980. Band I Herkomst en groei (Nijmegen: Valkhof Pers, 1995) 149-53; Bornewasser, Katholieke Volkspartij 1945-1980 Band II, 124-25; Hoogenboom, Standenstrijd en zekerheid, 27-28.

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both. The general old-age pension was to be primarily financed by worker contributions, although it contained so many features that loosened the link between individual contributory efforts and benefit entitlements that it hardly resembled a regular insurance program. These features were all introduced to ensure benefit adequacy. For instance, to obtain immediate improvements for existing pensioners and protect the benefit against loss of purchasing power as a result of inflation, the pension was financed by pay-as-you-go contributions.38 To ensure that lower income groups also had access to an adequate benefit, flat-rate benefits were combined with contributions that were graduated according to income and a small subsidy out of general revenue was added. Finally, to ensure that vulnerable groups also had access to sufficient benefits, entitlement to the benefit was not strictly tied to a person’s work history.39 The introduction of these features, as well as its universal nature, obviously conflicted with the confessional goal of preserving future pensioners’ sense of personal responsibility. In addition, many of these features also had strong redistributive consequences for different age, occupational, and income groups. As a result, the introduction of the General Old Age Act was not only a lengthy affair, but it was also accompanied by much political conflict. This conflict was not only fueled by disagreement between socialist and confessional forces in parliament and elsewhere; moreover, the debate on old-age pension reform was also increasingly characterized by disagreement between conservative and more progressive wings of the confessional movement. Representatives of both wings could be found in all of the three main confessional political parties as well as the two main confessional union federations, the Protestant CNV and Catholic KAB. Nonetheless, as organizations that had always displayed great concern with the welfare of their less fortunate members, the latter two found it somewhat easier to sacrifice actuarial principles to obtain benefit adequacy compared to their political party counterparts. This was one of the reasons why the 38 Funded pensions are paid from an accumulated fund built up over a period of years out of contributions of its members. Under pay-as-you-go financing, pensions are financed out of current revenue. The appeal of the latter is that benefit entitlements do not depend on individual savings, which allows for more intergenerational and occupational solidarity and makes it easier to offer inflation-proof benefits. For these reasons, almost all Western countries adopted pay-as-you-go financing in the postwar period. 39 While all workers and self-employed with a yearly income over 2,000 guilders per year between the ages of 21 and 65 contributed to the scheme on a compulsory basis, a full benefit was granted to all pensioners over the age of 65 who had resided in the Netherlands for at least 50 years since the age of fifteen.

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labor union movement was to play such a prominent role in the debate on old-age pension reform. When the then-minister of Social Affairs, Willem Drees, introduced his Emergency Old Age Provision Bill into parliament in November 1946, he knew that confessional approval for the bill was crucial. To ensure this, the bill among others included an explanatory memorandum promising that a permanent scheme would largely be contributory in nature. 40 As this would have needlessly antagonized confessional backbenchers, the memorandum did not state whether the permanent scheme would include the self-employed and – if so – how this could be combined with a contributory approach. When the tripartite second Van Rhijn Committee published its report on social insurance reform some one and a half years later, it advocated creating a universal old-age pension program (although it rejected compulsory membership for the self-employed of the other social insurance programs). In response to the introduction of the emergency old-age provision, the committee also argued against the use of the means-test and benefit variation among municipalities. The new old-age pension was to grant a uniform flat-rate benefit financed out of flat-rate contributions. For economic reasons, the committee did not believe that automatic adjustment of the benefit rate in accordance with increases in prices and living expenses was possible. 41 The second Van Rhijn Committee’s report had not been clear concerning how the inclusion of the self-employed was to be financed, nor had its members been able to agree on whether to adhere to a funded system under which benefits were linked to individual savings or opt for a pay-as-you-go system under which current contributors financed the benefits of current old-age pensioners. When a subcommittee on the matter – installed after the publication of its report – was also unable to find agreement on this, the responsible minister at the time, Dolf Joekes, decided to break the deadlock by drafting a bill of its own. Parallel to the activities of the second Van Rhijn Committee, department officials had already set out to prepare legislation for a more permanent solution for the old-age pension problem. Their work now needed to be brought in line with the recommendations of the second Van Rhijn Committee. The main outlines of this bill were completed by June 1949. Contrary to the second Van Rhijn Committee, Joekes felt that some degree of means-testing was necessary to contain the costs of the new 40 Memorie van Toelichting Noodwet Ouderdomsvoorziening, Handelingen Tweede Kamer 1946/47, bijlage 362, nr. 3, p. 4-5. 41 Van Rhijn, Rapport inzake, 27.

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scheme. The benefit was to be financed by pay-as-you-go contributions and responsibility for administration of the scheme was placed in the hands of industrial insurance associations. 42 The lowest paid were to be exempted from having to pay contributions. To Joekes’ dismay, his bill aroused tremendous opposition. Despite the second Van Rhijn Committee’s support for this, various Catholic ministers – for instance – strongly objected to its universal nature. Strong resistance also existed regarding the bill’s pay-as-you-go nature, especially among exchequer officials, who regarded this system as actuarially unsound. 43 Meanwhile, representatives of the State Insurance Bank (Rijksverzekeringsbank) and Labor Councils (Raden van Arbeid) – which shared responsibility for the administration of existing social insurance programs with the industrial insurance associations – argued that decentralized administration of the program was entirely impractical. 44 For obvious reasons, the bill’s meanstested nature also provoked strong opposition. Finally, and most importantly, the labor union movement – and in particular the NVV – was increasingly concerned that a flat-rate contributory system was unable to provide adequate benefit levels to old-age pensioners. As a result, despite the support given to a flat-rate contributory system by its representatives in the second Van Rhijn Committee, the NVV also came to voice its opposition to Joekes’ old-age pension bill. In addition, it came forward with an alternative old-age pension proposal, which immediately developed into a major rival of Joekes’ proposal. This rivalry was to some extent a coincidence, as the federation’s proposal had come about in response to its dissatisfaction with the recommendations of the second Van Rhijn Committee, which it began to criticize almost immediately after the publication of the committee’s report. When the other signatories to the report consequently reproached the NVV for not knowing what it wanted, it bluntly stated that many of its members had 42 The director-general of Social Affairs, A.C.M. van de Ven, had suggested placing responsibility for its administration in the hands of the state insurance office (Rijksverzekeringsbank) as this would have been more efficient. However, for political reasons, Joekes did not adopt his suggestion. Peter van der Zwaal, “Politici, ambtenaren en de verzorgingsstaat. De oudedagsvoorziening, 1945-1952”, In Blockmans and Van der Valk, Van particuliere naar openbare zorg, 187. 43 Ibidem, 185-187. 44 The State Insurance Bank was created in 1901 to administer the newly founded industrial injuries insurance program in cooperation with tripartite Labor Councils. The industrial insurance associations were born out of confessional opposition to the centralized nature of this scheme. For an overview of the complex and decentralized system that this created, see Couwenberg, Het particuliere stelsel; Cox, The Development of the Dutch Welfare State, 91-95; Hoogenboom, Standenstrijd en zekerheid, 270-271.

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disagreed with the proposals from the start. 45 Largely in parallel to the group of department officials working on Joekes’ old-age pension bill, the federation subsequently began working on a way to combine a contributory approach with a more generous outcome. Its solution was to create a scheme that combined flat-rate benefits with contributions that were graduated by income. In addition to their compulsory membership of this public scheme, all workers and the self-employed were to join occupational pension plans. Together, the public benefit and occupational supplement were to provide an income that equaled at least 70 percent of pensioners’ previous income. The NVV also favored automatic adjustment of the public pension benefit to price and wage increases. Contributions were to be collected by a central administrative authority on a pay-as-you-go basis. 46 The NVV’s willingness to come forward with a scheme that had strong redistributive consequences for different groups of workers was quite remarkable. The simultaneous opposition of the British Trades Union Congress to a scheme that was quite similar in the United Kingdom illustrates that this could not be taken for granted. 47 In future years, the NVV would continue to show that it was quite willing – and able – to press for welfare initiatives that redistributed risk and income to ensure that lower-paid, more risk-prone workers were also able to obtain adequate insurance against labor market risks. Increasingly, its confessional counterparts were also willing to do so. This became clear when the NVV – after being rebuffed by Joekes – approached its confessional counterparts and individual members of Joekes’ own Labor Party. Whereas the KAB quickly rallied behind the NVV plan, the CNV was initially somewhat more reluctant to accept a pension proposal that so clearly deviated from actuarial principles and which implied centralized administration. Nonetheless, after some discussion in the Council of Trade Union Federations, a platform designed to facilitate a common stance among the three main union federations, it also came to accept these features to obtain a more generous pension benefit. 48 45 IISG, NVV codelijsten 1945-1970, 1951, HM4, Notulen Sociale Commissie, 30 August 1951. 46 IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1955 E1, Noodvoorziening Ouden van Dagen. 47 During the early stages of preparations of the Beveridge committee, a proposal to combine earnings-related contributions with flat-rate benefits had been brought forward by the Association of Approved Societies and a think-tank, Political and Economic Planning. During the early 1950s, the Labour Party came forward with a similar proposal. In both cases, the Trade Union Congress came out in opposition to this. See Dennie Oude Nijhuis, “Rethinking the Beveridge Strait-jacket: The Labour Party, the TUC and the Introduction of Superannuation”, Twentieth Century British History 20:3 (2009) 370-395. 48 The Council of Trade Union Federations had been created in 1945 (preparations had already started during the war) to facilitate coordination among the three main union federations. The

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As the Council of Trade Union Federations threw its weight behind the NVV proposal, an increasing number of backbenchers from the governing Labor Party and KVP also came to express their preference for this proposal over Joekes’ bill. As a result, Joekes was forced to give in. Rather than asking the newly founded Social-Economic Council – which was to play a major role in discussions on public welfare reform in future years – to develop an opinion on his own old-age pension bill, Joekes put forward an open request for advice accompanied by an extensive note on the differences between his own bill and the unions’ proposal. 49 The decision to consult the Social-Economic Council for advice was made on 31 July 1951, only two months after the Council of Trade Union Federations officially adopted the NVV proposal. From then onwards, the initiative came to lie with what was increasingly referred to as the “social partners”. In cooperation with government-appointed crown members, representatives from the three main union federations and employer associations began working on an old-age pension proposal that closely came to resemble the NVV’s original proposal. The fact that the main employer federations also preferred this proposal over the Joekes bill also held strong importance here. According to the NVV, they mainly did so because the latter’s means-tested nature ensured that it “grabbed” what occupational pension plans remitted, which would greatly hinder the expansion of these plans.50 The employer federations had far fewer difficulties with the plan advocated by the unions. After some hesitation, they accepted the combination of flat-rate benefits and earnings-related contributions because the redistributive consequences of this were limited by the subsistence nature of the benefit and the introduction of an income council ceased to exist when the NVV discontinued its membership in response to an episcopal charge that prohibited Roman-Catholics from joining socialist organizations and condemned socialist, humanist, and liberal ideas. In future years, the three union federations would continue to cooperate to achieve a common line in matters relating to welfare and wages though. See for instance, Hazenbosch, Voor het Volk, 205-207 and 752-754; Gerard Kuys, De vrees voor wat niet kwam. Nieuwe arbeidsverhoudingen in Nederland 1933-1945 aan het voorbeeld van de Twentse textielindustrie (Amsterdam: Amsterdam University Press, 2010) 589-592. 49 The Social-Economic Council – of which one third of its members were appointed by the state and two thirds were appointed by the Labor Foundation – was created in 1950 and soon developed into the main corporatist body in the Netherlands. In matters relating to welfare, union and employer representatives often alternated discussions in the Social-Economic Council with discussions in the Labor Foundation. For a recent overview of the council’s history, see Willem Camphuis, Tussen analyse en opportuniteit. De SER als adviseur voor de loon- en prijspolitiek (Amsterdam: Aksant, 2009). 50 IISG, NVV codelijsten 1945-1970, 1951 HM4, Notulen Sociale Commissie, 30 August 1951.

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threshold over which no contributions were levied.51 For similar reasons, the employer federations supported granting automatic adjustment of the benefit to changes in the level of prices and wages. Representatives of the Central Social Employers’ Federation (Centraal Sociaal Werkgevers Verbond, henceforth CSWV), one of the largest employer federations at the time, justified their support for regular adjustment by pointing out that the guided wage policy made this cheap to administer. In addition, they emphasized that the guided wage policy currently only allowed wage compensation in accordance with price increases, which essentially meant that the old-age pension would – for the moment at least – merely become inflation-proof.52 However, they came to regret this decision when the guided wage policy collapsed.53 The confessional employer federations in particular objected more strongly to compulsory membership of occupational pension schemes and the scheme’s centralized design. As the latter was deemed to hold key importance for its operation by the unions, it initially proved quite difficult to obtain consensus on this. Eventually, the CSWV managed to persuade its confessional counterparts that continued principled opposition to this jeopardized the materialization of consensus in the council, which in turn endangered employer attempts to get rid of the means-test. Owing to its liberal world outlook, it was much easier for CSWV members to appreciate the cost-effectiveness of centralized administration.54 The same applies for the scheme’s pay-as-you-go feature, which the CSWV supported to prevent capital accumulation in a state fund.55 On their turn, the unions had to yield on the issue of compulsory membership of occupational pension plans. 51 NA, CSWV, 2.19.103.06, 131: Notulen Kring voor Sociaal Overleg, 13 October 1953; CSWV 2.19.103.06, 132: Notulen Kring voor Sociaal Overleg, 26 June 1956. 52 Internally, CSWV representatives also mentioned that the current policy of centralized wage setting made an automatic linkage to the wage index easy to administer. NA, CSWV, 2.19.103.06, 145: Notulen Kleine Technische Commissie Sociale Verzekering, 4 April 1955; NA, CSWV, 2.19.103.06, 132: Notulen Kring voor Sociaal Overleg, 17 May 1956. 53 NA, 2.06.064, 343: Verslag van de gecombineerde vergadering van de Werkgroep Financiering Sociale Verzekeringsprojecten van de Commissie Ontwikkeling nationale Economie en de Commissie Niveau AOW-pensioenen, 20 December 1963, 5. 54 VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Notulen, 5 November 1947. 55 Organizational considerations and the goal of creating an inflation-proof pension also played a role in this. NA, 2.19.103.06, CSWV, 32: Rapport betreffende de financiering ener wettelijke ouderdomsverzekering uitgebracht door een commissie van de Raad van Bestuur in Arbeidszaken, 24 August 1949, 7; NA, CSWV, 2.19.103.06, 131: Vergadering Kring voor Sociaal Overleg, 13 October 1953; VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Oudedags, weduwen- en wezenvoorzieningen. Voorlopige conclusies van de vergadering van de Commissie Sociale Verzekeringen van de Raad van Bestuur in Arbeidszaken, 7 March 1968.

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As this feature was deemed to occupy less importance for the unions, the employer federations had been quite forthcoming on their other proposals and compulsory membership also went a little too far for some of the representatives of the Protestant CNV, it did not prove that difficult for them to do so.56 In other words, the Social-Economic Council largely adopted the NVV’s proposal, as well as adding some features, of which only the two most important need to be mentioned here. First, whereas all workers were asked to contribute, the self-employed under a certain income limit were to be exempted from paying a premium. The union federations accepted his unevenness for practical and solidaristic reasons. Second – and holding much greater importance for future developments – the union federations accepted that the old-age pension was to be financed exclusively by worker contributions. This constituted a drastic change in existing practice (the invalidity and old-age pension was exclusively financed by employer contributions) and union views, albeit more so for the NVV than for the two confessional union federations, whose emphasis on worker self-reliance made them more likely to accept worker financing. When the NVV – which had long insisted on a tax-financed state pension – accepted a contributory approach, it initially insisted that employers also contributed to the pension. In the proposal that was later adopted by the Council of Trade Union Federations, workers and employers were each to finance 50 percent of its costs.57 Its later willingness to accept full worker financing of the old-age pension proposal held major importance because it implied recognition of the principle that public insurance benefits like occupational pension entitlements and other fringe benefits constituted deferred wages, which thus were to be financed out of the margin for pay increases. This acceptance would greatly facilitate the postwar expansion of the Dutch welfare state after the guided wage policy collapsed and the margin for pay increases surged. However, wages had been kept down artificially for many years at the time, which meant that complete worker financing of the act would have had major consequences for workers’ purchasing power. For this reason, the unions demanded some form of wage compensation. In a classic example of the complexities of Dutch wage negotiations in this period, the employer 56 IISG, NVV codelijsten 1945-1970, E1, Noodvoorziening ouden van dagen: concept-voorlopig verslag wetsontwerp 4009 (algemene Ouderdomsvoorziening). 57 IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1952, HM13, Commissie Ouderdomsvoorziening, vergadering NVV sub-commissie ouderdomsvoorziening, 15 October 1952.

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federations agreed to this because wages had lagged behind productivity growth for various years. To ensure that labor costs did not increase too rapidly, the unions in turn settled for partial compensation and agreed to a reduction in the contribution rate for the public unemployment insurance program.58 The Social-Economic Council’s advice – which was put forward in February 1954 – was not unanimous. According to the minority opinion of three government-appointed Catholic members, the council’s majority view would lead to a “state collectivist system of provisions for all kinds of needs”.59 Therefore, they argued that it would be better if the government created a limited workers’ insurance and separate, means-tested provision for the self-employed. However, their view was so outdated by then that the Consultative Council for Social Organizations (Raad van Overleg der Sociale Organisaties) – a consultative platform of Catholic organizations – hastened to speak out against it.60 The council’s advice could count on broad societal support, in particular from organizations representing old-age pensioners. Indeed, perhaps even more importantly, it could count on support from various prominent social security experts such as Marius Levenbach and the young Catholic economist Gerard Veldkamp, who would become a successful KVP minister of Social Affairs in later years. By arguing that collectively financed programs could still be viewed as insurance programs, these experts held great importance in facilitating confessional party acceptance of the principle of the (universal) social insurance.61 All of the major parties in parliament also gave their consent to the council’s majority view. This included the ARP, which had hitherto staunchly opposed a universal scheme. This volte face may have been partly prompted by pragmatic considerations as parliamentary acceptance of the council’s proposal seemed clear from the start and ARP acceptance of it was deemed 58 The contribution rate was set at 6.75 percent, while workers received a supplementary wage charge of 5.6 percent on top of the normal compensation for price and rent increases in the year following the act’s introduction. Reduction in contribution rate had no consequences for the program’s generosity owing to the low unemployment rate at the time. 59 SER, Advies inzake de wettelijke ouderdomsverzekering (Den Haag: SER, 1954) 112. 60 The members of the platform included the General Catholic Employers’ Federation (Algemene Katholieke Werkgeversvereniging, or AKWV), the Catholic Dutch Farmers and Horticulturist Union (Katholieke Nederlandse Boeren- en Tuindersbond, or KNBTB) and various unions representing Catholic middle-class groups. Roebroek and Hertogh, “De beschavende invloed des tijds”, 297. 61 Marius Levenbach, “Sociale Zekerheid”, Sociaal Maandblad 2 (1947) 261; Gerard Veldkamp, Individualistische karaktertrekken in de Nederlandse sociale arbeidersverzekering (Alphen aan den Rhijn: Samson, 1949) 13.

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necessary to secure participation in a new government.62 The KVP – whose ministers had so strongly condemned the universal nature of Joekes’ scheme five years ago – also completely supported the council’s advice. Little over a year after the publication of the council’s report, a new minister of Social Affairs with strong labor union ties, the social-democrat Ko Suurhoff, introduced the General Old Age Insurance Bill into parliament.63 During parliamentary treatment of the bill, confessional backbenchers went to great lengths to emphasize that its main features were in accordance with confessional principles. For instance, according to ARP backbencher Antoon Stapelkamp, the insurance concept had undergone an evolution in postwar years, meaning that it no longer mattered whether contributions were levied individually or collectively. Representatives from the KVP and CHU expressed themselves in similar terms.64 With the exception of the Reformed Political Party (Staatkundig Gereformeerde Partij, or SGP) – a small orthodox party that rejected the bill as tantamount to “state socialism” – all parties eventually gave their support to its introduction. The act passed the second chamber of parliament in June 1956 and would come into effect at the beginning of the following year. Despite its redistributive nature, the state pension did not immediately grant an above-subsistence level benefit. For married couples, the benefit was initially set at 1,338 guilders per year for a married couple and 804 guilders per year for a single pensioner. By comparison, the average yearly income at the time was just over 3,000 guilders. One year after its introduction, between one third and 50 percent of all old-age pensioners consequently still had an income below the government-defined “fiscal minimum”.65 62 However, not all ARP members agreed with the council’s proposal. One of them was the later ARP-leader Wim Aantjes, who complained that no Protestant-Christian members of the council had argued against the majority advice. Wim Aantjes, “Het SER-advies inzake de ouderdomsvoorziening principieel aanvaardbaar?” Anti-Revolutionaire Staatkunde 24 (1954) 332-36. 63 The word “insurance” was later replaced by “pension” on the insistence of SGP backbencher Pieter Zandt. For the SGP’s opposition to the bill, see Roebroek and Hertogh, “De beschavende invloed des tijds”, 301. 64 See Roebroek and Hertogh, “De beschavende invloed des tijds”, 299-300; Peter van Griensven, Peter van der Heiden, and Marieke Hellevoort, “Inkomenspolitiek: de welvaart verdeelt”. In Carla van Baalen and Jan Ramakers, Het kabinet Drees III 1952-1956. Barsten in de brede basis (Den Haag: Sdu, 2001) 505-506. 65 For various estimates on this, see HDP, VPCW, 172: Amendementen drs. H.A.M. Elsen bij ontwerp-advies inzake een verhoging van de AOW-pensioenen tot een sociaal minimum. Bestemd voor de vergadering van de raad van 28 February 1964; NCW, 29(3): Sociale Verzekeringsfederatie, 1967-74: Kanttekeningen bij de nota van het CPB aan de SER van 15 January 1969 getiteld “enkele gedachten over verbetering van de sociale zekerheid voor oudedagsvoorziening van werknemers”.

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Only those self-employed who earned over 3,000 guilders per year would have to pay a full premium, while those with a yearly income of at most 2,000 guilders were completely exempted from having to pay contributions. The income threshold over which no contributions were levied was set at 6,000 guilders per year. This meant that middle-class groups – in particular workers – largely carried the act’s redistributive consequences.66 It would take several more years before the pension was set at a social minimum level. In the meantime – and as we will see in the following chapter – the union federations would continue to press for higher benefits and an increase in the level of the income threshold. This would increasingly set them at odds with the employer federations, which strongly opposed both. While this naturally does not do away with the fact that the General Old Age Act greatly improved matters for old-age pensioners, the fact that its introduction demonstrated that the major parties in parliament were increasingly willing to incorporate solidaristic features that loosened the link between individual contributory efforts and benefit entitlements to obtain adequate protection for all Dutch pensioners held more importance to its landmark nature. Their willingness to do so would only increase in future years, largely because the union movement increasingly insisted on this. As these features often had strong redistributive consequences, it is also important to note that there had been surprisingly little resistance to the redistributive consequences of the General Old Age Act. Insofar that there had been resistance to the act’s solidaristic features, this mostly grounded in the confessional aversion to state intervention and insistence on personal responsibility and self-help. As these considerations became less important to confessional backbenchers (and labor union representatives) over time, it would prove much easier to improve the generosity of the Dutch welfare state, especially after the guided wage policy collapsed during the early 1960s and the need to moderate the growth of labor costs no longer acted as a major constraint on its expansion. The act’s introduction also further consolidated the central role of the “social partners” in the debate over welfare reform. Their ability to obtain consensus had broken the deadlock on pension reform and made the introduction of the General Old Age Act possible. As we will see, parliament’s 66 The threshold had been introduced on insistence of the employer federations. The unions had initially insisted on a higher threshold, although eventually they agreed on the figure of 6,000 guilders per year. IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1951 EC5, Noodvoorziening ouden van dagen: concept-voorlopig verslag wetsontwerp 4009 (Algemene Ouderdomsvoorziening); NA, CSWV, 2.19.103.06, 132: Vergadering Kring voor Sociaal Overleg, 26 June 1956.

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willingness to adopt the Social-Economic Council’s recommendations in future years also strongly depended on labor union and employer representatives’ ability to achieve consensus. The emerging practice of financing social insurance improvements out of the margin for pay increases further reinforced industry’s role in welfare reform. More often than not, future increases in the generosity of social insurance programs were to originate in wage negotiations between labor unions and employer representatives, which not only focused on the size of the margin for pay increases but also concentrated on which part of this margin would be used to finance direct wage increases and which part was to be reserved to finance increases in the generosity of public and private welfare entitlements. The following chapter will explain the consequences of this. Some three years after the creation of the General Old Age Act, parliament also passed the General Widows and Orphans Act (Algemene Weduwen- en Wezenwet, or AWW). The act’s main purpose was to ensure that widowers and orphans – many of whom lived in poverty – no longer depended on humiliating poor relief. Although many existing insurance programs already contained provisions for widows and orphans, these were often quite inadequate owing to their low benefit rates and because they only catered for workers. Because their situation was so desperate and they numbered a relatively small group, most political parties as well as the social partners came to accept that widowers and orphans were to be entitled to the same level of protection as old-age pensioners.67 Like the General Old Age Act, the Widows and Orphans Act introduced a universal flat-rate benefit whose level was to be adjusted automatically in line with price and wage increases. All widowers over the age of fifty were entitled to a permanent benefit until they reached the official retirement age (after which they were entitled to an old-age pension benefit). Widowers with children were entitled to a higher benefit, while there was a separate benefit for orphans. The act passed parliament with broad support at the beginning of 1959 and came into effect in October of that year.

67 A 1954 report published in the journal Economisch-Statistische Berichten outlined the severity of the situation for this group. See J.G.M. Delfgaauw, “De f inanciële situatie van weduwen”, Economisch-Statistische Berichten 39 (1954) 752-754.

5

Completing the Social Insurance System

During the early 1960s, the guided wage policy finally collapsed, bringing about an end to the relatively modest wage increases of the immediate postwar period. From the late 1950s until the early 1970s, labor costs were to grow much more rapidly in the Netherlands than in most other European countries.1 By extension, so would the Dutch welfare state. On the insistence of the labor union movement, a large share of the margin for pay increases was used to finance improvements to the social insurance system in this period. High growth rates and low unemployment in turn facilitated the introduction and expansion of related social programs. The result was a surprisingly rapid – and smooth – transformation of the Dutch welfare state. By the mid-1950s, social expenditure (i.e. expenditure on social insurance protection, health care, public education, social housing, labor market policy, and societal work) accounted for about fourteen percent of gross domestic product in the Netherlands, which was just below the European average at the time. By 1970, this figure had almost doubled to 27 percent. Having long been known for its conservative welfare outlook, the country was now spending more on social protection for its citizens than any other nation in the world.2 Its rapid pace, strong social and economic ramifications – as well as the absence of major parliamentary and societal opposition to this – all ensured that this transformation was truly remarkable. It was also significant that this transformation largely took place under confessional-liberal – as opposed to socialist-led – governments. When the last Catholic-socialist coalition of the immediate postwar period fell in 1958, the Labor Party was to remain in the opposition benches for a period of almost fifteen years, with one short interruption.3 Despite initial 1 Between 1958 and 1962 alone, labor costs in the Netherlands rose by 33 percent, compared to seventeen percent in the remaining f ive EEC countries and four percent in Great Britain and the United States. This “wage explosion” lasted until the mid-1960s. During the 1970s, wage increases in the Netherlands were close to the European average. John P. Windmuller en C. de Galan, Arbeidsverhoudingen in Nederland (Utrecht: Het Spectrum, 1977) 86; Bart van Ark, Jacob de Haan, and Herman de Jong, “Characteristics of Economic Growth in the Netherlands During the Postwar Period”. In Nicholas Crafts and Gianni Toniolo, Economic Growth in Europe since 1945 (Cambridge: Cambridge University Press, 1996) 297. 2 It would continue to hold this position until the late 1980s. See Flora, Growth to Limits. 3 This short intermission lasted from April 1965 to November 1966 and was not very successful. See Pieter van Griensven, Peter van der Heiden, Jan Ramakers, and Hilde Reiding, “Op weg naar

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assurances from the KVP and ARP – which consistently held power in this period – that they would change direction now that their cooperation with the Labor Party had ended, the confessional-liberal governments of the 1960s mostly pursued welfare policies similar to those favored by the Labor Party. In sharp contrast to their (social-democratic) predecessors, who had merely aimed to provide a modest level of state support to keep people out of poverty while limiting the system’s costs and preserving workers’ sense of personal responsibility, the KVP and ARP ministers of Social Affairs of the 1960s were responsible for creating a welfare system that offered truly extravagant levels of state support. To increase the system’s generosity and make it more inclusive, they not only allowed state spending to take up an ever-larger share of national income; moreover, they also further undermined the relationship between benefit entitlements and contributory efforts and allowed massive increases in the level of income and risk redistribution between middle-class and less advantaged groups. In addition – and as we will see – they paid very little attention to the possible adverse consequences of all this on labor supply. The confessional support for progressive welfare reform in this period can be attributed to a variety of factors, including electoral competition with the Labor Party, a genuine shift in welfare attitudes and strong pressure from the KAB (which would be called NKV from 1964 onwards) and CNV, which provided a significant number of KVP and ARP backbenchers, respectively, in this period.4 By the early 1960s, both parties had also come to welcome a new generation of politicians who placed much less importance on confessional notions of personal responsibility and self-help compared to their colleagues who had started their political career in the prewar era. As these younger members rose to positions of authority in their parties, they were also able to influence their parties’ stance on welfare reform. One of the most influential of this new group of politicians was the previously mentioned Catholic economist Gerard Veldkamp, who was responsible for the introduction of some of the most important welfare initiatives of the postwar period in his six years as minister of Social Affairs from 1961 to 1967, including the de nacht: sociaal-economische en financiële problematiek 1963-1966”. In Peter van der Heiden and Alexander van Kessel, Rondom de Nacht van Schmelzer: De kabinetten-Marijnen, -Cals en -Zijlstra 1963-1967 (Amsterdam: Boom, 2010) 283-325. 4 On the intense – but often problematic – relationship between the NVV, CNV, and KAB/NVK with respectively the Labor Party, ARP, and KVP, see among others Jos Perry, Louis Zweers, and Maarten Brinkman, Honderd jaar sociaal-democratie in Nederland (Amsterdam: Bert Bakker, 1994) 183-188; Hazenbosch, Voor het Volk, 200-4; Jan Bank, De broederlijke relaties tussen KAB, NKV en KVP, 1945-1981 (Amsterdam: Ambo, 1985).

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General Child Benefit Act, Health Insurance Act (Ziekenfondswet), the Unemployment Provision Act (Wet Werkloosheidsvoorziening or WWV), the Act on Disability Insurance, (Wet op Arbeidsongeschiktheidsverzekering or WAO), the Sickness Act (Ziektewet or ZW), and acts that increased the generosity of the existing state unemployment insurance and old-age pension programs. Like all of his predecessors, Veldkamp had developed strong ties with the labor union movement.5 The transformation of the confessional party views on welfare reform in this period has received much attention in the literature and will be further explored in this and the following chapters. However, it is important to recognize the extent to which parliament followed industry recommendations in matters relating to social insurance development in this period. The pillarized nature of Dutch society, the emerging practice of financing social insurance improvements out of the margin for pay increases and the growing authority of the Social-Economic Council following the introduction of the General Old Age Act all ensured that labor union and employer representatives were heavily involved in the development of social insurance. More often than not, the introduction and expansion of social insurance programs originated in wage discussions between labor unions and employer representatives, after which the main features of these programs were negotiated in the Social-Economic Council or Labor Foundation. Once the representatives of both sides of industry agreed on the main outlines of a social insurance program, parliament was generally quite willing to adopt the bulk of their recommendations. Of course, matters were quite different regarding tax-financed social provision programs. As these were financed out of general revenue rather than worker contributions, industry involvement in the development (and implementation) of these programs was generally quite limited. In other words, the rapid expansion of the Dutch welfare state in this period can largely be attributed to the proactive role of the labor unions and the employer federations’ surprising willingness to concede to so many of organized labor’s welfare demands. Of course, neither of these two could be taken for granted. The previous chapter already mentioned that labor unions in other countries were often much less willing to accept the redistributive consequences of welfare initiatives that aimed to improve the generosity and inclusive nature of social insurance programs, sometimes even outright 5 For an overview of Veldkamp’s political views and his relationship with the labor union movement and fellow politicians, see Gerard Veldkamp, Herinneringen 1952-1967: Le carnival des animaux politiques (Den Haag: Sdu, 1993).

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opposing such initiatives for this reason.6 However, despite the adverse consequences of this for their higher-paid, more secure members, the three union federations in the Netherlands consistently argued in favor of premium differentiation among industries, for the introduction of redistributive contributory systems that combined earnings-related contributions with flat-rate benefits or earnings-related contributions and benefits with minimum benefit levels, against the maintenance of wage and income limits that respectively excluded higher-paid workers from membership of social insurance systems and limited their contributory efforts, as well as in favor of various other measures that resulted in risk and direct income distribution among different groups of contributors. Even though all of these measures strongly undermined the actuarial principles on which the social insurance system was based, the Catholic and Protestant union federations – as we will see – had become equally insistent on this as the socialist NVV. Over the years, various scholars have argued that the main employer federations on the whole supported the rapid expansion of the Dutch welfare state during the 1960s.7 The following chapters will show that this support mostly resulted from tactical considerations. While there can be no doubt that the employer federations had strong misgivings about measures that increased the generosity and inclusive nature of the social insurance system, they seldom responded with outright opposition to welfare initiatives, instead choosing to negotiate with their union counterparts to postpone the introduction of these initiatives and bring them closer in line with employer preferences (which generally meant that they were not to be too costly, were not to affect labor supply in a major way and were not to obstruct the development of private pension schemes). As a result of the unified stance of the labor union movement, the generous margin for pay increases, and parliament’s lack of attention for the potential consequences of welfare expansion for labor supply in this period, they were generally only partially successful in their efforts. The practice of financing social 6 On organized worker opposition to postwar welfare state expansion in various countries, see Oude Nijhuis, “Rethinking the Beveridge Strait-jacket”, 370-395; Hugh Pemberton, “The Failure of ‘Nationalization by Attraction’: Britain’s Cross-class Alliance against Earnings-related Pensions in the 1950s”, Economic History Review 65:4 (2012) 1428-1449; Baldwin, The Politics of Social Solidarity, 223-226; Nørgaard, The Politics of Institutional Control, 189-190; Esping-Andersen, Politics Against Markets, 209-212. 7 See for instance, T. Berben and G. Jansen, De vakbeweging en sociale zekerheid in Nederland (Nijmegen: Instituut voor Politicologie, 1982) 113 and 118; Bruggeman and Camijn, Ondernemers verbonden, 75 and 110; Therborn, “‘Pillarization’ and ‘Popular Movements’”, 215; Keetie Sluyterman, Kerende Kansen: het Nederlandse bedrijfsleven in de twintigste eeuw (Amsterdam: Boom, 2003) 190; Cox, The Development of the Dutch Welfare State, 167.

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insurance improvements out of the margin for pay increases ensured that these improvements did not increase labor costs in a major way. Nonetheless, as we will see, this practice functioned as a double-edged sword: on the one hand, it gave the employer federations less of an incentive to oppose union demands for increases in the generosity of social insurance programs; while on the other, it made it more difficult for them to do so. In sum, as labor costs rapidly rose, unemployment fell to stunningly low levels and confessional views on welfare reform slowly became more progressive, it also became much more difficult for the employer federations to resist union demands for increases in the generosity of public protection against labor market risks. On those occasions in which they continued to disagree with their union counterparts, parliament generally sided with the latter. As we will see, this realization worked as a powerful incentive for the employer federations to find compromises that were also satisfactory to the labor union movement. In the first two decades following the collapse of the guided wage policy, organized labor undoubtedly had the upper hand in matters relating to welfare reform. This would only change during the 1980s as concerns over the system’s costs mounted and policy-makers increasingly attributed the poor functioning of the Dutch economy in this period to the existence of so-called “labor market rigidities”.8 Of course, these concerns and their consequences for the politics of welfare reform will be described at length in later chapters, while this and the following chapter focus on developments in the 1960s. To illustrate just how far confessional views on welfare reform had evolved by the beginning of this decade, this chapter will start with the first major welfare reform of the 1960s, namely the introduction of the 1963 General Assistance Act.

The Confessional Turnabout and the Introduction of the General Assistance Act A first concrete sign that the views of the KVP – the largest of the three main confessional parties – on the issue of poor-relief reform was slowly 8 Given the strong preoccupation of contemporary mainstream economics and both left- and right-oriented politicians with the consequences of benefit generosity on worker behavior and labor supply, one may be inclined to forget that this is a relatively recent phenomenon. For instance, as recently as 1994, an influential study by Charles Bean on European unemployment hardly paid any attention to the importance of labor market rigidities in explaining European unemployment patterns. As we will see in this chapter, Dutch politicians also paid little attention to this. See Charles Bean, “European Unemployment: a Survey”, Journal of Economic Literature 32:2 (1994) 573-619.

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changing came in 1956 when the party appointed Marga Klompé as Minister of Social Work of the last Catholic-socialist government of the immediate postwar period. Contrary to her predecessor, Klompé was known as a strong proponent of progressive reform.9 While appreciative of the role of religious charities in delivering immaterial poor relief (i.e. social work), she felt that the provision of financial assistance had to be accompanied by an enforceable right to entitlement, which implied that the state was to assume responsibility for delivering assistance. In addition, she felt that f inancial assistance should not only be able to provide for basic living necessities, but should also be set at a sufficiently high level to provide the poor with a “minimum of social existence”. Contrary to the state committee that had published its recommendations on reform of the Poor Relief Act some two years earlier, she thus advocated a major overhaul of the existing poor-relief system. By doing so, she inevitably headed towards conflict with more traditionally inclined party members and like-minded Protestant backbenchers. However, as societal views on providing financial assistance to society’s poorest members slowly evolved, these became increasingly isolated on the matter. Evidence of this evolution can among others be found in the way in which parties viewed the so-called “right of recovery”, a clause that enabled municipalities and private charities to recover assistance from family members. This right was increasingly subject to criticism in the postwar period, because it prevented many older people from asking for poor relief out of fear that family members would be charged for this and family members’ willingness to provide maintenance to one another had become less obvious over the years. In a separate advice on the matter, the state committee on reform of the poor-relief system in 1951 nevertheless recommended extending the right of recovery to new groups and enforcing this principle in a stricter manner. Following strong criticism of this, it adopted a very different stance in its final report, which came out some three years later.10 In the following years, various parties came to profess their support for a more limited interpretation of the right of recovery. On the insistence of the Labor Party, the last Catholic-socialist government of the immediate postwar period had committed itself to introducing a bill on this in 1956. Progress on this only halted because the government fell prematurely. Consequently, it was not until February 1960 when Klompé – as Minister of Social Work 9 See Ineke Jungschleger, Marga Klompé: een gedreven politica haar tijd ver vooruit (Utrecht: Veen, 1990); Gerard Mostert, Marga Klompé, 1912-1986: een biografie (Amsterdam: Boom, 2011). 10 Van der Valk, Van pauperzorg tot bestaanszekerheid, 89-90.

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in what had by then become a confessional-liberal government – finally introduced a bill that limited the right of recovery to (former) spouses as well as parents and their children.11 The bill passed parliament with broad support and came into operation in January 1961. In the same year, Klompé embarked on the more difficult task of obtaining government support for a comprehensive reform bill on which her department officials had been working since 1959. The main features of this bill were largely negotiated in a series of special ministerial conferences that took place over a period of two years. Representatives of the Dutch Council for Social Work – which had by then become a strong proponent of progressive reform – and municipal representatives also took part in the proceedings. At roughly the same time, three of the four coalition parties – the KVP, ARP, and liberal VVD – established internal advisory committees on the matter.12 In all of these bodies, there was early consent for one major aspect of the bill, namely that financial and non-financial assistance would no longer be linked to one another. Klompé had initially wanted to create an integrated law for both types of assistance, although she eventually decided against this as doing so would unduly complicate matters and the need for reform of existing social care programs was much less pressing.13 As many of those who relied on financial assistance were also in need of social care, the bill secured the possibility for cooperation with private charities, which would continue to be the main providers of social care. This meant that the subsidiarity principle remained intact for as far as this type of provision was concerned: a fact that Klompé would continue to point out during ministerial and parliamentary discussions over the bill’s introduction. 11 Under the existing poor law, the right of recovery also extended to grandparents, grandchildren and – in some instances – even third-degree relatives. Roebroek and Hertogh, “De beschavende invloed des tijds”, 311; Van der Valk, Van Pauperzorg tot bestaanszekerheid, 91-92; Van Leeuwen, “Armenzorg 1912-1965”, 544-545. 12 These were respectively called the Committee-Vos (Commissies-Vos, KVP), the Committee for Government and Societal Work (Commissie voor Overheid en maatschappelijke werk, ARP) and the Committee for the Replacement of the Poor Relief Act (Commissie Vervanging Armenwet, VVD). Of the four coalition partners, only the CHU did not establish a committee on the matter. 13 Following the introduction of the Department of Social Work in 1952, there was much more supervision and coordination between the various organizations that provided social work. The Dutch Council for Social Work also played an important role in coordinating the activities of various charities. On this, see Rob Neij, De organisatie van het maatschappelijk werk (Zutphen: De Walburg Pers, 1989) 236-254; Ernest Hueting, De permanente herstructurering in het welzijnswerk (Zutphen: De Walburg Pers, 1989) 76-87; Van der Valk, Van Pauperzorg tot bestaanszekerheid, 201-202; Marleen van der Haar, Marking Differences in Dutch Social Work. Professional Discourse and Ways of Relating to Clients in Context (Utrecht University: Academic Thesis, 2007) 52-54.

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On the other hand, regarding the delivery of financial assistance, the subsidiarity principle was already severely undermined by the time that Klompé put forward her bill. In 1963, only fifteen percent of recipients received their support from private charities.14 This meant that Klompé’s proposal to make the municipalities responsible for the provision of financial assistance effectively did little more than ratify existing practice. Nonetheless, there was strong resistance to this in the council of ministers. The Ministers of Finance (Jelle Zijlstra, ARP), Justice (Albert Beerman, CHU), and Education (Jo Cals, KVP) all voiced their objections to the government’s central role in Klompé’s bill. These ministers also opposed creating a legal government duty to provide assistance out of fear that this would undermine citizens’ willingness to take care of themselves.15 All three of them would continue to voice their opposition to these – and various other – aspects of the bill. In this respect, they strongly differed from the advisory committees that had been instigated by the KVP, ARP, and VVD. These all accepted that poor relief that was characterized by the subsidiarity principle could “no longer” offer adequate assistance. The ARP committee even went as far as motivating its support for a legal obligation to provide assistance by referring to biblical justice motivations.16 Of the three committee reports, only the VVD report contained a minority opinion expressing opposition to the notion that it was the government’s duty to provide assistance to the poor.17 The ARP advisory committee initially supported Zijlstra’s suggestion to distinguish between “deserving” and “underserving” assistance claimants by enabling municipalities to grant the latter a lower level of financial assistance. Nonetheless, it dropped this idea when another ARP committee – the permanent Council for Advice (College van Advies) – criticized it as unworkable. According to the latter, it would not be possible to distinguish between different groups of claimants without investigating every one of them, which would be very difficult for various reasons. In addition, it argued that such an investigation would work to reinforce the stigma of poor relief, which conflicted with one of the main reasons for reform.18 Klompé also 14 NA, 2.02.05.02, 641: Notulen Ministerraad, April 1961. 15 NA, 2.02.05.02, 632: Notulen Ministerraad, October 1960. 16 HDP, Archief ARP, 272, 127: Notulen en verslagen betreffende vergaderingen van de Tweede Kamerfractie, 5 January 1962; Ibidem, Interimnota inzake het Ontwerp Algemene Bijstandswet, 17 October 1962. 17 NA, 2.19.022, 145: Op weg naar een wetsontwerp bijstand levensonderhoud. Rapport van de Commissie Vervanging Armenwet der Volkspartij voor Vrijheid en Democratie, 1960. 18 HDP, Archief ARP 272, 127: Notulen en verslagen betreffende vergaderingen van de Tweede Kamer-fractie, Brief aan de leden van de Commissie Overheid en Maatschappelijk Werk, 1962.

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strongly opposed Zijlstra’s suggestion. In her view, it was sufficient that the provision of financial assistance would be accompanied by strict conditions, which included the obligation to look for work. A majority of members of the council of ministers agreed with her on this. More importantly, so did the vast majority of backbenchers, which became clear after Klompé – together with Veldkamp – submitted her bill to parliament in August 1962.19 Even though most of this also merely confirmed existing practice, there was much broader resistance to the individual basis of determining benefit levels and the goal of providing the poor with a minimum social existence rather than mere basic living necessities. The former among others meant that a claimant who used to be well off and thus had higher living costs might obtain a higher rate of financial assistance. For instance, the latter meant that cultural needs and social obligations might also be used to determine the level of the benefit. Both not only raised principled objections, but they also raised the possibility that social assistance levels might in some cases be higher than social insurance benefits or the wages of unskilled workers. For the latter reason, Veldkamp – who had recently become Minister of Social Affairs – also raised objections to this part of the bill. This led to the introduction of a clause that introduced a maximum benefit level.20 In addition, the government installed an interdepartmental committee to investigate whether some municipalities were currently already offering assistance levels higher than the wages of unskilled workers. Following these decisions, the bill was circulated to affected civil society representatives, including the private charities, municipal social councils, and the union and employer federations. With the exception of some charities representing reformed churches, these representatives all supported the bill.21 In parliament, the bill was accepted without much discussion. In contrast to the introduction of the General Old Age Act several years earlier, on this occasion confessional backbenchers felt no need to deny that the bill conflicted with confessional principles. Instead, they accepted Klompé and Veldkamp’s explanation, who stated that the bill was the outcome of 19 There had been much conflict between the Ministries of Social Work and Social Affairs concerning who was to control the assistance scheme and various related group schemes. It was not until the late 1980s that all social programs came under the control of the Department of Social Affairs. On this, see Cox, The Development of the Dutch Welfare State, 139-140; Hans van den Heuvel and Jacques van Maarseveen, “Van Armenzorg naar Verzorgingsstaat”, Intermediair 22 (1986) 47-51. 20 Van der Valk, Van Pauperzorg tot bestaanszekerheid, 206-209. 21 Cox, The Development of the Dutch Welfare State, 140-141; Hueting, De permanente herstructurering, 87-88 and 91-96.

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a transformation in societal views regarding social justice, as well as the need to provide all citizens with a dignified existence.22 Support for the act was so strong that parliamentary ratification took place without a roll call. Only the fundamentalist SGP and two ARP representatives requested that their opposition to the bill was to be noted in the logs. One of these two representatives was Wim Aantjes, who would later become chairman of the ARP in parliament. For principled reasons, Aantjes had also opposed the introduction of the General Old Age Act, voted against the 1962 General Child Benefit Act and three years later would vote against the decision to increase the state pension benefit to a social minimum level. To some confessional politicians, the importance of personal responsibility and subsidiarity continued to prevail over solidarity concerns for a long time. However, even the most ardent hardliners could eventually change their views. For instance, many years later, Aantjes came to regret his decision to oppose the aforementioned welfare initiatives.23 The General Assistance Act passed parliament in June 1963 and came into operation in January 1965. By creating a universal entitlement program under which the state had the obligation to provide financial assistance to citizens in need, the act held major importance in obtaining income security for all citizens. To emphasize that the government was under a legal obligation to provide assistance, the act specifically stated that claimants had the right to appeal against municipal rulings. To avoid the stigmatizing nature of its prewar predecessor, concepts such as “the poor” and “relief” had been replaced by the more neutral phrases of “persons” and “assistance”. However, the act was far from revolutionary in terms of its level of benefit. The act’s professed goal of providing assistance to cover “necessary living expenses” was so vague that it was quite unclear which expenses were supposed to be covered by municipalities. The predictable outcome was that different municipalities interpreted this phrase in a very different manner, which almost immediately led to renewed pressure to introduce nationwide assistance standards. However, as we will see in the following chapter, it would take another decade before this led to parliamentary action. By decoupling the link between “immaterial” and financial assistance, the act also had indirect consequences for the provision of social work. One of these was that it further undermined the power base of religious charities. 22 Roebroek and Hertogh, “De beschavende invloed des tijds”, 312. 23 At the time of the Old Age Insurance Act’s introduction, Aantjes had yet to become a member of parliament. On his later regret of his decision to oppose these welfare initiatives, see Jacques Kraaijeveld, Het evangelie volgens Jacob Cornelis (Gorinchem: Teksbureau to the Point, 2006) 8.

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By doing so, it reinforced a long postwar trend towards the increasing professionalization of the field. As the provision of social work had come to focus less on the poor and more on the long-term ill, disabled, and elderly, it had also become less self-evident for providers of relief to interfere in the private lives of assistance recipients. The wordings of the General Assistance Act further signaled to providers of social work that it was inappropriate to do so. As promised by Klompé, the provision of social work would continue to be the domain of private charities for the foreseeable future, although their work was increasingly subject to state oversight and regulation. It was not until the second half of the 1970s that a socialist-led government brought the social services under direct state control. In the meantime and as we will see in the following chapter – the activities of providers of most types of social work had increased immensely. On the insistence of the labor union movement and various other actors, the General Assistance Act did not replace existing group schemes. Many of these schemes not only remained intact but were also significantly improved in subsequent years. For instance, in 1964 the government introduced a separate scheme for unemployed workers who were not – or no longer – entitled to a benefit under the reduced pay and unemployment insurance program, the State Group Scheme for Unemployed Workers (Rijksgroepsregeling voor Werkloze Werknemers, or RWW). It mostly did so for administrative reasons and in terms of their financing, administration, and benefit generosity there was no distinction between general assistance for unemployed workers and other groups in need of assistance (such as elderly persons with an insufficient contributory record or self-employed and recently divorced persons who could not make ends meet). The most important difference was that the latter were not necessarily required to look for jobs.24 Moreover, in 1969 Veldkamp introduced a bill into parliament that was to create a uniform scheme for municipality-organized social employment programs for mentally and physically disabled workers. He did so in response to the massive growth of these programs since the mid-1950s: in 1955, social employment centers provided employment to just under 9,000 workers, while by 1963 this had increased to just over 30,000.25 This rapid growth 24 The distinction between general assistance for unemployed workers and other persons was nevertheless maintained until 1996 when a socialist-liberal government abolished the State Group Scheme for Unemployed Workers as part of a major overhaul of the general assistance system. See Chapter 7 on this. 25 This rapid growth largely came about as a top-down process following the introduction of the Municipal Social Employment Scheme (Gemeentelijke Sociale Werkvoorziening Regeling, or WSG) for manual workers in 1950. The success of this scheme necessitated the coming about of

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created a need for more state funding and national guidelines. The 1969 Social Employment Act (Wet Sociale Werkvoorziening, or WSW) did both, creating an open-ended commitment on the part of the central government to subsidize 80 percent of municipality-organized social employment centers. These were to cater to two categories of workers: the most productive of these – whose quantitative labor performance was at least one third of that of a minimal performance in a regular working process – were paid the minimum wage, while the other group received 75 percent of that. As a result of the open-ended nature of the central government’s financial commitment, the number of participants in these centers was to further rapidly increase, from 40,000 workers in some 200 employment centers in 1970 to almost 75,000 some ten years later.26 Shortly after the General Assistance Act passed parliament, a new confessional-liberal government also created another provision for long-term unemployed workers. It did so in the same year that parliament ratified a major reform of the state unemployment insurance program. Whereas the introduction of the Unemployment Provision Act was mainly a government affair – owing to its tax-financed nature – the main outlines of the revised unemployment insurance program largely came about during negotiations between union and employer representatives. Nonetheless, the introduction of both acts was closely connected. As well as strongly improving public protection against the financial consequences of unemployment, the two acts also greatly increased the possibility of misuse of the social insurance system by both workers and employers. Because they were so closely connected, the introduction of both acts will be treated at the same time below.

Health Insurance Reform and the Limits of Solidarity Perhaps even more so than the General Old Age Act, the introduction of the General Assistance Act testifies the extent to which confessional views on welfare reform had changed in the first decades of the postwar period. Even though the act formally terminated the subsidiarity principle on which the provision of welfare relief had always been based and clearly conflicted with the goal of preserving citizens’ sense of personal responsibility, the 1969 Social Employment Act. See Jan Terpstra, Aan de poort van de sociale werkvoorziening: een studie over besluitvorming en marginalisering als twee kanten van de toetreding (Nijmegen: Instituut voor Toegepaste Sociologie, 1985) 22-26. 26 Ibidem, 30.

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parliamentary support for it had been almost complete. Electoral motivations alone cannot explain this support, as the General Assistance Act – like its predecessor – was expected to mostly cater for specific (and relatively small) vulnerable groups, partly because the expansion of the social insurance system ensured that it would no longer have great importance for large demographic groups such as old-age pensioners and unemployed workers.27 To some extent at least, there seems to have been a genuine evolution in confessional thinking on welfare reform. Moreover, this evolution seems to have been at least partly driven by the growing acceptance that solidarity considerations needed to play a much more important role in the provision of state welfare than had been the case in the past. This acceptance went furthest when financial hardship was most severe, as was the case with the elderly and those depending on poor relief. In other cases, the confessional willingness to sacrifice traditional principles in favor of “human solidarity” was less pronounced. A good example of the latter can be found in the postwar debate over health insurance reform. As had been the case with unemployment, there had been no compulsory public insurance program for medical expenses before the war. To win the sympathy of the working population and create an equal playing field for German companies, the Germans eventually introduced such a program during the occupation. The 1941 Sickness Fund Decree (Ziekenfondsbesluit) created a compulsory health insurance program for all workers who were already covered under the Sickness Act. In exchange for a premium financed by workers and employers on an equal basis, all covered workers were entitled to medicines and care provided by general practitioners, medical specialists, and hospitals and sanatoria. The act also confirmed the government’s authority to determine which health care insurance funds would be recognized. Workers with an income above a certain threshold and the self-employed were not covered. As had been the case with some 40 percent of the population before the war, they could seek insurance on their own initiative. Nonetheless, given that many of them had low incomes and relatively high risks – meaning that the premium rates of voluntary insurance providers were also often relatively high – many of them found it difficult to do so.28 27 At the time of General Assistance Act’s introduction, the government was already considering increasing the old-age pension to the “social minimum” level. During the early 1970s the level of the old-age pension benefit came to be tied firmly to that of the minimum wage. As a result, the problem of poverty in old-age all but disappeared in the Netherlands. See Aldi J.M. Hagenaars, The Perception of Poverty (Leiden University: Academic Thesis, 1985). 28 See Companje et al., Two Centuries of Solidarity, 251.

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Although all major parties announced their eagerness to replace the German decree with a democratically implemented act in the immediate postwar period, it would take almost twenty years before they finally managed to do so. The very different position of the main parties, industry, and representatives from the field concerning issues relating to compulsory coverage as well as the administration and supervision of state health insurance played a major role in this. Whereas the Labor Party and NVV – for instance – argued for compulsory national insurance, most confessional and liberal forces wanted to limit coverage to workers below a certain income threshold. Some of them even argued in favor of a return to the postwar situation of completely voluntary coverage. On the issue of administration, the union, and employer federations – who wanted implementation by industrial insurance associations – stood against major health insurance funds and medical practitioners’ organizations. Finally, there was much disagreement on which organizations were to participate in the National Health Insurance Council, which was responsible for the supervision of its administration. A 1951 Advice on health insurance reform by the Social-Economic Council revealed the extent of divisions between industry and state representatives.29 Consequently, various attempts to introduce comprehensive reform bills in the immediate postwar period failed. In terms of coverage rates, the most significant reform was the decision to extend compulsory membership to the elderly, disabled, and students.30 In 1962, Veldkamp finally broke this deadlock by introducing a health insurance bill that was to provide compulsory health insurance for workers only, and accompanying this by an announcement to investigate the creation of a separate general insurance for serious medical risks. He motivated the latter by arguing that the financial consequences of serious medical costs could be so severe that all citizens should be covered for this.31 This solution placated both conservative and progressive backbenchers and could count upon the support of the Social-Economic Council and National Health Insurance Council. The 1964 Sickness Fund Act mostly retained the features of the existing system under which workers under a certain income limit were compulsory insured by a national sickness fund. The 1967 General Act on Exceptional Medical Expenses (Algemene Wet Bijzondere Ziektekosten, or AWBZ) added a public insurance against the treatment and care of serious 29 SER, Advies inzake het ontwerp van wet tot regeling van de ziekenfondsverzekering (Den Haag: SER, 1951). 30 Companje et al., Two Centuries of Solidarity, 252-253. 31 Roebroek and Hertogh, “De beschavende invloed des tijds”, 335-336.

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medical expenses for the entire population to this. Furthermore, the act also covered costs relating to the maintenance and improvement of the capacity to work. Contrary to most other social insurance acts, it did not have an age limit and the general tax office collected contributions. The two acts came into operation in January of 1966 and 1968, respectively. Despite the early choice for an insurance approach in which the costs of financing medical expenses were financed by workers and employers on a collective basis, the union and employer federations never played a truly central role in the debate over health insurance reform. Despite certainly being vocal in expressing their views, their influence was largely checked by the existence of rival representatives from the field in the form of health insurance funds and medical practitioners’ organizations. Such powerful rivals did not exist in the areas of old-age pension, unemployment, disability, and sickness reform. As a result, the union and employer federations managed to play a much more important role in these areas. The following two paragraphs – the first of which deals with the area of unemployment insurance development – will illustrate this.

Improving the Generosity of Unemployment Insurance Protection As the collapse of the guided wage policy was accompanied by massive pressure for increased worker remuneration and the union movement had made it clear that at least part of the increased margin for pay increases was to be used to finance social insurance improvements, the unemployed were among the first to benefit from this collapse.32 This was the result of extreme union dissatisfaction with the sober nature of the 1949 Unemployment Insurance Act. Following the introduction of this act, the union federations almost immediately announced their intention to improve the generosity of the scheme. From the early 1950s onwards, they consistently lobbied for the abolition (or at least a strong increase in the level) of the wage limit, an increase in the level of the unemployment benefit to a uniform rate of 80 percent of the previous wage, an extension in the duration of the 32 On the unions’ insistence that part of the margin for pay increases was to be used to financing improvements to the social insurance systems. NA, CSWV, 2.19.103.06, 139: Verslag vergadering Commissie Sociale Verzekering, 5 September 1962; IISG, NVV, Codelijsten van het NVV-Commissiearchief 1945-1967, 12, Cie sociale verzekeringen tot en met 1966, Beknopte samenvatting van de besprekingen van het overlegorgaan NVV-NKV-CNV, 3 June 1964.

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benefit with several weeks, as well as completely uniform contribution levels. Having previously been quite susceptible to arguments in favor of premium differentiation – for reasons already established in the previous chapter – the NVV now emphasized that “there is no reason why a worker who, through no fault of his own, works in a branch of industry with an unfavorable risk, should pay a much higher premium than a worker who happens to work in a branch with a more favorable risk”. It thus felt that all workers should pay the same contribution rate.33 The employer federations opposed all of these demands, partly owing to cost considerations, but also because they feared the consequences of more generous protection against unemployment on the behavior of in particular younger and lower-paid workers. In addition, they had various demands of their own. Some of these were in direct conflict with the goals of the union movement, such as their demand to extend premium differentiation among industries to both parts of the unemployment insurance program, as opposed to simply the reduced-pay scheme as was the case at the time. As this was the main difference with the “general” unemployment scheme, they also demanded that the Social-Economic Council looked into the possibility of merging both schemes, arguing that it would also be administratively more efficient.34 Finally, the employer federations lobbied for a stricter treatment of the suitable work condition. While not opposed to allowing unemployed workers to only accept jobs that were similar to their previous work for a short period to preserve skill levels, the employer federations aimed for a rather strict definition of this condition to broaden labor supply and limit the possibility of abuse.35 For obvious reasons, the labor union movement firmly resisted this and the employer federations’ other demands. The stalemate that resulted from this only broke down when the guided wage policy collapsed and the rapid wage increases of the late 1950s onward shifted the power balance in favor of the labor unions. A clear sign of the initial weakness of the position of the union federations was that they spent much of their time debating which of their demands were 33 IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1951 HB 4, Verslag Commissie Sociale Verzekering NVV, 24 May 1951. For the agreement of the two confessional union federations with this view, see NA, CSWV, 2.19.103.06, 146: Vergadering van de Technische Commissie Sociale Verzekering, 5 December 1956. 34 NA, CSWV, 2.19.103.06, 146: Verslag vergadering Technische Commissie Sociale Verzekering, 19 March 1957. 35 Catholic Documentation Center (Katholiek Documentatiecentrum, henceforth KDC), AKWV, 1500: Commissie Sociale Verzekering van het Katholieke Verbond, 1954-1960, Nota inzake enkele principiële wijzigingen, welke in de Werkloosheidswet dienen te worden aangebracht, 1958.

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to be given priority. Whereas the NVV valued an increase in the duration of the benefit most, the CNV preferred raising its benefit level first. Together with the KAB, it motivated this stance by arguing that the existing situation – under which different categories of contributors received different replacement rates based on their gender, marital status and age despite having paid the same contribution levels – was not only unacceptable from a social perspective but also conflicted with actuarial principles. For obvious reasons, the latter argument resonated most strongly among the confessional employer federations.36 Whereas some CSWV representatives privately admitted that the current situation was “incorrect”, others argued “for reasons of principle, that in a social insurance program, a uniform premium does not have to result in a uniform benefit”.37 It is unclear how this view comported with the CSWV’s initial response to the Council of Trade Union Federation’s old-age pension proposal some years earlier. While eventually supporting this proposal for the simple reason that it strongly preferred it to the government’s means-tested alternative, the CSWV had long emphasized its adherence to the principle that “when the benefit is uniform, the contribution must be uniform as well”.38 Like their socialist union counterparts, liberal employers were much more opportunistic in their adherence to actuarial principles compared with confessional union and employer representatives. Discussions over the reform of the unemployment insurance program – which alternately took place in the Labor Foundation and Social-Economic Council – first proved successful in 1959, when the latter advised abolishing the wage limit for inclusion in the unemployment insurance program. Shortly after, it also argued in favor of extending the maximum duration of the benefit from 21 to 26 weeks and increasing the level of the benefit to 80 percent of the previous wage for all entitled workers with the exception of those under 21 years of age and those who were not married. This outcome had clearly been a compromise as the union federations had initially demanded an extension of up to 34 weeks and a completely uniform benefit rate of 80 percent of the previous wage. During internal discussions on the matter, employer representatives explained their willingness to compromise on these issues by pointing out that complete rejection of union demands 36 KDC, AKWV, 1500: Commissie Sociale Verzekering van het Katholieke Verbond, 1954-1960, Nota voor de Commissie Sociale Verzekering van het Katholiek Verbond van Werkgeversvakverenigingen, September 1954. 37 NA, CSWV, 2.19.103.06, 146: Vergadering van de Technische Commissie Sociale Verzekering, 20 June 1957. 38 NA, CSWV, 2.19.103.06, 131: Vergadering van de Kring voor Sociaal Overleg, 13 October 1953.

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for increases in the generosity of the state unemployment program was “politically infeasible”. According to the same representatives, the unions in turn had been willing to compromise because they wanted industry to present a unanimous stance.39 In exchange for this increased generosity of the state unemployment program, the unions promised to review the suitable job criterion. 40 Regarding the issues of premium differentiation, the Social-Economic Council recommended preserving the status quo, which also meant that a merger of the two parts of the state unemployment program was out of the question for the foreseeable future. In line with the importance attached to industry’s views in this period, parliament adopted almost all of the Social-Economic Council’s recommendations. The one exception to this was its proposal to differentiate between contributors based on their age. To the dismay of employers, a majority in parliament felt that this needlessly conflicted with actuarial principles and thus they consequently voted to set the benefit at a uniform rate of 80 percent of the previous wage. 41 As we will see, parliamentary amendments would continue to mostly favor organized labor’s perspective in future years. This would only change during the 1980s as mass misuse of social insurance schemes for labor-shedding purposes increased parliamentary attention to the problem of moral hazard and led to great concern over increasing welfare costs. This was not yet the case during the 1960s, when the economy grew rapidly and the unemployment rate averaged at one percent. This among others became clear when the government chose to introduce a separate unemployment provision to complement the state unemployment insurance program. Both acts passed parliament in late 1964 and came into operation in January of the following year. Given the time that had passed since the introduction of the Unemployment Insurance Act and parliamentary reform of this act, the changes made were far from radical. For instance, the increase in the maximum 39 NA, CSWV, 2.19.103.06, 139: Verslag vergadering Commissie Sociale Verzekering CSWV, 7 November 1961. 40 Part of the reason for this was that the unions themselves were also concerned about misuse of this criterion by unemployed workers. Despite this, it would take several more decades before the concept was defined in a significantly stricter manner. On this, see for instance Inge Pardaan, Passende arbeid: een beschouwing vanuit de sociale wetgeving rond werkloosheid, ziekte, arbeidsongeschiktheid en bijstand en kijkend naar regulieren, seizoens- en gesubsidieerde arbeid (Deventer: Kluwer, 1997). 41 As early as 1958, the Center for Political Education (Centrum voor Staatkundige Vorming) – which was closely linked to the KVP – had already argued against granting different benefit levels to different groups. As a result, all major confessional parties in parliament supported the decision. On the amendment, see Roebroek and Hertogh, “De beschavende invloed des tijds”, 338.

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duration of the benefit with five weeks was so minimal that the CSWV expected that it would not even lead to an increase in the contribution rate.42 The introduction of a uniform benefit rate in turn only affected a small group of contributors as some 80 percent of benefit claimants were already receiving the maximum benefit rate prior to its introduction.43 The abolition of the wage limit massively increased the scope for risk redistribution. 44 Nonetheless, overall, there can be no doubt that the introduction of the Unemployment Provision Act held much greater consequences for workers, especially in the long term. The act created a tax-financed, state provision that entitled all workers with a work history of only six consecutive weeks to a benefit that equaled 75 percent of their previous wages for a period of at most two years. Despite its provision nature – and like the unemployment insurance program – the scheme lacked a means-test and even allowed granting private supplements as long as the total benefit did not exceed a recipient’s previous wage. In contrast to the unemployment insurance program organized by industrial insurance associations, responsibility for the operation of the provision was placed in municipal hands and benefits were also granted to voluntary unemployed workers. The introduction of the Unemployment Provision Act was closely linked to that of the General Assistance Act. When Klompé started working on the latter, she initially wanted to create a single program for all assistance claimants, including unemployed workers. This led to strong resistance from the labor union movement, various parties in parliament and her fellow-minister Veldkamp, all of whom argued in favor of maintaining a separate program for the long-term unemployed, who were currently catered for by the social provisions program. As the General Assistance Act would be more generous than its predecessor, the government in the early 1960s also decided to improve the generosity of the latter program. It briefly considered increasing the duration of the state unemployment scheme instead, but shied away from this when union and employer representatives in the Social-Economic Council reached their hard-won compromise on an extension of its duration by just five weeks. The government feared that rejecting this would unduly complicate matters. Moreover, as neither 42 NA, CSWV, 2.10.103.06, 139: Verslag vergadering commissie Sociale Verzekering CSWV, 7 November 1961. 43 KDC, AKWV, 1500: Commissie Sociale Verzekering, 1954-2960, Technische herziening werkloosheidwet, 14 June 1954. 44 At the time, the wage limit equaled about 10,000 guilders per year. By comparison, average wages in manufacturing at the time equaled about 7,500 guilders per year. See CBS, Vijfennegentig jaren statistiek in tijdreeksen 1899-1994 (Heerlen: CBS, 1994) 51.

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the unions nor the employer federations were willing to accept increased contribution levels to finance an improved version of the social provisions program, the government felt that a separate provision scheme continued to be the most suitable option. 45 When compared to the time taken to make relatively minimal improvements to the unemployment insurance program, the Unemployment Provision Act’s rapid introduction and generous nature stand out as quite remarkable. This difference may have partly stemmed from the very different views of labor unions and employers regarding the cause of unemployment, as well as their resultantly very different attitudes concerning whether and how to organize insurance against its financial consequences. There can certainly be no doubt that the introduction of the Unemployment Insurance Act and its first major reform had been accompanied by more conflict between union and employer representatives than most other welfare initiatives. It may have been easier to achieve progress for confessional political parties, which were not marred by class conflict. At the same time, it should be noted that the Unemployment Provision Act was introduced at a time of extremely low unemployment and the near-absence of long-term unemployment. In the four years prior to its introduction, the financial costs of operating the social provisions program had consequently been less than ten percent of the costs of running the unemployment insurance program. 46 Under these circumstances, most parties must have felt that a generous outcome was not problematic: after all, they did not expect workers to make much use of the new scheme anyway. This may also help to explain why parliament had shown such a clear disregard for the potential effects of benefit generosity and contributory leniency on worker behavior by setting the required working history at only six weeks and also allowing voluntary unemployed workers to obtain access to a benefit. The immediate cause of this leniency was the government’s wish to steer a middle course between the two existing social provisions, of which only one demanded that workers met certain qualification criteria. This was the so-called social provision A (sociale voorziening A), which – like the unemployment insurance program – granted a benefit of 80, 70, and 60 percent to different types of contributors. It did so for a maximum period of 21 weeks and required a working history of at least thirteen weeks in the 45 NA, Ministerie van Sociale Zaken, afdeling Sociale Bijstand 1945-1967, 5.068.5008, nr. 168: Advies inzake het voorontwerp-Wet Werkloosheidsvoorziening, 26 June 1964. 46 See SER, Advies inzake het voorontwerp van een Wet Werkloosheidsvoorziening (Den Haag: SER, 1965) 5.

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previous twelve months. The voluntary unemployed were not entitled to a benefit. Workers without a (sufficient) working history, the voluntary unemployed, and those who were no longer entitled to a social provision A benefit could apply for a somewhat less generous social provision B (sociale voorziening B) benefit. This benefit could in principle be granted for an indefinite period. In contrast to their successor, both social provisions applied a means-test. However, not all involved actors agreed with the government’s assessment. For obvious reasons, the employer federations were most critical. Like the liberal VVD, which eventually voted against the Unemployment Provision Bill for this reason, they adopted the position that there was no need for the continuation of a separate group scheme for unemployed workers now that parliament had passed the General Assistance Act. Like all other citizens, unemployed workers who had exhausted their unemployment benefit entitlements perceived that they could simply apply for a social assistance benefit. 47 If the government were to go ahead with the creation of a nonmeans-tested provision, they further argued that strict qualification rules must apply. Various other actors shared this view, including the governmentappointed members of the Social-Economic Council (but crucially, not its union members) and the Association of Social Services’ Directors. 48 The latter among others did so because even the probation period was often longer than six weeks. 49 Nonetheless, these arguments were to no avail: while acknowledging their validity, the government felt that for reasons of fairness it had to steer a middle course between the two existing social provisions. In addition, it pointed out that the municipalities had sufficient means at their disposal to prevent misuse of the new scheme.50 Theoretically, this was indeed the case. To counter possible misuse, the act among others allowed municipal officers to lower or stop handing out 47 NA, CSWV, 2.19.103.06, 28: Resumé van de Contactvergadering van directeuren en secretaressen der aangesloten werkgeversverenigingen, gehouden op 24 August 1964 ten kantore Kneuterdijk 8. For the VVD’s rejection of the bill, see Hertogh, “Geene wet, maar de heer”, 347. 48 The government initially did not want to consult the Social-Economic Council and only did so after another advisory body – the Council of State (Raad van State) – pointed out that “such a move will not be understood politically”. NA, Ministerie van Sociale Zaken, Afdeling Sociale Bijstand 1945-1967, 5.068.5008, Nota van de Centrale Revisie en Contact Instantie, 26 February 1964. 49 NA, Ministerie van Sociale Zaken, Afdeling Sociale Bijstand 1945-1967, 5.068.5008, nr. 168: Brief van Verenigingen van Directeuren van Overheidsorganen voor Sociale Arbeid, 29 February 1964. 50 NA, Ministerie van Sociale Zaken, Afdeling Sociale Bijstand 1945-1967, 5.068.5008, nr. 168: Concept-wijziging van het Algemeen gedeelte van de Toelichting op de Wet Werkloosheidsvoorziening.

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benefits altogether. However, it soon became clear that they seldom did so. According to an unemployment survey conducted in the city of Geldrop some two years after the introduction of the Unemployment Provision Act, almost half of all unemployment provision benefit recipients were under thirty and the vast majority of them had no motivation to return to work. Little over one third of recipients were also classified as voluntary unemployed.51 When it became clear that these problems also existed in other cities, a different confessional-liberal government decided to introduce stricter qualification criteria in 1972. From that year onwards, the voluntary unemployed were no longer entitled to a benefit. The union movement did not support the 1972 amendment. Despite being willing to admit that some degree of misuse existed, the union federations felt that this was not nearly severe enough to warrant such a drastic move.52 This was the first time that the problem of misuse had forced the unions on the defensive. As long-term unemployment became a serious problem and misuse of the social insurance system rapidly increased in future years, it would be put in this position much more often. Nonetheless, the growth of long-term unemployment during the 1970s initially mainly led to pressure for improved protection against this. In 1976, a left-leaning government responded to this with a further amendment to the Unemployment Provision Act. The Act on Extension of the Unemployment Benefit Duration for the Elderly (Wet tot Uitbreiding Uitkeringsduur WWV voor Ouderen) increased the duration of the benefit by a maximum of five years for all workers whose entitlement to an unemployment benefit ended by the time that they had reached the age of sixty years or older. As the act also released this group from the obligation to look for work and the combined duration of the unemployment insurance and provision benefits for regular workers amounted to two-and-a-half years, these workers could effectively retire at the age of fifty-seven and a half years.53 As a result, many of them came to do so. Given the monumental importance of this act – which rapidly developed into one of the most popular early exit pathways among 51 NCW, 31(5): Cie Sociale Verzekeringen 1971-1975: nota de gemeenten en de werkloosheidsvoorziening, 3. 52 On the insistence of its union members, the Social Insurance Council also argued that “although the council is of course not in the least indifferent to the size of the fraud… [it] considers it more important to prevent social insurance laws from being discredited or provoking irritation”. VNO, Misbruik/oneigenlijk gebruik sociale voorzieningen, F64(4): Persbericht Ministerie van Sociale Zaken, 9 June 1975. 53 The maximum duration of the unemployment insurance was 26 weeks, or half a year. The maximum duration of the unemployment provision benefit was two years.

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workers – we will deal with its introduction separately in Chapter 5. This chapter will also explore labor union and employer attitudes towards the misuse of this and other social insurance programs.

Equal Opportunity and the Introduction of the Act on Disability Insurance Little over a year after parliament increased the generosity of state protection against loss of income due to unemployment, it also passed two acts that improved matters for the sick and disabled. The 1966 Sickness Act and Act on Disability Insurance – which created programs that provided state insurance against loss of income due to inability to work owing to respectively short- and long-term sickness and disablement – have become symbols of the generosity of the Dutch welfare state in this period, for good reason. The two programs provided high replacement rates (which were equivalent to that of the revised state unemployment insurance program) to all sick and disabled workers regardless of the cause of injury from the moment that they started working for as long as their sickness or disablement lasted. The disability insurance program – which granted a benefit to sick and disabled workers once these had exhausted their one-year entitlement to a sickness insurance benefit – also provided reduced benefit rates to the partially disabled. Moreover, in cases where partial disablement impeded a worker’s ability to find new work, he or she could even obtain a full benefit. This combination of high benefit generosity and extreme ease of access could not be found anywhere else in the world at the time, or indeed ever since.54 At the time of their introduction, the two programs received much parliamentary praise for this. However, as the costs of the disability insurance program began to spiral out of control within only a couple of years, even Veldkamp came to express his regret over some of its most generous features.55 54 In most countries, insurance against loss of income as a result of industrial sicknesses and injuries is quite generous, although non-work-related sicknesses and injuries are generally treated in a much less generous manner. For a broad-country comparison, see Flora, Growth to Limits (volume 4). 55 In an interview in 1974, the by-then ex-minister argued that “if I had then known that the costs of the program would develop contrary to the prognoses of all the experts, then at the time we would have formulated the law differently”. Inteview with Veldkamp in De Tijd, 31 August 1974. Cited in J.G. Hibbeln, “Rechtsvinding, theorie en praktijk”. In Hibbeln and Velema, Het WAO-debacle, 101.

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Accordingly, how are we to explain the extreme generosity of both programs? While the favorable economic circumstances at the time of their introduction certainly played a role in this, it is important to note that broad support for generous solutions long preceded actual reform. For instance, as early as 1948, the second Van Rhijn Committee already recommended granting the sickness benefit regardless of cause, as well as extending its duration from one to two years. As entitlement to this benefit did not require a minimum contributory period and the benefit rate equaled 80 percent of the previous wage, this was a massive step forward. The committee’s members did not yet support removing the distinction between work- and non-work-related sicknesses and injuries for long-term sick and disabled workers, although it recommended reducing the minimum contribution period for entitlement to the invalidity benefit from three to one year, as well as increasing the level of the invalidity benefit to 70, 60, and 50 percent of the previous wage for the first, second, and all ensuing years, respectively. These suggestions were primarily intended to improve matters for workers who incurred a permanent non-work-related sickness or injury at an early age. In the current situation, under which benefit levels completely depended on the number of years a worker had contributed to the scheme, these often received either inadequate benefits or no benefit at all. Finally, the committee proposed that the invalidity insurance program – like the industrial injuries program – was also to hand out benefits to partially disabled workers. Despite this early consensus concerning the need for major reform, actual reform measures would take a long time in coming. Initially, the delay mainly resulted from the decision to focus on the more pressing matter of old-age pension reform first. The union federations in particular feared that if both areas were to be dealt with at the same time, the introduction of the new state pension might be delayed.56 As a result, serious discussion on disability and sickness insurance reform did not get underway until the mid-1950s. Following a request to do so from the then Minister of Social Affairs, Dolf Joekes, the Social-Economic Council turned its attention to reform of the invalidity insurance program after it published its advice on old-age pension reform in 1954. By then, the second Van Rhijn Committee’s recommendations were no longer deemed sufficient. In a unanimous report published in 1957, the council recommended setting the invalidity benefit at 70 percent of the previous wage and granting this benefit independent of contributory record. To avoid misuse, the industrial insurance associations 56 SER, Advies inzake de herziening van de invaliditeitsvezekering (Den Haag: SER, 1957) 1.

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would be given the right to refuse benefits to claimants whose disablement occurred within one year of starting their work and could be traced back to their state of health prior to that period. The council also proposed switching from funded to pay-as-you-go financing and making the benefit inflationproof. Finally, it argued for the introduction of four disability classes with intervals of 25 percent to provide protection for the partially disabled.57 Had the council’s proposal prompted immediate action on behalf of the government at the time, then a much more generous insurance program for loss of income due to long-term sickness and disablement could have been in operation before the end of the decade. However, as in the earlier proposal of the second Van Rhijn Committee, there was no such immediate follow-up. In this instance, the delay resulted from two political dilemmas. The first concerned whether it still made sense to maintain separate invalidity insurance and industrial injuries programs if the former was to resemble the latter so much in terms of benefit generosity and ease of access. During the preparation of the council’s advice, both union and employer representatives had given much thought to the possibility of merging both schemes, although they eventually shied away from this owing to union fears that this might lead to further delay. However, the Social-Economic Council changed course when the Social Insurance Council came out in support of a merger on technical grounds one year later.58 To the council’s employer representatives, a major advantage of such a merger was that it would be administratively cheaper to administer. Nonetheless, for technical reasons – and like their union counterparts – they wanted to maintain a distinction between short- and long-term sick and disabled workers.59 The second dilemma standing in the way of rapid progress concerned whether the self-employed were also to be subjected to compulsory disability 57 Ibidem, 4-5. 58 Whereas the Social-Economic Council focused on socioeconomic aspects of social insurance programs, the Social Insurance Council was responsible for supervision of their administration and provided advice on technical matters. SVR, Advies inzake een arbeidsongeschiktheidsverzekering (Den Haag: SVR, 1960) 79-92. 59 The SER wanted to maintain the distinction between short- and long-term sicknesses and disabilities for two reasons: first, whereas all parties agreed that contribution levels for insurance against short-term sicknesses and disabilities should differ among industries, there was disagreement over whether contribution levels for insurance against long-term sicknesses and disabilities should be uniform or different among industries; And second, the SER wanted to retain a wage limit for participation in the sickness insurance scheme. It did not want to retain the wage limit in the new disability insurance program. For both reasons, see NA, CSWV, 2.19.103.06, 145: Verslag Vergadering Kleine Technische Commissie Sociale Verzekering, 22 April 1955.

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insurance and – if so – on what terms. This dilemma became a pressing matter when Veldkamp – who strongly supported it – became Minister of Social Affairs in 1961.60 In a broad advice request on the long-term development of the social insurance system in 1962, Veldkamp asked the Social-Economic Council to also consider the introduction of a separate disability insurance scheme for the self-employed. Despite – (or perhaps due to) – vocal opposition to this from representatives of various self-employed groups, he did not wait for the council’s response. Moreover, in addition to submitting bills to parliament on reform and the introduction of a sickness and disability insurance program for workers, respectively, he also introduced a public disability bill that would cover the self-employed and handicapped. Despite being submitted in 1963, parliament did not begin discussing them until mid-1965. By that time, the Social-Economic Council had finished its report, which did not endorse the minister’s latter bill. Ironically, the council argued that while the introduction of insurance against long-term disability for the self-employed was in principle desirable, the recent introduction of the General Assistance Act made it unnecessary to also create insurance for the handicapped. The immediate consequence of the council’s advice was that the first chamber of parliament refused to even debate the bill. Veldkamp’s attempt to bypass the Social-Economic Council had spectacularly backfired. Partly as a result of this, the self-employed were not subjected to compulsory insurance against loss of income due to long-term disability until 1976. To assuage union fears that the merger of the invalidity insurance and industrial injuries programs into a single disability insurance program would be a lengthy affair, in 1962 parliament passed the Temporary Act for Invalidity Beneficiaries (Interimwet Invaliditeitstrekkers), which created a benefit equal to 80 percent of the previous wage for a fully disabled worker.61 This act would be in operation for about five years. In the meantime, union, employer, and state representatives discussed the many issues that still needed to be resolved to achieve more permanent reform. The proposals that resulted from this were once again remarkably generous. Both the sickness and disability insurance programs were to entitle (fully) sick and disabled workers to a benefit that equaled 80 percent of their previous wages from 60 Veldkamp was also a long-standing supporter of removing the distinction between work and non-work-related injuries. He had argued in favor of the creation of a single disability insurance that granted benefits regardless of cause of injury in his 1946 academic thesis. See Veldkamp, Herinneringen, 170. 61 Workers were entitled to a benefit when they had contributed to the invalidity insurance program for at least a year and their disability impaired at least two thirds of their work capacity. See W. van Uden, “Interim-regeling voor invaliditeitstrekkers”, Sociale Zorg 24 (1962) 405-409.

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the moment that they started working. The disability insurance program was to have no wage limit (unlike all existing insurance plans against disability), as many as eight disability levels and a minimum benefit rate for those fully disabled workers whose benefit was lower than the recently introduced minimum wage. Responsibility for the assessment of sickness and disability was to be placed in the hands of a Common Medical Service (Gemeenschappelijke Medische Dienst, or GMD). The maximum duration of the sickness insurance benefit was to be set at six months: after their entitlement to this benefit had been exhausted, long-term sick and disabled workers would be entitled to a disability insurance benefit for an indefinite period. Given the generosity of these proposals, it is important to note that all of them could count upon full support from the union and employer federations as well as state representatives. From the side of the unions, this is unsurprising: after all, the remarkable commitment of three union federations towards improving the generosity of state protection against labor market risks for all workers, their (increasing) willingness to break with actuarial principles to do so and acceptance of the redistributive consequences of this have already been demonstrated earlier. Nonetheless, when compared to – for instance – their conservative stance on unemployment insurance reform, it is quite remarkable to note that the employer federations also supported these proposals. Indeed, there seems to have been little employer opposition to abolishing the wage limit and setting the benefit at 80 percent of the previous wage. In fact, when the chairman of the CSWV’s Social Insurance Committee asked its fellow members’ opinion on the latter, he found that they had no objections to this.62 The employer federations were somewhat more hesitant to lend their support to the creation of eight disability levels, the introduction of a minimum benefit rate into the disability insurance programs and setting entitlement to a benefit at the beginning of employment, although they eventually also conceded to this.63 Their willingness to do so can probably be partly explained by the fact that the (long-term) disabled – unlike the unemployed – did not struggle with the stigma of being unwilling to work. As a result, there was much less concern over the consequences of benefit generosity on worker behavior. 62 NA, CSWV, 2.19.103.06, 132: Vergadering Kring voor Sociaal Overleg, 30 January 1958; NA, CSWV, 2.19.103.06, 145: Verslag Kleine Technische Commissie Sociale Verzekering, 22 April 1955. 63 The fact that the industrial injuries scheme contained as many as twenty disability levels held strong importance here. Moreover, some employers felt that further refinement of invalidity levels would help to keep more disabled workers at work. NA, CSWV, 2.19.103.06, 146: Kort Verslag Vergadering Technische Commissie Sociale Verzekering, 21 May 1958.

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The employer federations feared that generous sickness benefits might induce workers to call in sick more easily. As a result, they emphasized the necessity of strict control and successfully opposed the introduction of minimum benefit rates into the sickness insurance benefit. They motivated the latter by arguing that this would make benefits too generous for the lower paid. In addition, they strongly emphasized the need for variation in contribution levels among industries for both the sickness and disability insurance programs. They argued that f irms would only be motivated to keep their levels low if contributions levels reflected actual business risks.64 By contrast, the union federations supported uniform contribution levels because they felt that it would be unfair if a worker had to pay higher contribution levels only because he or she worked in a more dangerous industry.65 After much discussion, union and employer representatives agreed to a compromise whereby the costs of the disability benefit would be carried by individual industries for the first two years, after which they would be shared equally among industries. As both parties had already agreed that contribution rates for the sickness insurance benefit were also to differ among industries, this meant that industries would themselves be responsible for the costs of the first two-and-a-half years of a worker’s disability. According to the employer federations, this period accounted for “ninety-eight to ninety-nine percent” of all sickness and disability insurance costs.66 However, to their dismay, parliament did not adopt this compromise. On the insistence of Veldkamp – who perceived this solution as being too administratively complex – it decided that the new disability insurance program would have uniform contribution levels from the start. In a futile attempt to placate employers, parliament also overturned the council’s recommendation to reduce the duration of the sickness insurance benefit from one year to six months. In subsequent years, the employer federations would continue to insist upon the need to abolish inter-industrial solidarity. As we will see in Chapter 6, they did so for good reason. Both acts passed parliament, which adopted all of industry’s other proposals, without a roll-call vote in the beginning of 1966, whereby they came into operation in July 1967. 64 NA, CSWV, 2.19.103.06, 146: Vergadering Technische Commissie Sociale Verzekering, 20 May 1959. 65 VNO, Arbeidsongeschiktheidsregelingen, F5(6): Nota Raad van Bestuur in Arbeidszaken, 30 December 1963. 66 NA, CSWV, 2.19.103.06, 132: Vergadering Kring voor Sociaal Overleg, 29 May 1959.

6

Catering to the Low Paid

The rapid and relatively smooth expansion of the Dutch welfare state from the early 1960s onwards was not only made possible by the collapse of the guided wage policy and dwindling confessional aversion to state interference and preoccupation with personal responsibility and self-help in this period; moreover, it was also strongly important that there does not seem to have been particularly powerful resistance to the redistributive consequences of this expansion. On various occasions, the previous chapters have already highlighted these consequences. As benefit generosity gradually increased and entitlement conditions also became more lenient over time, risk redistribution among groups that were more and less exposed to major labor market risks such as sickness and unemployment naturally also increased. Moreover, in order to ensure that the welfare system not only adequately catered to middle-class groups with a relatively strong position on the labor market, but also for those who were unable to obtain sufficient protection against labor market risks through a purely actuarial approach, governments of various political persuasions adopted specific measures to improve matters for the latter group. An excellent example of this is the aforementioned mid-1950s decision to introduce a state old-age pension that combined flat-rate benefits with contributions that were graduated according to income up to a threshold set at just below twice the average income level in manufacturing industry. In future years, many more of these measures were to follow. As the postwar period progressed and “regular” workers were increasingly well catered to, policy-makers gradually came to focus more on improving matters for society’s most vulnerable groups. For instance, the realization that a substantial minority of mostly low-paid workers would not be able to obtain access to supplementary occupational pension provision in the foreseeable future motivated parliament to raise the level of the old-age pension benefit to that of the “social minimum” during the mid-1960s. In consecutive years, it also decided that most other major insurance programs as well as the social assistance scheme were to hand out benef its that were at least equal to the social minimum level. This among others led to the introduction of minimum benefit rates into the “Bismarckian” state unemployment and disability insurance programs. During the early 1970s, the social minimum (and by extension the state old-age benefit, the social assistance benefit, and the minimum levels of the state unemployment and disability insurance benefits) was equated to the recently introduced

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statutory national minimum wage, which was in turn linked to general wage increases. This system, which became known as the “net-net link” (netto-netto koppeling), greatly improved the financial security of lower-paid workers. Of course, the redistributive consequences of all of these measures were largely carried by middle-class groups.1 Given the electoral importance of these groups, the lack of effective resistance to these measures can be viewed as quite remarkable. Of course, this is not to say that there was no opposition to these measures at all. As we will see, the employer federations and liberal VVD certainly objected on a frequent basis to the “excessive solidarity” brought about by specific welfare initiatives.2 All of the three main confessional parties – which together continued to hold a majority of parliamentary seats up to the late 1960s and remained the largest denominational group for long thereafter – also contained powerful factions that worried about the electoral consequences of measures that adversely affected the material interests of middle-class voters.3 Finally, some of the unions that exclusively catered to higher-paid white-collar groups occasionally also expressed their opposition to welfare initiatives that worked to the advantage of lower-paid, more risk-prone workers. 4 Nonetheless, while not completely without success in their attempts to limit the redistributive nature of the welfare system, they were unable to dissuade parliament from implementing any of the 1 The abolition of the wage limit expanded the scope for redistribution, albeit only to a certain extent as wage limits were often replaced by income limits over which no contribution levels needed to be paid. Due to their universal and flat-rate nature, the General Old Age Act and Widows and Orphans Act from the start only had an income limit. 2 For the use of this term by employers, see VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Verslag van de vergadering van de Commissie Sociale Verzekering van de Raad van Bestuur in Arbeidszaken, 9 October 1963. See also VNO, Arbeidsongeschiktheidsregelingen, F5(6): Nota Raad van Bestuur in Arbeidszaken, 30 December 1963. 3 The KVP had already been accused of having “degenerated” into a party for workers only during the early 1950s. In this decade, there was also strong conflict between the KVP and Labor Party over the latter’s request for a progressive incomes policy. See Van Kersbergen and Becker, “The Netherlands”, 487; Therborn, “‘Pillarization’ and ‘Popular Movements’”, 211-214. 4 For instance, during the late 1950s, various unions representing higher-paid white-collar workers expressed their opposition to the abolition of the wage limit by arguing that there was no need for compulsory membership of social insurance programs for those workers who were either not exposed to labor market risks in a major way or were able to insure themselves by private means. Of course, their main fear was that compulsory membership would lead to massive risk redistribution between more and less exposed workers, as would indeed be the case. See Nederlandse Vereniging van Hoger Personeel, Katholieke Vereniging van Hoger Personeel, Nederlandse Christelijke Vereniging van Hoger Personeel, De loongrens in de sociale verzekering (1958) 1-2.

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aforementioned measures. On the contrary, these as well as many other redistributive initiatives, such as the abolition of the wage limit in most social insurance programs, passed parliament with rather comfortable majorities during the 1960s and early 1970s. As a result, the Dutch welfare state not only became one of the most generous but also one of the most inclusive of its day. The success of these measures largely rested upon the support of the main confessional parties and particularly that of the KVP, which continued to occupy the position of key coalition member up to the onset of the Den Uyl government in 1973. It is difficult to say what motivated these parties to pursue such a clear solidaristic course in this period. Given the strong redistributive consequences of this course, it is difficult to explain this solely based on electoral considerations. The need to accommodate the labor union movement and their progressive wings – which not only advocated closer cooperation with the Labor Party but also occasionally threatened with outright defection unless their parties adopted a more solidaristic stance – may thus have been more important in persuading party leaders to take on a more left-leaning approach.5 What certainly mattered is that the three main confessional parties were large catch-all parties that were not primarily geared towards middle-class interests and displayed a genuine concern with the position of society’s most fragile members. As pointed out earlier, this was particularly the case with the KVP, whose adoption of a more solidaristic welfare approach fitted well with church teachings on the importance of empathy for the less privileged. Nonetheless, the ARP – which, as we have seen, was in many ways the most conservative of the three main confessional parties during the immediate postwar period – now also came to place more importance on the government’s role in providing a “shield for the weak”.6

5 Throughout the 1960s, a substantial section of particularly the ARP and KVP continuously expressed its preferences for cooperation with the Labor Party rather than the liberal VVD or the other confessional parties. As we will see later in this chapter, these fractions occasionally also threatened to withdraw their support for incumbent governments unless their redistributive demands were met. In 1973, various ARP and KVP members indeed effectively defected to the Labor Party by agreeing to join the progressive Den Uyl government. See for instance, Van Griensven et al., “Op weg naar de nacht”, 283-325; Peter Bootsma and Willem Breedveld, Verbeelding aan de macht – het kabinet-Den Uyl 1973-1977 (Den Haag: Sdu, 2000). 6 This reference to the confessional need to act as a shield for the weak had already been part of the ARP’s electoral program for the 1952 elections, although it became much more prominent in later years. See for instance Couwenberg, “Op- en Neergang der Christen-democratie”, 2-23; Roelof Bouwman, De val van een bergredenaar: het politieke leven van Willem Aantjes (Amsterdam:

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The union movement’s willingness to press for redistributive welfare solutions has already been demonstrated at length in the previous chapters. Following the introduction of the General Old Age Act as the first major welfare initiative deliberately favoring the lowest paid through the introduction of a redistributive contributory system, the three union federations would continue to insist upon the introduction of specific measures that worked to the advantage of lower-paid contributors. Although this stance must have aggravated some of their higher-paid members, there is little evidence of strong internal opposition to this. As already noted in Chapter 2, those white-collar unions representing higher-paid workers that occasionally expressed their opposition to redistributive welfare policies were relatively small and had little influence over federation policies. Moreover, and as noted there as well, while discontent over the federations’ egalitarian wage policies led to the creation of a separate union federation for higher-paid white-collar workers, the MHP, in 1974, this organization never came to rival the existing union federations in terms of political influence and organizational strength. Throughout the postwar period – and as we will see in this and the subsequent chapters – the union movement would continue to act as a powerful force in favor of the creation and maintenance of a welfare system that catered adequately to all members of society, including the less privileged. While the political leverage of the three union federations – which rested upon both their relationship with affiliated parties and wage-bargaining power – was most obvious and pronounced in the area of social insurance development, they were also quite successful in pressing for the creation and extension of various other social programs during the 1960s and 1970s. The period among others witnessed a strong expansion of social housing, the introduction of rent subsidies, and a truly astonishing increase in various forms of social work. While total spending on these activities remained insignificant compared to the total spending on the major social insurance programs, they nevertheless constituted an important part of the country’s social safety net as they often either focused specifically on the lowest paid or primarily benefited the most vulnerable. As a result, their expansion held great importance in ensuring that the Netherlands could boast one of the lowest poverty rates in the world by the mid-1970s.7 This chapter will explore Boom, 2002); Ria Jaarsma, Elske ter Veld, and Joke Mes, ‘Zeg maar Hannie…’: 65 jaar strijdlustig in politiek en samenleving (Wormer: Inmec, 2005). 7 See for instance, Katherine McFate, Tomothy Smeeding, and Lee Rainwater, “Markets and States: Poverty Trends and Transfer System Effectiveness in the 1980s”. In Katherine McFate,

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the development of these programs and their importance for the coming about of a truly inclusive welfare system in the Netherlands, although first we will turn to the discussion on the introduction of a “social minimum” into the social insurance system.

The General Old Age Act and the Introduction of the Social Minimum Given the severity of the problem of poverty among the elderly, even in the years following the introduction of the General Old Age Act, it may not be surprising that the notion that all social insurance programs should provide benefit rates that were at least sufficient to live on – regardless of the contributory efforts of individual contributors – was first put forward in a forceful manner in response to the continuing inadequacy of the state old-age pension. Despite its redistributive nature – and as we have seen in Chapter 2 – the old-age pension initially provided a rather meager benefit that did not even cover minimum living expenses. This meant that only those workers who had access to supplementary private pensions managed to obtain true income security in old-age. By the late 1950s, this was the case for some two thirds of all workers.8 The bulk of existing pensioners and the self-employed obviously did not have access to private pension supplements at the time.9 As these groups generally did not have large personal savings either, they often had to supplement their old-age pension benefit with financial assistance through poor relief or from family members to obtain an above-subsistence level income.10 In practice – and for reasons explained in the previous chapters – many of these did not apply for supplements through the humiliating poor relief system. By as late as the mid-1960s, some Roger Lawson, and William Julyus Wilson, Poverty, Inequality, and the Future of Social Policy: Western States in the New World Order (New York: Russel Sage Foundation, 1995) 38. 8 This number is based on a CNV estimate. See IISG, CNV, Commissie Sociale Zekerheid, 63, Ouderdomsverzekering, F5, Het vraagstuk van het aanvullende ouderdomspensioen. Uit “De Vakbeweging”, 21 January 1958. 9 As late as 1965, the VNO estimated that some 45 percent of existing pensioners did not have access to additional occupational provision. Moreover, for those who did, the supplement was often rather meager. VNO, Bijlagen DB 69-123: Recente ontwikkelingen op het terrein van de pensioenvoorzieningen, 1965. 10 By the early 1960s, the level of the old-age pension benefit was some 20 to 35 percent below the average level of poor relief handed out by different municipalities. See Henk Vording, Koppelingen in de sociale zekerheid 1957-1992: van wetten en praktische bezwaren (Amsterdam: Thesis Publishers, 1993) 56.

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35 percent of married and 60 percent of single pensioners consequently still lived below the poverty rate in the Netherlands.11 These circumstances naturally prompted various groups to exert pressure to increase the level of the old-age pension benefit. Among the first to do so were representatives of old-age pensioners such as the General Association for the Elderly (Algemene Bond voor Bejaarden) and Association for a State Pension (Bond voor Staatspensionering), which had been quite vocal in their disappointment about the “subsistence nature” (in Dutch: “bodemkarakter”) of the old-age pension benef it and continued to draw attention to this in the years following its introduction.12 When it became clear that the percentage of workers with occupational pension fund membership was likely to stabilize at some 70 percent for the foreseeable future, while it would be very difficult to make occupational pension benefits inflation-proof, the labor unions also began to exert pressure for incremental increases in the level of the old-age pension benefit.13 Given the popularity of the state pension among the electorate, it is unsurprising that their stance aroused much sympathy in parliament. For instance, during the early 1960s, the Labor Party went as far as calling for an immediate 50 percent increase in the level of the old-age pension benefit. While the confessional-liberal of the day felt that this went too far, most of its members also adopted the stance that the purpose of the social insurance system was to “ban poverty”, which meant that benefits should in principle be sufficient to live on.14 It consequently opted for a fifteen percent increase in the level of the benefit and asked the Social-Economic Council for advice on the need for further increases. 11 This is based on a Social-Economic Council estimate. See SER, Advies inzake een verhoging van de AOW-pensioenen tot een sociaal minimum, 10-11. 12 The two associations – which merged into the Central Council for Cooperating Organizations (Centraal Orgaan voor Samenwerkende Organisaties) in 1957 – noted that there remained significant poverty among the elderly, which meant that there was still a long way to go. They further noted that there had been much less enthusiasm among the elderly following the introduction of the General Old Age Act compared to the introduction of the emergency pension. They explained this by arguing that the low level of the benefit ensured that its introduction was not perceived as a major breakthrough. See Willem Winters, “Die staatshulp wenschen wij…” Pensioenstrijd in Nederland (Den Haag: Sdu, 1990) 113-114; Roebroek and Hertogh, “De beschavende invloed des tijds”, 301-302. 13 In a 1961 report on the matter, the SER described the emergence of inflation-proof private pension as an important goal, although it also acknowledged that it would be difficult to reach this goal in the near future. The report also called for an increase in the level of the public old-age pension benefit. See SER, Advies over waardevaste bedrijfspensioenen (Den Haag: SER, 1961). 14 Vording, Koppelingen, 57-60. See also Roebroek and Hertogh, “De beschavende invloed des tijds”, 302.

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By doing so, it essentially referred the question to a platform that harbored both the most ardent supporters (the three union federations) and opponents (the employer federations) of such a move. As explained in Chapter 2, to the latter, the low level of the old-age pension benefit had been a key condition for their consent for the introduction of the General Old Age Act. Their insistence on this had been based on at least three considerations. In addition to preserving workers’ sense of personal responsibility and limiting the redistributive consequences of the combination of flat-rate benefits and earnings-related contributions, it ensured that the state pension did not interfere with the expansion of private pension industry, which was greatly valued by employers owing to the investment opportunities that it created. A further extension of the public pension would obviously reduce these opportunities as it would “leave[s] less room for additional supplements provided by industry or company pension funds”.15 For all these reasons, the employer federations’ main policy on pensions following the introduction of the General Old Age Act was to ensure that the public share of old-age pension provision remained as small as possible. As part of this policy, they first tried to block the move towards wage indexation that followed on the collapse of the guided wage policy by arguing that it had never been their intention to agree to more than an inflation-proof benefit.16 When this failed, they attempted to persuade parliament to refrain from increasing the level of the benefit in an incremental manner, which they did by claiming that the practice of wage indexation eliminated the need for this, ensuring that the pension benefit would eventually reach a full subsistence level regardless.17 The obvious problem with this view was that it would take many more years before this would be the case. The argument also failed to impress because the employer federations at the same time took the principled stance that social insurance benefits did not have to be adequate in the sense of preventing beneficiaries from descending into poverty: in their view, this was what social assistance was for. Employer representatives to the Social-Economic Council underlined this stance in a report published on the matter in 1964. Nonetheless, with the possible exception of one or two 15 VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Notulen, 29 October 1963. 16 However, there was some disagreement on this among employer circles, as some employer representatives adopted the stance that wage indexation was the proper course. See NA, CSWV, 2.19.103.06, 139: Verslag vergadering Sociale Kring, 9 May 1963; HDP, VPCW, 172: Ontwerp-advies inzake een verhoging van de AOW-pensioenen tot een sociaal minimum. Bestemd voor de vergadering van de raad van 28 February 1964. 17 Ibidem.

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confessional crown members, they were the only ones to do so.18 In parliament, their position likewise failed to resonate. During the parliamentary debate on the budget in 1962, all of the major political parties had already expressed their support for raising the level of the old-age pension benefit to that of the social minimum and in the run-up to the parliamentary elections of 1963 the three main confessional parties as well as the Labor Party and liberal VVD had incorporated this goal in their electoral program. Following these elections, the new minister of Social Affairs immediately expressed his support for the Social-Economic Council’s majority view and managed to submit a bill to parliament that formally introduced the principle of a wage-indexed social minimum pension in the same year. The bill aimed to raise the level of the old-age pension benefit by a further twenty percent to roughly 70 percent of the minimum wage for a married couple. Single pensioners were to receive 70 percent of a full benefit. The bill was accepted with broad support and came into operation in January 1965. It also increased the level of the widows and orphans insurance benefit to that of the social minimum. In response to the bill’s introduction, the employer federations complained that in matters concerning the public pension, the government – which, it should be noted, consisted of a coalition of the three main confessional parties and the liberal VVD – always sided with the labor union movement.19 While this may have been a slight overstatement, there can be little doubt that the employer federations failed in their attempt to prevent the old-age pension from acquiring ever-more generous features. Between 1963 and 1975 the level of the pension benefit increased by more than twice the amount that index linking alone would have entailed.20 This rapid expansion can be attributed to various factors, including the popularity of the old-age pension program among voters, genuine concerns over the insufficiency of the benefit for workers without occupational supplements among socialist and confessional backbenchers, and the rapidly expanding margin for pay increases, which made it easy to finance benefit increases. Organized labor’s willingness to accept that part of the increase was to be financed out of this margin and the insistence upon the need to increase the level of the income threshold over which no contributions were levied illustrates that there was 18 SER, Advies inzake een verhoging van de AOW-pensioenen tot een sociaal minimum (Den Haag: SER, 1964) 23. 19 HDP, VPCW, 172: Notities betreffende SER-stuk R. no 640. Advies aan de minister van Sociale Zaken inzake verhoging AOW en AWW uitkeringen tot een sociaal minimum. 1964. 20 See Vording, Koppelingen, 177.

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little opposition in union circles to the redistributive consequences of a further extension of the public pension for different groups of contributors. Only the employer federations and the liberal VVD seem to have expressed some concern about this. The latter also expressed its discontent with the decision to finance part of the increase through general means, in a decision made to reduce the contributory burden for lower-paid workers.21 When Veldkamp put forward his bill to parliament in 1964, it did not contain a clear definition or norm for the social minimum. This was likely deliberate. While most parties now agreed that the old-age pension should at least be able to guarantee a life at the bare social minimum, there was no agreement on what this was exactly. Parliament’s decision to equal this minimum to 70 percent of the minimum wage had in itself been somewhat coincidental, having resulting from a KVP amendment that aimed to increase the level of the minimum proposed by Veldkamp.22 The decision certainly did not solve the problem of poverty in old-age in the Netherlands. According to a report published by the Labor Party some years later, the income of almost a quarter of the elderly continued to be below the “acceptable minimum”.23 Many old-age pensioners also continued to make use of the social assistance benefit in this period. As various municipalities increased the level of the social assistance benefit during the late 1960s, this number only increased.24 When this resulted in parliamentary questions, the then Minister of Social Affairs, Bauke Roolvink – an ARP politician and former secretary of the CNV – could only respond by stating that he firmly believed that the old-age pension benefit should be sufficiently high to ensure that no old-age pensioner needed to apply for a social assistance benefit.25 The predictable result of all this was that a debate emerged about what exactly was the acceptable minimum standard of living that the old-age pension needed to guarantee. This debate was further complicated by the question of whether this social minimum should only apply to the state old-age pension or the other major social insurance programs and the 21 According to Veldkamp, the VVD was assuaged by its confessional partners through a tax reduction that equaled about one billion guilders. To compare, the increase in the state subsidy that the increase the old-age pension benef it necessitated equaled 150 million guilders. See Veldkamp, Herinneringen, 136-140. 22 Winters, “Die staatshulp wenschen wij…”, 116. 23 Partij van de Arbeid, Welvaart en verantwoordelijkheid (Amsterdam: De Arbeidspers, 1968). 24 In 1967, some 60,000 old-age pensioners periodically applied for social assistance benefits. This equaledabout six percent of all old-age pensioners at the time. By 1969, this had increased to 90,000 or some nine percent of all old-age pensioners. See Vording, Koppelingen, 61. 25 See Winters, Die staatshulp, 117.

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social assistance program. As we have already seen, the latter had also been introduced with the aim of guaranteeing a “minimum social existence”, but then for all citizens and as a matter of last resort. How then were the benefit rates for social assistance recipients to compare to those for old-age pensioners? Furthermore, if the state were to guarantee that all old-age pensioners could enjoy a minimum standard of living, should it subsequently not also do the same for the unemployed, sick, and disabled? In the years following parliamentary acceptance of the principle that the old-age pension should at least provide a social minimum level benefit, various groups began to exert pressure for extending this principle to all major transfer programs and tying the social minimum to the recently introduced national minimum wage. These included the Labor Party and the three union federations, as well as the progressive factions of the three main confessional parties. On the other hand, the liberal VVD and the employer federations firmly rejected this solution as a costly and redistributive exercise. While the main confessional parties were quite receptive to labor’s demands overall, various conservative backbenchers expressed concern over the financial consequences of this solution. As a result, divisions on the matter once again partly transcended party lines.

Towards a Truly Inclusive Welfare System: The Introduction of the Net-Net Link For largely coincidental reasons, the introduction of a statutory national minimum wage roughly coincided with the debate on the introduction of the social minimum principle into the major social insurance (and assistance) programs. As a result of the highly regulated character of the Dutch labor market until the early 1960s, the Netherlands did not have formal legislation on a minimum wage until the end of that decade. There simply had not been a need for this until the guided wage policy broke down. After all, this policy not only established an effective wage floor because it covered all wage earners with the exception of the very upper echelons; moreover, as a result of strong labor union pressure, it was also accompanied by a substantial increase in the relative wages of the lowest paid. As early as 1945, the NVV had already made it clear that its support for an incomes policy depended on the introduction of a “social minimum” that had to be increased “not just in absolute but also in relative terms” over the years. It had done so by arguing that under the prevailing circumstances of austerity it was “reasonable that this sacrifice will be

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made by the better situated to prevent hardship for the most deprived”. 26 Both this demand and its motivation were fully supported by the two confessional union federations. They were also accepted by their employer counterparts, who in exchange obtained an exceptionally durable wage restraint policy. The result was an initial sharp and subsequent continual increase in the relative wages of the nation’s poorest workers. With a brief exception from 1954 to 1956, and as noted earlier, all wage agreements in the first fifteen years of the postwar period contained specific measures to improve the relative wages of the lowest paid.27 The central nature of wage bargaining further ensured that no group of workers ran the risk of falling behind. This obviously changed when the guided wage policy collapsed. While all involved parties by the early 1960s supported the move towards decentralized (industrial-level) bargaining and accepted the resulting greater diversity in wage developments among sectors, many of them also voiced concern over the possible consequences of this for the position of low-paid workers, particularly those operating in sectors that were either quite competitive or not covered by collective bargaining.28 To prevent these workers from falling behind, they deemed the introduction of an effective wage floor indispensable. Initially, both the labor unions and the employer federations felt that it would be best to do so in a voluntary manner. When the Labor Foundation consequently produced an agreement on the introduction of a “minimum income” that equaled 100 guilders per week for male workers above the age of 25 for 1964, the Social-Economic Council in the year after that concluded that there was no need for statutory intervention.29 However, in the very same year, the social partners failed to reach agreement on an increase in the level of the minimum wage and even disagreed whether this should be decided at the national or industrial level. In response, Veldkamp intervened and raised the level of the minimum wage to 120 guilders per week for all workers over the age of 25 – including women – by January 1966. Two years later, his successor Bauke Roolvink successfully introduced the 26 IISG, Archief NVV, doos 21, Notulen van de Hoofdbesturenvergadering, 19 July 1945, 21. See also ibidem, 8 January 1946; Ibidem, Verslag van het NVV looncongres, 10 October 1945, 7. 27 For a specific year-to-year overview, see Van Hulst, De effectiviteit van de geleide loonpolitiek, 256-260. For a more general view, see for instance Mulder, Loonvorming in overleg, 62-97. 28 In 1962, some 70 percent of the workforce was covered by collective bargaining (in the coming two decades, this increased to 90 percent). Many of those who were not covered belong to the high end of the wage divisions, although some low-paid workers were also not covered though. See Windmuller, De Galan, and Van Zweeden, Arbeidsverhoudingen in Nederland, 259. 29 SER, Advies inzake een wettelijke regeling van het minimumloon (Den Haag: SER, 1965) 9.

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Act on a Minimum Wage and Holiday Surcharge (Wet minimumloon en vakantiebijslag), which came into operation in February 1969. The act introduced a minimum income guarantee for all workers over the age of 24 that initially equaled 135 guilders per week and would be automatically adjusted in line with the average level of price and wage increases.30 While all of the main parties in parliament with the exception of the liberal VVD had voiced their preference for a fully wage-indexed minimum wage, Roolvink initially disagreed and instead opted for what he described as a more “responsible” course of action. In response, the Labor Party, several smaller left-leaning parties and various individual ARP and KVP backbenchers voted against the act.31 When pressure for a more generous automatic adjustment did not abate in subsequent years, the employer federations – which had initially opposed full wage indexation as too costly – came to the conclusion that its introduction was inevitable and consequently changed their position in exchange for an administrative less burdensome indexation mechanism.32 As a result, the Social-Economic Council published a unanimous advice in favor of full wage indexation in June 1970. In the same report, a part of the council comprising union representatives and crown members also advised to reduce the age at which workers were entitled to a full minimum wage.33 Parliament adopted both 30 At the time, the average wage in industry equaled 195 guilders per week for a 40-hour workweek. See CBS, Vijfennegentig jaren statistiek, 51. 31 Roolvink argued that he supported this proposal “in his heart” but did not deem it to be a “responsible course of action at this point in time”. Leon van Damme, “De verzorgingsstaat verder optuigen”. In Johan van Merriënboer en Carla van Baalen, Polarisatie en Hoogconjunctuur. Het kabinet-De Jong 1967-1971. Parlementaire geschiedenis van Nederland na 1946, deel 9 (Boom: Amsterdam, 2013) 466-468. 32 In 1971, the members of Council of Directors in Labor Affairs (Raad van Bestuur in Arbeidszaken) – a discussion platform for social security experts and the leadership of the various employer federations – came to the conclusion that wage increases would not have been very different if wage indexation had been introduced in 1969. However, they strongly opposed the practice of adjusting the level of the minimum wage based on an estimate of future wage increases (which was called “pre-indexation”), as this had the problematic side effect of influencing the outcome of these negotiations. In exchange for their cooperation with wage indexation, they requested as a “condition sine qua non” that the government ended this practice. VNO, F119(5): Cie Sociale Verzekering RCO: Verslag gezamenlijke vergadering Commissie Sociale Verzekering en Commissie inzake de wet minimumloon van de Raad van Bestuur in Arbeidszaken, 12 February 1971. For their erstwhile opposition to wage indexation, see NA, 2.06.064: Advies inzake de regeling van het minimuminkomen, 20 May 1966, 9. For their estimate that the introduction of wage indexation was inevitable, see VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO, 14 May 1970. 33 SER, Advies inzake enkele problemen verband houdende met de wettelijke regeling van het minimumloon (Den Haag: SER, 1970) 14-16.

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proposals the next year. Of the major parties in parliament, only the VVD had clearly expressed its unhappiness with the council’s report. Nonetheless, as its confessional coalition partners all supported the proposal, it reluctantly provided its consent.34 The act helped to ensure that the level of the statutory minimum wage rose to exceptionally high levels during the 1970s and early 1980s, peaking at some 80 percent of the average earnings of male workers in manufacturing industry.35 Largely as a result of this increase in its relative level, the number of workers who earned the statutory minimum also increased, from roughly three percent in 1971 to more than double that by the end of the decade. This percentage would reduce again as the liberal-confessional governments of the day reduced its generosity in consecutive years and its level came to lag behind the minimum pay scales of most collective bargaining agreements.36 In other words, its importance in providing a minimum wage floor among others remained limited by the fact that the bulk of the low paid was treated even more generously under collective bargaining agreements. However, at the same time, it became exceptionally important in providing workers and the self-employed with a minimum income guarantee. In as early as 1968 – and thus before the Act on a Minimum Wage had even entered into operation – it already provided the benchmark for the wages of workers who worked in the previously mentioned social employment facilities. Despite conservative concerns over the consequences of this for government spending levels and the income distribution, the reservation wage of workers and (in the case of the state old-age pension benefit) private pension industry, it would only take a few more years before all minimum social insurance benefit levels and the social assistance benefit rate were also raised to that of the minimum wage. Even more than the liberal VVD, the employer federations proved outspoken opponents of this. While the experience of the guided wage policy had long reconciled employers with the existence of an effective minimum floor 34 Van Damme, “De verzorgingsstaat”, 469. 35 See among others Kees Goudswaard and Philip de Jong, “The Distributional Impact of Current Income Transfer Policies in the Netherlands”, Journal of Social Policy 14:3 (1985) 36783; VNO, Boekje over inkomens 1970-1981. Een VNO-monografie over het in Nederland gevoerde inkomensverdelingsbeleid in de jaren 1970-1981 (Den Haag: VNO, 1981) 32; Paul de Beer, Het verdiende inkomen (Houten: Bohn Stafleu van Loghum, 1993); Manus O’Riodan, “Minimum Wages in Europe”, Low Pay Review (1981) 5. 36 W.P.J.M. Fase, Vijfendertig jaar loonbeleid in Nederland. Terugblik en perspectief (Alphen aan den Rijn: Samson, 1980) 352; Wiemer Salverda, “Laagbetaald werk in Nederland 1972-1990”, Tijdschrift voor Arbeidsmarktvraagstukken 10:4 (1994) 336-349.

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under wages and they could eventually also accept a statutory solution for this, they strongly objected to the “political goal of viewing the minimum wage as minimum income to which all citizens in the Netherlands are entitled” as this would mean that “no one will be willing to work for the minimum wage anymore”.37 However, unfortunately for them – and as we have already seen in the previous chapter – this objection made little impression in a country where the unemployment rate had averaged about one percent for over half a decade. During parliamentary debate on a Labor Party proposal to raise the level of the social assistance benefit to that of the minimum wage during the late 1960s, only the VVD for instance voiced its concerns over the consequences of this on worker behavior. The main confessional parties all expressed their support for the proposal, whereby the ARP’s spokesman on the matter, Hannie van Leeuwen, did so by specifically pointing out that the majority of long-term benefit recipients were either of old-age or handicapped, a group for whom “the incentive to work does not, and should not, play a role”.38 Later in the year, the employer federations complained that the decision to raise the level of the social assistance benefit to that of the minimum wage was a political one and that the responsible minister had proven unreceptive to warnings by employers regarding the financial costs of this measure.39 Part of the reason for the latter may have been that a large group of municipalities had already raised assistance benefit rates to the level of the minimum wage, while many others considered doing so.40 Therefore, rather than creating large additional obligations, national regulation to a large extent once again merely seemed to codify existing practice. These municipalities had not only set assistance rates at the level of the minimum wage because this provided an administratively easy way of assuring benefit adequacy; moreover, it also made sense to them to do so because both had the purpose of providing a socially acceptable minimum standard of living. As the minimum standard depended on a large number of factors, various municipalities actually allowed social assistance recipients to receive more than the minimum wage under specific circumstances. When the conservative-liberal government of the 37 VNO, F118(25) Verslagen Sociale Kring VNO: Verslag van de vergadering van de Sociale Kring, 20 November 1968. See also VNO, F118(24) Verslagen Sociale Raad VNO: Korte samenvatting van de vergadering van de Sociale Raad, 5 September 1968; VNO, F119(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering, 22 August 1968. 38 Van Damme, “De verzorgingsstaat”, 4. 39 VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Verslag van de vergadering van de Commissie Sociale Verzekering van de Raad van Bestuur in Arbeidszaken, 13 September 1968. 40 Vording, Koppelingen, 65.

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day finally produced legislation that set the social assistance rate at the level of the minimum wage in 1971, it effectively also banned municipalities from providing more than this.41 The oppositional Labor Party strongly opposed this and consequently voted against the act. However, because the VVD – as a junior coalition partner in a government dominated by the three main confessional parties – eventually provided its reluctant support, this was to no avail: the amendment to the General Assistance Act passed parliament in November 1972 and entered into operation in July 1974. From that moment onwards, married couples without children in need of assistance were entitled to a benefit rate equal to the minimum wage of a married worker without children. Single parent families and single benefit recipients were entitled to 90 and 70 percent of this rate, respectively. To prevent unemployed and long-term disabled workers from having to apply for a supplementary assistance benefit, the lowest unemployment insurance and provision benefit levels as well as the minimum disability insurance benefit were also raised to the level of the minimum wage. Two years earlier, parliament had already decided to do the same for the old-age pension and widows and orphans benefits. This meant that this “net-net link” between minimum benefits and the minimum wage was de facto established by 1974, although parliament did not confirm its willingness to preserve this as a formal feature of the Dutch welfare system until some three years later. 42 While the labor union movement greeted this decision with great enthusiasm, the employer federations expressed their strong dissatisfaction with these amendments. According to the chairman of the Federation of Dutch Industries (Verbond van Nederlandse Ondernemingen, henceforth VNO) committee on social insurance, the only advantage could be that policy-makers might be more reluctant to introduce further structural increases in the level of the minimum wage in the future. 43 Indeed, this proved to be the case. In 1972, the Social-Economic Council unanimously advised to take a moderate approach regarding future structural increases in the level of the minimum wage, the last of which took place in 1975. 44 41 Vording, Koppelingen, 65-66; Van Damme, “De verzorgingsstaat”, 474-475. 42 The only major social insurance program to lack a minimum benefit level was the state sickness insurance program. The employer federations – which strongly opposed this because they feared that low-paid workers would then be much more likely to call in sick – regarded this as a major victory. VNO, F119(4): Cie Sociale Verzekering CSWV en Raad van Bestuur in Arbeidszaken, 25 January 1966. 43 VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO, 7 August 1974. 44 SER, Advies inzake het minimumloon (Den Haag: SER, 1972).

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In subsequent years, policy-makers not only regarded such increases as too costly owing to their consequences for government spending levels; moreover, because this proved an effective and electorally relatively safe way of reducing relative government expenditure, as we will see in the following chapters, they increasingly acted upon the incentive to freeze the level of the minimum wage by making use of parliament’s discretion to refrain from adjusting its rate in line with general wage increases. The practice of freezing the level of the minimum wage and thereby minimum benefit levels obviously emerged in response to a strong need to embark on austerity measures. During the late 1960s and early 1970s, this was not yet the case. In these years, economic conditions were quite favorable, which undoubtedly facilitated the introduction of the net-net link, which worked to soften concerns over the consequences of this on both government spending levels and the reservation wage. 45 The employer federations seem to have realized this quite well, as they frequently complained about how difficult it was to find arguments that could convince policy-makers to refrain from steering towards this course. 46 While this can partly be attributed to the favorable economic conditions of the time, a more durable factor also played a role. As had been the case with earlier welfare initiatives that affected the distribution of income and risk among different groups of workers, there had been very little opposition to the redistributive consequences of the introduction of the net-net link. Whereas the employer federations loudly complained that “its leveling effects [made] its introduction even less acceptable”,47 and the VVD’s ill-disposed view towards this link undoubtedly partly resulted from the fact that its electorate mostly comprised relatively high-income individuals, there is little evidence that the stance of the main 45 Of course, this is not to say that there were no worries about the cost consequences of these measures. The confessional parties delayed the introduction of both the social minimum principle and the introduction of the net-net link owing to cost considerations, as testif ied by the earlier-mentioned response of the confessional-liberal government of the day to the Labor Party’s response to raise the level of the old-age pension by 50 percent and Roolvink’s unwillingness to create an wage-indexed minimum wage. The confessional parties initially also resisted Labor Party demands to make the social assistance benefit inflation-proof. Van Damme, “De verzorgingsstaat”, 471. 46 NA, CSWV, 2.19.103.06, 140: Verslag van de vergadering van de Commissie Sociale Verzekering van het CSWV, 27 November 1967; VNO, F118(24) Verslagen Sociale Raad VNO: Korte samenvatting van de vergadering van de Sociale Raad, 5 September 1968; VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Verslag van der vergadering van de Commissie Sociale Verzekering van de Raad van Bestuur in Arbeidszaken, 9 October 1963. 47 VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO, 7 August 1974.

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confessional parties was largely driven by distributional concerns. While some confessional backbenchers may internally have expressed concerns about the distributional consequences of the net-net link, this did not prompt many of them to vote against its introduction. It was also particularly important for the introduction of the net-net link that the labor union movement strongly supported it. During the 1950s, when the perceived need to adhere to actuarial principles was still quite influential, even some NVV representatives had expressed their discomfort with their federation’s stance that social insurance benefits should in principle at least provide sufficient benefit levels to cover living expenses. 48 Among confessional union leaders – and as illustrated earlier – this emphasis on the importance of adhering to actuarial principles had been even stronger. Nonetheless, by the late 1950s this had completely given way to an approach that emphasized the need to display solidarity with lower-income groups. Given the adverse consequences of this for the material position of higher-paid union members, the lack of internal opposition to this may be viewed as quite remarkable. While some occupationally organized whitecollar unions – as we have already seen – occasionally expressed their discomfort with particular welfare initiatives, as a rule they did not oppose the solidaristic welfare stance of the three main union federations. Indeed, much more importantly, all sectorally organized union affiliates – which represented the bulk of their members – completely supported this stance. Some of the higher-paid members of these unions may have occasionally expressed their dissatisfaction with the increasingly solidaristic stance of their representatives, which – after all – also extended to the area of wages.49 Nonetheless, this does not seem to have affected union policies in a major way, nor did it prompt these higher-paid workers to defect to independent unions in massive numbers.50 48 IISG, NVV notulen 1908-1975. Codelijsten 1945-1970, 1952, HM13 Commissie Ouderdomsvoorziening, Verslag eerste vergadering van de subcommissie ouderdomsvoorziening van het NVV, 16 October 1952. 49 On the egalitarian wage policies pursued by the labor union movement during the 1960s and 1970s, see for instance Harry ter Heide, Overleg en strijd. Recente ontwikkelingen in de Nederlandse loonpolitiek (Leiden: Stenfert Kroese, 1976); Peter van Wijngaarden, Inkomensverdelingsbeleid in de verzorgingsstaat. Rechtvaardigheidscriteria voor inkomensverschillen uit arbeid (Utrecht: Academic Thesis, 1982); VNO, Boekje over inkomens; J.C. Hesemans and Henk van Reijn, “De ontwikkeling van het minimumloon”, Sociaal-Economische Maandstatistiek 8 (1986) 4-20. 50 While – as we have seen earlier – the 1970s witnessed the emergence of a separate union federation for higher-paid workers, the MHP, never rallied large groups of workers. See Chapter 2 of this book on this.

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Religion, Cl ass, and the Post war Development of the Dutch Welfare State

This unif ied stance provided the union movement with immense power, which was further strengthened by the favorable conditions at the period and their willingness to accept that increases in the generosity of insurance against labor market risks should in principle be financed by workers themselves. This willingness to view public insurance programs as deferred wages went furthest regarding the state old-age pension, which also happened to be considerably the most expensive social insurance program. In contrast to the negotiations for the introduction of the General Old Age Act in the mid-1950s, when the unions had demanded some form of wage compensation by arguing that the guided wage policy had already kept wages artif icially low for many years, they had – for instance – refrained from demanding any form of compensation for the increase in worker contributions necessary to f inance the 1965 benef it level increase. Instead, they proposed to finance the bulk of the increase by removing the ceiling above which no contributions needed to be paid, which essentially meant that the increase would mainly be f inanced by higher-paid contributors. As the old-age pension also catered to the self-employed, the government eventually also provided a small subsidy.51 The union federations likewise strengthened their subsequent demand to increase the level of the public old-age pension benefit to that of the minimum wage by offering to f inance this out of workers’ own pay pockets. By doing so, they successfully managed to assuage fears among policy-makers that this increase significantly added to labor costs, which greatly contributed to their ability to obtain parliamentary support for their demand. This support finally came about after the labor union and employer federations reached an agreement on the matter in the Labor Foundation, which meant that the latter eventually supported raising the level of the old-age pension benefit to that of the minimum wage. However, they only did so because their union counterparts had successfully put their backs against the wall. As late as 1969, all of the employer federations were still adamantly opposed to doing so, even refusing to discuss this in the Labor Foundation. In response, the CNV – which had previously often been the most moderate union federation of the three – suddenly came forward with a proposal to create a Swedish-style supplementary public benefit supplement that equaled 600 guilders for all existing pensioners. The proposal immediately received full support from the NKV (which had by then succeeded the KAB) and NVV. It would be an understatement to say that the proposal disturbed 51 See Veldkamp, Herinneringen, 136-140.

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the employer federations. Its introduction would bring about an almost complete replacement of private pension funds by a public fund and thus it was so radical that some VNO members doubted that this was more than an off-season attempt to lure employers into voicing approval for raising the level of the existing benefit to that of the minimum wage.52 If so, the attempt was quite successful. Most employer representatives regarded the proposal as a serious one and as the government had also supported earlier union demands for increases in the level of the public benefit, they also feared that the proposal might be successful. The fact that the supplement would be completely financed through worker contributions held importance for the latter.53 To prevent this from happening, the employer federations decided to counter the CNV proposal with a proposal of their own. Under the proposal, the level of the public pension benefit would be raised to that of the minimum wage, old-age pensioners would receive a holiday surcharge on top of their benefit and all workers were to become compulsory members of occupational pension funds. Internal opposition to this counter proposal – which was strongest among the members of confessional employer federations like the Catholic and Protestant-Christian Employers’ Unions (Federatie van Katholieke en Protestants-Christelijke Werkgeversverbonden, or FCWV) – were brushed aside with the argument that it was simply necessary to bring forward a proposal “that leads to a solution in the short term that is satisfactory to the union organizations as well”.54 In exchange, the employer federations demanded that the unions dropped the 600 guilders proposal and that they lived up to their promise to refrain from demanding wage compensation. Despite being unwilling to support the latter in a formal statement, the NKV and NVV promised to endorse this as a proper stance if their members were to challenge it during upcoming wage negotiations.55 As the total costs of handing out an old-age benefit that equaled 70 percent of the previous wage would accrue to some 25 percent of total labor costs according to employer estimates, the union federations also promised to consider the introduction of various measures aimed at reducing welfare costs. These included a freezing of child benefits, the introduction of waiting 52 VNO, F118(21) Cie Sociale Zekerheid VNO: Notulen Sociale Verzekering, 4 December 1969. 53 HDP, FCWV, 18: Voorlopige conclusies ten aanzien van nieuwe pensioenvoorstellen vakbeweging, 4 December 1969. 54 HDP, FCWV, 18: Nota inzake de mogelijke structuur van een algemene aanvullende pensioenverzekering voor werknemers in Nederland, 17 October 1969. 55 VNO, F118(21) Cie Sociale Zekerheid VNO: Notulen Commissie Sociale Verzekering, 6 November 1969; Ibidem, 4 December 1969.

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days in the Sickness Act and the introduction of deductibles into the health insurance program.56 Once the employer federations came forward with their proposal, the negotiations proceeded in a remarkably rapid manner, with both parties reaching an agreement in the Labor Foundation in October 1969. Two months later, the Social-Economic Council supported the agreement in a formal advice. In several consecutive steps, parliament consequently raised the level of the old-age pension benefit to that of the minimum wage. As it proved quite difficult to make membership of pension schemes compulsory for all workers – especially for those who worked part-time, had long interruptions in employment, or worked in small companies – this goal eventually disappeared from the agenda during the early 1980s, partly because the generous nature of the old-age pension benefit reduced the necessity of providing this final group with private supplements. However, by this time occupational pension coverage had already reached some 90 percent: a figure that was to remain remarkably stable in subsequent decades.57 To make these benefits inflation-proof, the labor union and employer federations had also agreed to introduce a limited degree of pay-as-you-go financing into the private pension sphere. The result was an old-age pension system that was exceptionally generous by any standards.

The Rapid Expansion of Social Care and Social Housing Programs By guaranteeing that the recipients of all social insurance and social assistance benefits received an income whose level at least equaled that of a rather generously defined social minimum, the introduction of the net-net link held immense importance for the emergence of a truly inclusive welfare state in the Netherlands. Following its introduction, the problem of poverty in old-age and owing to long-term disability or sickness all but disappeared in the country.58 In addition, recipients of a full social insurance benefit 56 VNO, F75(105) VUT-regelingen 1970-1985: Rapport inzake consequenties van vervroegd pensioneren in het kader van oplossingen voor oudere werknemers; VNO, F119(5) Cie Sociale Verzekering RCO: Notulen Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 25 November 1971. 57 Joris van Ruysseveldt and Jelle Visser, Industrial Relations in Europe. Traditions and Transitions (London: Sage, 1996) 227-232. 58 One consequence of this was that progressive policy-makers and researchers increasingly looked to the Netherlands as an example of how to improve the social insurance system. For instance, in the 1970s, the chairman of the Disablement Income Alliance, the renowned poverty

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no longer needed to apply for supplementary social assistance to obtain an above-subsistence-level income, which meant that they were no longer subjected to means-testing. This meant that the social assistance program came to focus less on providing assistance to traditional vulnerable groups such as the elderly and disabled and more on those who were unable to find employment and had either exhausted their entitlement to or did not qualify for an unemployment insurance benefit. Due to its increased generosity and as unemployment levels gradually increased from the beginning of the decade onwards, the program nevertheless rapidly grew during the 1970s. In the first decade after the General Assistance Act came into operation, the number of social assistance recipients almost doubled, from roughly 60,000 in 1965 to just under 120,000 in 1975, which equaled about two percent of the working population at the time.59 For partly similar reasons, most of the other major tax-financed programs also rapidly increased in this period. For instance, from the mid-1960s onwards, government spending on social care programs grew at a remarkably rapid rate, from about 40 million guilders in 1965 to close to one billion guilders one decade later.60 A large part of this increase resulted from government efforts to professionalize the social care sector and it was consequently used to expand the paid workforce at the expense of voluntary workers, increase the wages of staff members and family care workers and invest in workforce training. This also meant that the government’s subsidy for social care activities further grew from roughly 50 percent of all spending during the mid-1960s to close to 100 percent one decade later.61 While family or “home” care remained considerably the largest source of spending, other forms of social work, such as rehabilitation as well as relatively new areas such as community development, also rapidly grew in this period.62 The use of child protection services constituted the one major exception to this. As a result of a growing aversion to disciplinary measures and changing societal views of the poor, the demand for this actually decreased from the scholar Peter Townsend, repeatedly called for the creation of a “Dutch system” of disability insurance. See, for example, The Disability Alliance, The Case for a Comprehensive Income Scheme for Disabled People (London: The Disability Alliance, 1975). 59 Van der Veen, “De ontwikkeling”, 45. 60 Maria Brenton, “Changing Relationships in Dutch Social Services”, Journal of Social Policy 11:1 (1982) 66; Hueting, De permanente herstructurering, 286. 61 At the start of the postwar period, the government’s share was only 25 percent. See WRR, Bewijzen van goede dienstverlening (Amsterdam: Amsterdam University Press, 2004) 84. 62 Brenton, “Changing Relationships”, 66-68; Hueting, De permanente, 288; WRR, Bewijzen, 84-85.

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mid-1960s onwards. During the early 1970s, hundreds of shelters were forced to close as a result. For a variety of reasons, including the introduction of a central reporting office and the increased use of specialized counselors, the number of child protection measures and outplacements to shelters and foster families would grow again from the early 1980s onwards.63 As a result of increased government spending and the ongoing process of depillarization, parliament also gradually became less reluctant about regulating the sector. In 1965, the Department of Social Work consequently received far-reaching supervisory powers, which it increasingly used to attach stringent conditions to the receipt of subsidies. These conditions not only related to quality of services and work conditions (e.g. hours worked, salary rates, and even training levels) of social care workers, but increasingly also ensured that the services provided by confessional organizations were made generally available. In response, most providers of relief lost their confessional identity over time and acquired a more general or secular character. To reduce the fragmented nature of the field, in 1971 the government also stated that providers of general relief were to have at least six social care workers in their employment. At the time, this was only the case for 63 of the roughly 520 private relief providers. In response to the decree, the number of providers of general relief would reduce by over half within four years.64 In part, pressure for a more rational organization that made greater use of economies of scale also came from the field itself, as organizations such as the Dutch Council for Social Work actively stimulated social care providers to develop and make use of national advisory and service machineries. At the same time, these organizations frequently complained about the increased conditionality of government subsidies, which they regarded as burdensome. Perhaps unsurprisingly, the government’s goal of reducing the ideological orientation of social care providers received some of the most resistance.65 This process of centralization largely bypassed the municipalities and provinces, which had never been strongly involved in the actual provision 63 Geertje Dimmendaal, Heropvoeding en behandeling: Meisjes in Huize de Ranitz, Groningen 19411967 (Amsterdam: Van Gorcum, 1998); Ido Weijers, De creatie van het mondige kind: geschiedenis van pedagogiek en jeugdzorg (Amsterdam: SWP, 2001). 64 However, this only reinforced a long-term trend, given that the number of providers had actually decreased from the immediate postwar period onwards. See Hueting, De permanente, 285-287. 65 One factor that worked in favor of this goal was that as they professionalized, social care workers gradually also grew less attached to the ideological orientation of their organization. See Neij, De organisatie van het maatschappelijk werk, 237-38.

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of social care (after all, this was done by private charities) and now complained that they also lacked the effective means to regulate the sector. To add insult to injury, the municipalities were often asked to cofinance the activities of social care providers.66 In 1976, the progressive Den Uyl government formalized this process of centralization by introducing the Framework Act on Specific Welfare (Kaderwet Specifiek Welzijn, or KSW), which brought the sector under complete state control. The act’s specific nature led to much conflict between the central government on the one hand and lower level authorities and social care providers on the other, with the latter among others complaining about the lack of feasibility of goals and the time-consuming nature of procedures.67 In response to these criticisms, parliament initiated a large process of decentralization in the mid-1980s, which partly placed regulatory responsibility in municipal hands. In consecutive years, various governments would continue to struggle with the conflicting demands of those who insisted that a well-organized, fair, and centrally financed social care system needed centrally devised rules and supervision and those who emphasized the need for local flexibility. To further complicate matters – and as we will see in the following chapters – this dilemma was increasingly subjugated to the need to prevent sectoral costs from spiraling out of control. While total spending on social care programs remained relatively small compared to the costs of major social insurance programs or even that of the social assistance program, they held immense importance for the vulnerable, low-income groups to which they mostly catered. This bias towards low-income groups also characterized most of the other major tax-financed programs that rapidly expanded in this period, including the social assistance program, the social employment program, and most of the programs that aimed to facilitate access to affordable housing. In the case of the latter, this increase partly resulted from the dramatic growth in general housing construction that took place in this period. Between 1963 and 1966 alone, stimulated by an increase in the number of government advances (long-term loans against low interests) to municipalities, housing corporations, and private investors, the number of houses built increased from some 75,000 to 120,000 per year. Roughly half of these houses were offered as part of social housing: a number that had been more-or-less stable 66 Vereniging van Nederlandse Gemeenten, Lokaal bestuur en welzijn (Den Haag: VNG, 1975). 67 Nico de Boer and Jan-Willem Duyvendak, “Welzijn. Een verweesde sector”. In Hans Dijstelbloem, Pauline Meurs, and Erik Schrijvers, Maatschappelijke dienstverlening. Een onderzoek naar vijf sectoren (Den Haag: WRR, 2004) 27.

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since the early 1950s.68 When the first confessional-liberal government of the postwar period announced its intention to reduce the share of social housing in the number of annual produced houses, CNV-affiliated and other left-leaning ARP backbenchers almost withdrew their support from the coalition during what came to be known as the “construction crisis” of 1960, which forced it to cave in.69 In consecutive years, the progressive wings of the main confessional parties would continue to play an important role in ensuring that low-income groups would have access to affordable housing, often doing so in close cooperation with the labor union movement. The close involvement of the labor union movement in developing government programs to facilitate access to affordable housing – as well as their extensive nature – can at least partly be attributed to the centralized nature of wage bargaining in the Netherlands.70 As housing constituted a major part of workers’ costs of living, in the immediate postwar period the union movement had successfully insisted that any long-term incomes policy required government measures to reduce housing costs, particularly for the lowest paid. During the first years of the postwar period, the government consequently imposed a general freeze of rents, which was followed by a series of differentiated increases that lasted up to 1955. From that year onwards, rent levels were related to the differences between costs and so-called “brick and mortar” subsidies. With the partial exception of the liberal VVD, all of the major parties accepted the need for a government policy relating to rent costs and continued to do so after the guided wage policy broke down. For instance, when the confessional-liberal De Jonggovernment aimed to liberalize the market for house rentals during the late 1960s, it could only do so in exchange for the introduction of rent subsidies 68 From the early 1950s until the early 1970s, municipal and private non-profit spending by social housing corporations together accounted for some 50 percent of total housing production. From the early 1970s until the first decade of the new millenium, the number fluctuated between 35 and 40 percent. Throughout this latter period, the share of social housing in the total housing stock remained more-or-less stable at about 40 percent. This was almost twice as much as the European average at the time. See Taco Brandsen and Jan-Kees Helderman, “Volkshuisvesting”. In Dijstelbloem, Meurs, and Schrijvers, Maatschappelijke dienstverlening, 74; Peter Boelhouwer, Financiering van de sociale huursector in West-Europa (Delft: Delftse Universitaire Pers, 1996). 69 On this, see for instance Wouter Beekers, Het bewoonbare land. Geschiedenis van de volkshuisvestigingsbeweging in Nederland (Nederland: Boom, 2012) 206. 70 Another factor that prompted strong government intervention in the housing sector was the surprisingly long duration of housing shortages in the country. It has been estimated that in 1947 some 300,000 families were forced to live with others because they did not have a home of their own. By 1954, this had decreased to 200,000 (often young) families. See Siraa, Een miljoen nieuwe woningen, 181; Beekers, Het bewoonbare land, 204.

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to lower income groups. Its predecessors would increasingly make use of these subsidies to coax labor unions into reducing their wage demands, which among others made them inflation-proof. Together with the increased provision of government advances and other types of subsidies to the housing production, these rent subsidies were responsible for the massive increase in government spending on public housing from the mid-1960s onwards.71 The redistributive consequences of these measures were partly (although by no means completely) offset by government measures to stimulate home ownership. These measures included the introduction of one-off subsidies to buyers during the 1950s, of which the generosity depended on the selling price and their income level. Since the late nineteenth century, house owners were also entitled to subtract part of their mortgage from their taxable income. While the latter policy was not introduced to stimulate home ownership, the confessional and liberal parties in particular greatly appreciated its ability to do so. In addition, many confessional and liberal backbenchers also must have appreciated its usefulness as an instrument to partially offset the redistributive consequences of progressive income taxation. Partly as a result of these measures, home ownership increased from some 30 percent during the early 1960s to about 40 percent by the mid-1970s. However, it would take until the turn of the century before the number of homeowners exceeded half the population.72

71 Between 1970 and 1988, annual spending on public housing increased from between one and two billion guilders to almost seven billion guilders. Part of this increase can be attributed to increased attempts by various governments to stimulate housing production by providing more subsidies in response to the outbreak of the first oil crisis. See Van Griensven et al., “Op weg naar de nacht”, 283-325; Brandsen and Helderman, “Volkshuisvesting”, 96; Taco Brandsen, “Volkshuisvesting: tegen de vlakte”. In Willem Trommel and Romke van der Veen, De herverdeelde samenleving. Ontwikkeling en herziening van de Nederlandse verzorgingsstaat (Amsterdam: Amsterdam University Press, 1999) 177. 72 CBS, “Woningbouwtrends”, Index 6 (2001) 3.

Part III The Politics of Retrenchment

7

The Emergence of Welfare Without Work

By the mid-1970s, the Dutch welfare state had undoubtedly become one of the most generous in the world. With the possible exception of some of the Scandinavian countries, it offered more cradle-to-the-grave protection to its citizens – and on more lenient terms – compared to any of its foreign counterparts. Whereas major labor market risks such as disability, old-age, sickness, and unemployment continued to be major sources of poverty and income reduction in many Western countries, this was no longer the case in the Netherlands.1 Of most importance to this was the generosity of the social insurance system, whose high coverage rates, lenient eligibility criteria, high benefit rates and preferential treatment of lower-paid contributors increasingly began to draw attention among policy-makers in other countries. At the same time, other forms of state help and provision had also come to compare favorably to their foreign equivalents in terms of their ability to provide care and assistance to those in need. Given the poor state of these programs in the immediate postwar period, this can be viewed as a remarkable achievement. Within a period of only two to three decades, Dutch policy-makers had managed to radically transform the functioning of the national welfare system, thereby succeeding in lifting large groups of citizens out of poverty as well as greatly increasing their citizens’ ability to deal with major socioeconomic uncertainties in life. To do so, it had of course been necessary to commit an ever-larger amount of financial resources to the social insurance system. In the ten years between the introduction of the General Assistance Act and that of the net-net link, total spending on income transfer programs in the Netherlands increased from roughly fourteen to twenty-four percent of gross national product. By the mid-1970s, Dutch spending on social benefits exceeded that of any other country in the world. 2 At the same 1 On this, see for instance OECD, Public Expenditure on Income Maintenance Programs. OECD Studies in Resource Allocation Number 3 (Paris: OECD, 1976); Vic George and Roger Lawson, Poverty and Inequality in Common Market Countries (London: Routledge & Kegan Paul, 1980). 2 For some references to this in the comparative political economy literature, see Harold Wilensky, The Welfare State and Equality: Structural and Ideological Roots of Public Expenditures (Berkeley: University of California Press, 1975) 12; Flora, Growth to Limits, xix; Therborn, Why Some People Are More Unemployed, 196; Robert Goodin and Anneloes Smitsman, “Placing Welfare States: The Netherlands as a Crucial Test Case”, Journal of Comparative Policy Analysis 2:1 (2000) 44.

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Table 7.1 The number of benefit recipients of various social insurance programs, the general assistance program and early retirement schemes, 19701990 (in thousands of recipients)

Disability benefits Unemployment benefits Sickness benefits General assistance benefits Early retirement benefits

1970

1975

1980

1985

1990

196  58 234  70 –

312 197 280 117 –

608 235 306 112  11

698 652 257 182  26

778 536 346 164 119

Sources: Romke van der Veen, “De ontwikkeling en herziening van de Nederlandse verzorgingsstaat”. In Willem Trommel and Romke Van der Veen, De ontwikkeling en herziening van de Nederlandse verzorgingsstaat (Amsterdam: Amsterdam University Press, 1999) 45; Philip de Jong, “Reforming Social Policy: Learning from the Dutch Experience”, Swiss Journal of Economics and Statistics 135: 3 (1999) 253-71; Dienst Collectieve Arbeidsvoorwaarden, Vervroegde uittreding in cao’s (Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid, 1990) 23

time, as we have seen in the last two chapters, the various governments responsible for the postwar expansion of the welfare state had paid very little attention to the possible consequences of high benefit generosity on labor supply. While these consequences had remained limited during the 1960s and early 1970s, when economic circumstances were quite favorable, this rapidly changed following the outbreak of the first oil crisis in 1973. In response to this crisis, employers massively began to make use of the social insurance system for redundancy purposes. As a result, the number of social insurance benef it recipients strongly increased and the costs of the system further soared. As can be seen in Table 7.1, the number of disability and unemployment benef it recipients (as we will see, the disability insurance program would become a popular alternative to the costly dismissal route) increased from about a quarter of a million in 1970 to almost 1.5 million some fifteen years later. By then, the Netherlands had truly become a “welfare state without work”. This mass withdrawal of workers from the labor market was further facilitated by three welfare initiatives adopted in response to the increase in unemployment that the country experienced during the 1970s: the 1973 decision to interpret the disability insurance program’s employability criterion in a broad manner, the 1976 Act on Extension of the Unemployment Benefit Duration for the Elderly (Wet tot Uitbreiding Uitkeringsduur WWV voor Ouderen) and the late 1970s introduction of industry-wide early retirement schemes. The first two of these measures effectively transformed the disability insurance and unemployment insurance and provision programs

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Figure 7.1 Labor force participation rate of men aged 55 to 64 in various countries (in percent) from 1965 to 2000 100 90 80 70 60 50 40 30 1965

1970

1975 Sweden Germany

1980

1985

United States The Netherlands

1990

1995

2000

United Kingdom

Sources: OECD, Labour Force Statistics (Paris: OECD, various years)

into early exit pathways that allowed workers to retire early on generous terms and made it easier for employers to release them. The latter created an official early exit pathway for older workers. As a result of these measures, older workers in particular began to withdraw from the labor market in large numbers. As can be seen in Figure 7.1, the labor force participation rate of male workers aged 55 to 64 almost halved from 82 to 42 percent between 1970 and 1985. Of all men aged 60 to 64, only 25 percent were still in the workforce by 1985, whereby a further 25 percent of these worked part-time.3 The figure also shows that this decline went much further in the Netherlands compared to other Western countries. For various reasons that will be explained at length in the following chapters, the labor for participation rate of older workers did not significantly improve until the early 2000s. 3 See Klaus Jacobs and Martin Rein, “Early Retirement: Stability, Reversal, or Redefinition”. In Frieder Naschold and Bert de Vroom, Regulating Employment and Welfare. Company and National Policies of Labour Force Participation at the End of Worklife in Industrial Countries (Berlin: Walter de Gruyter, 1994).

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Over the years, various studies have investigated the extent to which generous welfare arrangements stimulated workers’ willingness to withdraw from the labor market (so-called “push” factors) and employers’ ability to reduce the costs of layoffs (so-called “pull” factors) in the Netherlands and elsewhere. Some of these studies have suggested that these labor-shedding practices were not only an unintended side effect of the postwar expansion in social rights but also an important goal of this expansion. 4 In their view, at least some of the measures taken to improve the security of workers against the f inancial consequences of redundancy were supported by groups of employers because they facilitated their ability to make workers redundant. A good example of this is the 1973 decision to interpret the disability insurance program’s employability criterion in a broad manner, which has been described as the outcome of a “mammoth alliance” (in Dutch: monsterverbond) between labor unions and employer organizations.5 However, this chapter argues against this view, showing that the use of the disability and unemployment insurance programs for redundancy purposes was nothing more than an unintended side effect of measures propagated by the labor union movement in response to the increase in unemployment that their members experienced. As we will see, the employer federations were quite hesitant to support these measures, only doing so due to strong labor union pressure and because they feared the coming about of even more intrusive measures. The final part of the chapter will show that they were also reluctant to support the introduction of industry-wide early retirement schemes during the late 1970s.

The Dutch Disability Insurance Program and Its Use for Redundancy Purposes Most scholars would probably be hard pressed to find an example of a social insurance initiative whose assessment changed so strongly before and shortly after its enactment as the Act on Disability Insurance. When Veldkamp introduced “his” bill on a disability insurance program into parliament in April 1963, it was welcomed with great enthusiasm by all of the major parties. One backbencher – the ARP’s Bauke Roolvink, who 4 See Hall and Soskice, An Introduction to Varities of Capitalism”, 50; Ebbinghaus, Reforming Early Retirement, 3; Mares, “Enterprise Reorganization”, 295-317. 5 Velema, “De kroongetuige”, 22. See also De Vroom and Blomsma, “The Netherlands”, 109; Bannink, “Het Nederlandse Stelsel”, 67; Van der Veen, De sociale grenzen, 77.

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Figure 7.2 The number of disability benefit recipients per 1,000 active labor market participants by age in various countries in 1990 2000

1500

1000

500

0

US

UK

Sw 15-44

45-59

Ge

Nl

60-64

Source: See Leo Aarts, Richard Burkhauser, and Philip de Jong, “Introduction and Overview”. In Ibidem, Curing the Dutch Disease: An International Perspective on Disability Insurance Reform (Aldershot: Avebury, 1996) 4-5

would later succeed Veldkamp as minister of Social Affairs – even went as far as exclaiming that the bill placed him “among the great as far as social insurance system is concerned”.6 The bill passed parliament without a roll-call vote and was described in the press as the “crown jewel” of the social insurance system. However, as early as 1974, Veldkamp – who was by then ex-minister – himself admitted that he would have formulated the law in a different manner had he known that “the costs of the program would develop contrary to the prognoses of all the experts”.7 This of course raises the question of why the program’s costs proved much higher than these experts – and the minister himself – had believed. At the time of the introduction of the Act on Disability Insurance and Sickness Act, Veldkamp had voiced the expectation that the number of sickness and disability benefit recipients would eventually stabilize at 150,000 to 200,000. In reality, this number was surpassed within three years after the act came into operation. At its peak during the early 1990s, the number of sickness and disability benefit recipients amply surpassed one million, out of a working population 6 Veldkamp, Herinneringen, 1970. 7 Interview with Veldkamp in De Tijd, 31 August 1974. Cited in J.G. Hibbeln, “Rechtsvinding, theorie en praktijk”. In Hibbeln and Velema, Het WAO-debacle, 101.

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of roughly ten million.8 Figure 7.2 illustrates how exceptionally large the number of disability benefit recipients was per age group at its peak in 1990. Among those aged 60 to 64, disability benefit recipients outnumbered labor market participants by a two-to-one ratio. The figure also shows that this ratio was much higher than in other Western countries. This strong increase in the number of disability benefit recipients following the introduction of the Act on Disability Insurance largely resulted from the mass use of this act to shed redundant workers, in a development that could not have been foreseen by Veldkamp. According to one estimate, at least 50 percent of all disability insurance enrollment directly resulted from labor-shedding practices until the system underwent its first major reform in 1987.9 Almost immediately after its introduction, employers started to make use of this program as an alternative to the costly dismissal route.10 Labor union representatives generally accepted this use because the outcome was so much more generous for workers (up to the 1976 introduction of the Act on Extension of the Unemployment Benefit Duration for the Elderly, unemployment benefits lasted for at most two-and-a-half years and were granted upon the condition that recipients looked for new work; a disability benefit was often granted for an indefinite period and did not involve the need to look for work). As mass dismissals became more common during the 1970s, so did the use of the disability insurance program for this purpose.11 As Figure 7.2 suggests, the vast majority of workers who ended up on disability benefits as a result of these practices belonged to an older age group. To them, this solution effectively resulted in early retirement on a benefit that 8 See Leo Aarts, Richard Burkhauser, and Philip de Jong, “Introduction and Overview”. In Ibidem, Curing the Dutch Disease: An International Perspective on Disability Insurance Reform (Aldershot: Avebury, 1996) 1. 9 See Wolter Hassink, Jan van Ours, and Geert Ridder, “Dismissal Through Disability”, The Economist 145:1 (1997) 29-30. 10 Following the introduction of the 1945 Extraordinary Labor Relations Decree (Buitengewoon Besluit Arbeidsverhoudingen, or BBA), employers had to provide regional employment offices with advance notifications in case of dismissal. The period of notification equaled one week for every year of service, up to a maximum of thirteen weeks. In 1969, a confessional-liberal government added one additional week of notice for every year of service for workers over the age of 45, up to a maximum of thirteen weeks (which brought the total maximum up to 26 weeks for this group of workers). By the late 1960s, it had become quite normal for regional employment offices to make approvals of dismissal dependent on the existence of a redundancy scheme. See for instance, Antoine Jacobs, Labor Law and Social Security in the Netherlands (Den Bosch: Bookworld, 1995). 11 The disability insurance program was apparently used on a mass scale for this purpose during the closing of the mines in the southern province of Limburg during the second half of the 1960s and early 1970s. See Messing, De Nederlandse economie, 230.

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equaled at least 80 percent of their previous wages, to which employers often graciously added another ten to twenty percent in private supplements for at least a couple of years and sometimes for as long as their disability lasted.12 Of course, the fact that the practice proved possible on such a large scale cannot only be attributed to the generosity of the disability insurance program. Moreover, it was also strongly important that the program was largely administrated by organized industry rather than the state. For reasons explained in Chapter 1, in the late 1940s parliament had placed responsibility for the provision of worker insurance benefits in the hands of industrial insurance associations, which comprised representatives of labor unions and employers in a particular industry. In the case of the disability insurance program, benefits could only be awarded following a diagnosis from a medical officer, although these often worked in the service of industrial insurance associations or even in those of individual companies.13 Responsibility for supervision of the disability insurance program largely lay with three organizations: the Common Medical Service, the Federation of Industrial Insurance Associations and the Social Insurance Council. The boards of the latter two organizations respectively consisted of and were dominated by labor union and employer representatives. On the insistence of the confessional parties in parliament who were supported in this by the employer federations, labor union attempts to enable the Common Medical Service to provide a mandatory opinion to the industrial insurance associations failed.14 From the start, the industrial insurance associations would frequently overrule the advice of medical officers when they felt that this advice did not result in generous outcomes for workers.15 12 Although the vast majority of workers who were declared disabled to circumvent the costly dismissal route were older workers, workers below the age of 45 were also frequently declared disabled with this goal in mind. The Netherlands was the only country where this happened, at least on a large scale. See Aarts, Burkhauser, and De Jong, “Introduction and Overview”, 2. 13 Major concerns in particular often used their own medical officers to assess the existence and level of disability. Of course, this strongly facilitated their ability to shed redundant workers. For an excellent overview of firm practices, see Van der Veen, De sociale grenzen; Willem Trommel, Korter arbeidsleven: de wording van een rationale mythe. Loopbaan, arbeidsmarkt en verzorgingsstaat in neo-institutioneel perspectief (Den Haag: Sdu, 1995) 163-208. 14 According to the employer federations, the KVP and CNV were initially also somewhat averse to the creation of a central medical service that could over-rule the industrial insurance associations. However, they (partly) changed course on this in later years. See NA, CSWV, 2.19.103.06, 146: Verslag van de vergadering van de Technische Commissie Sociale Verzekering, 9 October 1956, 3 April 1959 and 20 May 1959. 15 For instance, in his study on the operation of the disability insurance program, Romke van der Veen described a situation in which a medical officer proved unwilling to declare a 25 year-old road worker fully disabled, despite strong pressure from union and employer representatives.

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A f inal facilitating factor was the existence of a clause that enabled administrators to grant partially disabled workers a full benefit if their partial disability stood in the way of finding new work. This “employability criterion” (in Dutch: verdisconteringsartikel) had entered the disability insurance program through being part of one of its predecessors, the industrial injuries insurance program.16 At the time of its introduction, the incorporation of the clause had been uncontroversial with all involved actors agreeing that the new scheme was not supposed to be less generous than its predecessors. Although some employer representatives expressed their fear that the incorporation of the clause in a program that also catered to non-work-related disabilities might lead to a high number of disability benefit recipients, they also felt that administrators should have some leeway in determining the level of disability to deal with situations in which a strict medical assessment might result in an unjust outcome.17 Their willingness to do so may have partly resulted from the auspicious labor market situation at the time. With almost two decades of uninterrupted growth and low unemployment behind them, they had good reason to believe that this situation would continue indefinitely. Moreover, they certainly could not foresee that the employability criterion would come to play a major role in the use of the disability insurance program for redundancy purposes. However, of course this is exactly what happened when unemployment levels started to increase during the early 1970s. Under these circumstances, individual employers soon found that the clause lent itself particularly well to the aim of shedding older workers. Workers of this age often had various minor handicaps and were rarely able to find new work after losing their jobs, which made it very easy to grant them a full benefit following a medical assessment that established a partial disability. It became even easier to do so following a 1973 decision made by the Federation of Industrial Insurance Associations that industrial insurance associations would subsequently assume that poor employment opportunities of partially disabled workers were the result of discrimination unless the opposite could be proven. In the literature on Dutch welfare state development, this decision has been described as either a “very broad interpretation” or a “fundamental alteration” The industrial insurance association consequently did not adopt the medical officer’s advice and declared him fully disabled regardless. See Van der Veen, De sociale grenzen, 83. 16 For instance, the British, German, and Swedish industrial injuries insurance programs also contained a employability criterion, albeit only for older workers in the latter two cases. However, none of these countries had similar clauses for non-work-related disability insurance programs. 17 NA, CSWV, 2.19.103.06, 142: Verslag vergadering Werkgroep Bovenwettelijke Uitkeringen, Commissie Sociale Verzekering, 23 September 1964.

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of the original meaning of the employability criterion.18 In the more popular discourse – and as noted earlier – this decision has been described as the outcome of a “mammoth alliance” (monsterverbond) between labor unions and employer interest groups. This accusation would also be frequently uttered during a parliamentary inquiry into the operation of the social insurance system taking place in 1992 and 1993.19 Nonetheless, close inspection of the events leading up to the 1973 decision does not provide support for the idea that the federation’s decision was the outcome of an alliance between labor unions and employer organizations, let alone with the purpose of making it easier for employers to release redundant workers in mind. Furthermore, it also does not support the view that the federation’s statement entailed a “fundamental alteration” of the original meaning of the employability criterion. It is even questionable whether it constituted a “very broad interpretation” of the clause. Instead, it suggests that the decision was in line with the clause’s central purpose, namely to ensure that partially disabled workers did not have to apply for an unemployment benefit or – even worse – social assistance, when their disability prevented them from finding new work. As unemployment levels increased during the early 1970s, so did the job prospects of these partially disabled workers. For this reason, the federation’s statement received broad political support in 1973, including from the then Minister of Social Affairs, Bauke Roolvink. Once again, the employer federations (as well as some individual bureaucrats) were the only ones to express their doubts about the wisdom of the decision at the time. Nonetheless, as we will see, they crucially did not question its legality. The Federation of Industrial Insurance Association’s decision came about in response to an advice on the matter written by a study group of the Common Medical Service, which it viewed as too strict. Initially, it seems that medical officers and the industrial insurance associations employed the labor market considerations in the same way as formally endorsed by the federation in 1973.20 However, this changed as concerns over the staggering 18 For this, see respectively De Vroom and Blomsma, “The Netherlands”, 107; and Bannink, “Het Nederlandse stelsel”, 67. See also Van der Veen, De sociale grenzen, 77. 19 Although the committee responsible for the parliamentary inquiry did not accuse the “social partners” of deliberately changing the interpretation of the employability criterion to facilitate the shedding of workers through the disability insurance program, it argued that they had not done enough to stem the inflow of disability insurance claimants. See Buurmeijer, Parlementaire enquête uitvoeringsorganen, 66. 20 Tellingly, the number of beneficiaries was already as high as 90 percent in 1970. See Leo Aarts and Philip de Jong “The Dutch Disability Program and How it Grew”. In Aarts, Burkhauser, and De Jong, Curing the Dutch Disease, 39.

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increase in the number of full disability benefit recipients increased. In November 1970, a study group of the Common Medical Service investigated this increase, concluding that it was often difficult to prove that partially disabled workers’ inability to find new work related to their handicap. The service consequently advised that medical officers were only to advise on a higher level of disability when it could be proven that a partially disabled worker’s inability to find new work was the direct result of his or her handicap. This obviously limited the use of the employability criterion. As a result, the number of workers who were declared partially disabled increased exponentially. Representatives of the Common Medical Service themselves acknowledged that these were subsequently rarely ever able to find new employment.21 When this subsequently resulted in parliamentary questions, Roolvink replied that “in certain cases, the determination of a less-than-full disability percentage occurs too swiftly […] In my opinion, an employee who loses his position through a disease or disability should receive a full disability benefit until the moment in which he finds new employment and it has been shown that he can perform the new labor permanently”.22 This was also the view of the federation, which had recently found that medical officers operating under the Industrial Injuries Act had almost always made use of the employability criterion unless the partially disabled worker succeeded in finding new employment. The federation concluded from this that partially disabled workers were entitled to a full benefit whenever employers refused to offer them new work. Following discussions with representatives of the Common Medical Service and Social Insurance Council shortly after the Common Medical Service had put forward its advice, it consequently released a circular of its own in May 1973, stating that industrial insurance associations would subsequently assume that partially disabled workers’ inability to find work was the result from discrimination unless the opposite could be proven.23 It received further moral support for this stance from the Central Court of Appeal (Centrale Raad van Beroep, the country’s highest authority in administrative law disputes), which had issued a verdict in July 1972 stating that a worker should be considered fully 21 Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, henceforth UWV), Archief GMD: Verslag bespreking delegaties Federatie van Bedrijfsverenigingen en de Gemeenschappelijke Medische Dienst over de toepassing van artikel 21, lid 2, sub a van de wao, 20 March 1973. 22 Philip de Jong and Pieter Vos, Het wao-debat: de centrale regelingen en de praktijk bij bedrijven (Amsterdam: Welboom Bladen, 1994) 22. 23 SVR, SVR-advies dd. 19 February 1979 (B22 doos 14): De verdiscontering van de WW bij vaststelling van de mate van arbeidsongeschiktheid a.b.i. art. 12 lid 2, AAW.

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disabled if he or she could only be re-employed with intensive counseling.24 Following the release of the circular, medical officers employed the labor market consideration in this way until – and in some cases, for many years after – its formal abolition in 1987. Far from enthusiastically supporting the circular, the employer representatives to the Federation and Social Insurance Council first actively sought to persuade their fellow members to pursue a less generous course, by arguing for a “middle way” between a purely medical assessment and the use of the employability criterion. However, the other members regarded this as both impractical and improper, whereby they also rejected an employer proposal to apply the clause only to workers over the age of 45 for the latter reason.25 This left the employer federations with no option but to grudgingly admit that “on reading the relevant documents, the Act itself and that which has been written regarding its introduction, one has to conclude that the receipt of an unemployment and disability benefit should only rarely be combined. The reason for this is that during the granting of a disability benefit, account should be made for labor market considerations”.26 They also found it difficult to refute the unions’ claim that a “worker with a remaining work capacity of less than 50 percent had zero chances of finding new work even if he or she were still young”, as they had already admitted this during internal discussions on the matter.27 Based on these considerations, the employer representatives to the Federation and Social Insurance Council had no alternative but to support the federation’s circular. Nonetheless, they certainly did not do so wholeheartedly, almost immediately insisting upon reforms that would lead to a decrease in the number of disability insurance benefit recipients. Only the first of these could count upon the support of the labor union movement. Following the release of the federation’s circular, both the union and employer federations insisted upon the need to improve medical officers’ 24 However, somewhat earlier it had come out against the continuation of a full benefit until the resumption of work, which made its verdict somewhat ambivalent. On this, see Saskia Klosse, Menselijke schade: vergoeden of herstellen? De werking van (re)integratiebepalingen voor gehandicapten in de Bondsrepubliek Duitsland en Nederland (Antwerpen: Maklu, 1989) 396-399. 25 UWV, Archief FvB, doos 78: Notulen vergadering bestuur Federatie van Bedrijfsverenigingen, 14 April 1971 and 9 February 1972. 26 VNO, F119(5) Cie Sociale Verzekering RCO: Verslag vergadering Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 10 November 1972. 27 UWV, Archief GMD: Verslag bespreking delegaties Federatie van Bedrijfsverenigingen en de Gemeenschappelijke Medische Dienst over de toepassing van artikel 21, lid 2, sub a van de WAO, 30 March 1973; VNO, F119(5) Cie Sociale Verzekering RCO: Verslag vergadering Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 10 November 1972.

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ability to mediate between employers and partially disabled unemployed workers. However, their attempts to persuade parliament to do so faltered as the Common Medical Service became further overwhelmed following the outbreak of the first oil crisis.28 All of the other measures put forward by the employer federations encountered strong labor union opposition. These included the introduction of premium differentiation among industries, which – as we have seen in Chapter 3 – had been a long-standing demand of the employer federations, as well as putting an end to the practice of adding private supplements to the sickness and disability insurance benefits.29 In little over a year after the federation had released its statement, the employer federations also began to call for a statutory change of the clause, followed by its abolition. In an official document addressed to the members of the second chamber of parliament in 1975, the two largest employer federations – the VNO and Christian Employers’ Federation (Nederlands Christelijk Werkgeversverbond, henceforth NCW) – pointed out that the premium level of the disability insurance program had increased from about four to over nine percent of labor costs in less than a decade. They argued that unless parliament was to act – for instance – by altering the employability criterion, the program’s cost might further double in the coming decade, especially since parliament was currently preparing for the introduction of the General Disability Act, which would create a flat-rate disability insurance for the self-employed.30 Although many backbenchers also expressed worries about the financial consequences of the increased number of disability insurance recipients, the vast majority of them were not yet willing to consider measures that constituted such a clear break with existing practice. For instance, during the parliamentary debate on the introduction of the General Disability Act in the same year, the government admitted to having its doubts about “the practice that has grown by now”, although it immediately added that it 28 As early as 1971, medical officers had already admitted that those over the age of 45 received little to no career re-entry guidance. Following the outbreak of the first oil crisis in 1973, the service became even more overwhelmed. On this, see UWV, Archief FvB, doos 78: Notulen vergadering bestuur Federatie van Bedrijfsverenigingen, 12 December 1973. 29 By the mid-1970s, almost all collective agreements covering more than 5,000 workers included provision for granting private supplements in case of sickness, disability, or unemployment, which often led to complete earnings replacement for at least a couple of years. See Loonbureau, Bovenwettelijke uitkeringen. Bepalingen inzake toekenning van (aanvullende) uitkeringen bij arbeidsongeschiktheid, overlijden en werkloosheid zoals geregeld in de cao’s voor bedrijfstakken met meer dan 5.000 werknemers (Den Haag: Loonbureau, 1978). 30 VNO, Arbeidsongeschiktheidsregelingen, F5(6) Nota VNO en NCW aan de leden van de Tweede Kamer van de Staten-General, 19 February 1975.

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did not see direct cause for legislative changes.31 As a result, despite strong employer protests, the act was to include a similar employability criterion. The government also refused to consider the introduction of premium differentiation into the existing disability insurance program for workers, which – the employer federations emphasized – was the best way to ensure that firms could not transfer normal company risks onto each other. Moreover, it was also unwilling to do something about the growing practice of adding private supplements to the public sickness and disability (as well as the unemployment) benefits. In fact, this suggestion also went too far for many of the VNO and NCW’s affiliates at the time.32 It would take many more years before different governments even came to consider these measures. Of course, the main problem with many of these measured proposed by employers was that they would severely undermine workers’ social rights. For instance, the abolition of the employability criterion at a time when unemployment was rapidly increasing would have major consequences for partially disabled workers who – as the employer federations had themselves admitted – had little to no chance of finding new work. Many of them would have undoubtedly ended up on a general assistance benefit. Given these consequences, a majority of backbenchers for the time at least agreed with the labor union movement, which argued that the financial consequences of the use of the employability criterion simply had to be accepted owing to the lack of a satisfactory alternative.33 It would take many more years before parliament’s view on this would change. In 1981, it added a section to the clause that enabled industrial insurance associations to limit its use to a certain period. Nonetheless, as they could still only do so when they could demonstrate that a partially disabled worker’s inability to find new work had nothing to do with his or her handicap, the effect of this law was quite limited. It certainly did not prevent employers and labor unions from misusing the disability insurance program for redundancy purposes, which consequently continued to grow in terms of both costs and the number of benefit recipients. In 1987, a confessional-liberal government finally abolished the employability criterion as part of a larger overhaul of the social insurance system, which also resulted in a reduction of the benefit level from 80 to 70 percent 31 See Klosse, Menselijke schade, 411-414. 32 VNO, F119(5): Cie Sociale Verzekering RCO: Verslag van de vergadering van de Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 13 February 1976. 33 UWV, Archief FvB, doos 78: Notulen vergadering bestuur Federatie van Bedrijfsverenigingen, 7 February 1973.

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of the previous wage for all workers’ insurance programs. This reform did not immediately solve the country’s inactivity problem, given that various other early exit routes remained in existence. Moreover, despite the formal repeal of the clause, some industrial insurance associations continued to apply labor market considerations to their disability estimates.34 Nonetheless, it certainly showed that such practices were now no longer accepted. By the early-1990s, popular criticism of these practices had grown so severe that parliament instituted a parliamentary inquiry into the operation of the social insurance system. The findings of the enquiry – and the commotion that it created – eventually set the stage for yet another major reform of the social insurance system. In 1995, the first-ever postwar government not to have a Christian-democratic coalition partner brought forward a new Social Insurance Organization Act, which entered into operation in 1997. The act effectively transferred responsibility for the operation of the social insurance system away from the social partners by abolishing the industrial insurance associations and transforming the Social Insurance Council into an independent supervisory body, the Social Insurance Supervision Committee (College Toezicht Sociale Verzekeringen, or CTSV), of which the labor unions and employer organizations were no longer members. Thus, over a century of industry involvement in the operation of worker insurance programs came to an end.

Dealing with the Return of Long-Term Unemployment To the labor union movement and progressive backbenchers, the gradual increase in the unemployment rate during the early 1970s not only made it even more important to apply labor market considerations to the disability estimates of partially handicapped and unemployed workers; moreover, it also necessitated steps to further improve the generosity of state benefits for regular unemployed workers. As unemployment levels rapidly increased, so did the average duration of unemployment, meaning that an increasing number of backbenchers began to view the two-and-a-half year duration of the unemployment benefit as inadequate.35 In addition, the deteriorating 34 On this, see W.C. Kers, Afvloeiing of herintreding: WAO-toetreding voor en na de stelselherziening 1987 (Den Haag: VUGA, 1996) 3-17; Teulings, Van der Veen, and Trommel, Dilemma’s van sociale zekerheid, 80-81. 35 Until the early 1970s, long-term unemployment was extremely low in the Netherlands. The low unemployment rate at the time ensured that unemployment was generally of a short duration, although this rapidly changed following the outbreak of the first oil crisis. From 1973 to 2000,

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economic situation also strongly affected the self-employed, who could only rely on a means-tested social assistance benefit when they lost their regular income. In response to these problems and supported by the main labor union federations, various left-wing parties began to press for a further extension in the duration of the unemployment insurance benefit and the releasing of workers over a certain age from the obligation to look for work and the inclusion of the self-employed into the unemployment provision (but not unemployment insurance) program. When the progressive Den Uyl government came to power in May 1973, a further increase in the generosity of state protection against unemployment consequently seemed inevitable. This prospect greatly worried the employer federations. To them, the problem with such an increase was not just that it would be costly and would further raise workers’ reservation wages, but they also feared that an overly generous benefit might prompt individual employers to release their workers more easily. The latter practice had been a consistent source of concern to them since the state unemployment insurance program entered into operation during the early 1950s. In the years after its introduction, the employer federations had received various complaints from affiliates operating in industries with lower than average unemployment rates, many of which revolved around the accusation that firms in certain industries deliberately transferred regular company risks to the general unemployment insurance fund by using this program as a de facto early retirement route. By the late 1960s, it became clear that firms sometimes even contacted the regional employment officers responsible for handing out unemployment provision benefits with the request to release older workers from the obligation to look for employment. When the employer federations found out about this practice, they immediately condemned it as “illegal” and “costly”.36 As did the then Minister of Social Affairs, Bauke Roolvink, who promptly sent a letter to the Social Insurance Council demanding that it put an end to this form of misuse.37 To the labor union federations, these practices did not constitute a major problem. This among others became clear in 1967 when the Social Insurance Council discussed the introduction of so-called non-activity arrangements roughly half of all unemployment lasted longer than six months and thus could be described as long term. See Marc van der Meer and Jelle Visser, “Arbeidsvoorziening”. In Dijstelbloem, Meurs and Schrijvers, Maatschappelijke dienstverlening, 191. 36 NA, CSWV, 2.19.103.06, 134: Verslag vergadering Kring voor Sociaal Overleg, 13 January 1967. 37 HDP, FCWV, 18: Brief Ministerie van Sociale Zaken en Volksgezondheid aan de Sociale Zekerheidsraad, 16 November 1967.

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for older workers in the textile industry: a sector that increasingly suffered from the competition from low-cost firms in developing countries.38 To prevent the emergence of mass unrest in response to the major layoffs that had become inevitable by the late 1960s, union and employer representatives in the industry eventually gave way to the temptation to use the unemployment insurance and provision programs as a semi-official (and rather generous) early retirement pension. They did so by topping of the state benefit with private supplements to grant complete earnings replacement, granting a one-time bonus that equaled roughly one month’s pay for a lower-skilled worker and promising a continuation of the occupational pension buildup. In addition, they released the workers who were selected for these nonactivity arrangements from the need to look for employment. Indeed, this latter practice prompted the Social Insurance Council to investigate these arrangements. After all, both the Unemployment Insurance Act and the complementary Unemployment Provision Act clearly stated that benefits would only be granted when recipients actively looked for new work. Despite their clear unlawfulness, the members of the Social Insurance Council did not see eye to eye on the matter. As far as the employer representatives to the council were concerned, these arrangements obviously could not be tolerated. For reasons of principle alone, it would not suffice to provide ad-hoc support to measures that clearly constituted misuse of the public unemployment insurance and provision programs in their view, although they also emphasized that it would be quite unfair if firms in the textile industry would be allowed to reorganize their workforce at the expense of firms in other industries, many of which were also in distress. On top of these concerns, the employer representatives feared that firms in other industries such as the construction industry – which also drew heavily from the unemployment fund – would copy this practice.39 On the other hand, the union representatives to the Social Insurance Council accepted that the non-activity arrangements were far from perfect, but nevertheless supported them as the only socially acceptable alternative. As 38 On this, see for instance, Bastiaan Willink, De textielbaronnen: Twents-Gelders familisme en de eerste grootindustrie van Nederland 1800-1980 (Zutphen: Walburg, 2010); Hendrik Jan Hesselink, Strategische besluitvorming in een neergaande bedrijfstak (Delft: Eburon, 2010). 39 VNO, 119(4) Cie Sociale Verzekering RCO 1947-1970: Verslag vergadering Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 19 October 1967. In subsequent years, various large firms would indeed approach officials from the Department of Social Affairs requesting permission to create similar arrangements. This practice greatly worried the employer federations. See VNO, F79(14) Werkloosheidsregelingen 1921-1986: Consequenties uitbreiding uitkeringsduur Wet Werkloosheidsvoorziening (WWV) ten behoeve van oudere langdurig werklozen.

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would be the case with the introduction of industry-wide early retirement funds some years later, the union representatives also emphasized that the measures would enable employers to take on more youngers workers. However, given that the whole point of these measures was to reduce the size of the workforce, this argument failed to impress the employer federations. 40 Despite the objections raised by its employer representatives, a majority of council members eventually provided its permission for the use of the non-activity arrangements. Some eight years later, the progressive Den Uyl government introduced an extension to the Unemployment Provision Act that officially legalized the use of non-activity arrangements and extended their use to all workers covered by the unemployment insurance and provision programs. It did so by extending the duration of the unemployment provision benefit with five years for all unemployed workers whose entitlement to a regular benefit was exhausted by the time they turned 60, as well as releasing this group from the obligation to look for work. As the duration of the regulation was two-and-a-half years, this meant that workers could effectively retire at the age of 57,5 years at a benefit that equaled at least 75 percent of their previous wages. Most of the time, they received much more as the bulk of employers were quite happy to complement the state benefit with private supplements, even when this resulted in full earnings replacement. 41 The result of the measure was that in terms of popularity, unemployment insurance and provision programs came to rival the disability insurance benefit as an early retirement path. All involved actors – including the labor unions, employer federations and members of parliament – foresaw this development in the years leading up to the introduction of the act. They also realized that the act undermined the actuarial principles on which the unemployment insurance system was based. The act could nevertheless count on support from a broad majority in parliament and – perhaps even more surprisingly – it received full backing from the main employer federations. 40 HDP, FCWV, 18: Brief Federatie van Katholieke en Protestantsch-Christelijke werkgeversverbonden aan de betrokken vakorganisaties, 14 October 1967; NA, CSWV, 2.19.103.140: Verslag vergadering Commissie Sociale Verzekering, 10 November 1967. 41 This led to much discussion among employers over whether the granting of private supplements should continue to be allowed. Ultimately, the employer federations were hesitant to press for a reduction in the use of these benefits “because of the response of their members”. VNO, F119(5): Cie Sociale Verzekering RCO: Verslag van de vergadering van de Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 13 February 1976. See also VNO, F30(5): Kort verslag van de vergadering van de Werkgroep Collectief Ontslag, 21 October 1975.

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The latter makes it tempting to argue that this support at least partly grounded in the act’s ability to enable employers to release redundant workers more easily without upsetting the labor union movement. Indeed, upon first consideration there even seem to be grounds for doing so. For instance, the VNO workgroup on collective dismissals readily admitted that the act “provid[ed] a solution for employers in these times of reorganization and company closures”. However, crucially, its members also emphasized that this would result in an increased burden of collective expenses, which would be accompanied by an unwanted transfer of resources from one firm to another. 42 As a result, various members of the employer federations raised the question of whether they should renew their opposition to this “illegitimate” use of the unemployment insurance system. After all, the financial consequences of this would now be many times greater. 43 The fact that they did not answer this question in the affirmative can most likely be explained by their realization that some form of improvement to the unemployment protection system was inevitable. In fact, of the many proposals on this that were circling around at the time, this was undoubtedly one of the least costly. The fact that some form of improvement to the unemployment protection system was inevitable can be attributed to both the gradual rise in unemployment since the early 1970s and onset of the progressive Den Uyl government in May 1973, which further tilted the balance of power in favor of the labor unions. In response to the increase in unemployment, the unions among others called for a general increase in both the duration and level of the unemployment benefit, improved protection for the voluntary unemployed and the inclusion of the self-employed into the unemployment insurance system. 44 In addition to these proposals, the minister of Social Affairs, the progressive ARP politician and former union leader Jaap Boersma – who in joining the Den Uyl government had defied his own party leadership – considered increasing the level of dismissal protection for older workers. When confronted with these proposals, the employer federations 42 As a result, they felt that they found themselves right in between “Scylla and Charybdis”. For this and the previous quotes, see VNO, F30(5): Kort verslag vergadering Werkgroep Collectief Ontslag, 19 November 1975. 43 Ibidem; VNO, F79(14) Werkloosheidsregelingen 1921-1986: Consequenties uitbreiding uitkeringsduur Werkloosheidsverzekering (WWV) ten behoeve van oudere langdurig werklozen. 44 All of these proposals were rejected by the main employer federations. See VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO gehouden op 6 August 1975; SER, Advies inzake de financiële positie van langdurig werklozen (Den Haag: SER, 1975) 6-7.

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naturally viewed an increase in the duration of the unemployment provision benefit as the lesser evil. 45 By granting their support to this increase, they also hoped to convince the government to introduce stricter job-searching requirements for workers drawing an unemployment benefit. While this attempt floundered in the face of strong union opposition, they managed to prevent the coming about of a general increase in the duration of the unemployment benefit. In a 1975 Social-Economic Council advice on the matter, only the labor unions supported increasing the duration of the unemployment benefit for all workers. Despite its pro-labor leanings – and to the employer federations’ great satisfaction – the government adopted the council’s majority advice. 46 Following the Social-Economic Council’s advice, the Department of Social Affairs delayed the act’s introduction for some time in an attempt to press the union and employer federations into urging their members to refrain from using the act as a de facto early retirement route. However, this attempt was entirely unsuccessful. For instance, during discussions about its possible introduction, the liberal VNO had already warned that “once the arrangement is there, it should be possible to make use of it” and that “it is not the purpose of the employer federations to urge their members to be reticent about the use of the current legislation”. 47 As far as the VNO – and the other employer federations for that matter – were concerned, one could hardly expect firms not to use the act as an early retirement pathway when it explicitly stated that workers no longer had to look for employment. Indeed, using the arrangement they did. Before the bill was even presented to parliament, various large firms had already negotiated generous dismissal 45 When confronted with a government initiative to increase the waiting period for dismissals of workers over the age of 45 in 1967, the employer federations had already considered proposing to increase the duration of the unemployment benef it for this group instead, because they regarded this as a cheaper solution. Ultimately, they refrained from doing so “as this would not prevent the labor unions from opting for a longer dismissal notice”. VNO, F119(4) Cie Sociale Verzekering RCO 1947-1970: Verslag van de vergadering van de Commissie Sociale Verzekering van de Raad van Bestuur in Arbeidszaken, 3 February 1967; Ibidem, Korte samenvatting van het besprokene in de gecombineerde vergadering van de Werkgroep Collectief Ontslag en de Commissie Sociale Verzekering van de Raad van Bestuur in Arbeidszaken, 15 March 1967. 46 VNO, F30(5): Kort verslag van de vergadering van de Werkgroep Collectief Ontslag, gehouden op 3 September 1975. 47 VNO, F10(5): Korte vergadering Werkgroep Collectief Ontslag, 3 September 1975; VNO, AG F2(3): Kort verslag van de vergadering van het Algemeen Bestuur van het VNO, 23 September 1975; VNO, F79(14) Werkloosheidsregelingen 1921-1986: Consequenties uitbreiding uitkeringsduur Wet Werkloosheidsvoorziening (WWV) t.b.v. oudere langdurig werklozen, 23 September 1975; VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO gehouden op 1 October 1975.

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agreements with labor unions that took its eventual introduction in mind. 48 After the act entered into operation, other firms followed suit. As was the case with the disability insurance program, the use of the unemployment insurance and provision programs as an early retirement pathway was most popular among larger firms that often negotiated directly with the labor unions, thus resulting in a large transfer of resources among different groups of employers and workers. In sum, while there is no evidence that the introduction of the 1976 Act on Extension of the Unemployment Benefit Duration directly resulted from the need to facilitate employers’ ability to dismiss redundant workers, all involved actors realized very well that this would be the outcome of its introduction, yet they pressed ahead with it nevertheless. The act’s introduction certainly improved the protection of workers against the financial consequences of unemployment, while also increasing the chances that they would become redundant. Following the outbreak of the second oil crisis in 1979 – which affected the Netherlands much more severely compared to its predecessor – the use of the unemployment insurance and provision programs as a de facto early retirement pathway became even more popular. By that time, various industries had just started experimenting with the introduction of a third early exit pathway in the form of official early retirement schemes (in Dutch: Vervroegde Uittreding or VUT-regelingen). This third – and only official – pathway towards early exit would gradually increase in popularity during the 1980s and 1990s. Indeed, we will turn to this pathway in the last section of this chapter.

Labor Redistribution and the Introduction of Industrial Early Retirement Schemes As the number of disability and unemployment benefit recipients gradually increased during the 1970s, the government and social partners naturally also began to consider ways of dealing with the problem of redundancy that were less burdensome to the social insurance system. This among others led to the introduction of various measures that aimed to directly assist workers in their efforts to find new work, such as wage cost subsidies for specific groups of workers and more intensive job-search assistance through newly created employment agencies. Despite strong employer resistance to this, the Den Uyl government also tightened employment protection against 48 VNO, F10(5): Korte vergadering Werkgroep Collectief Ontslag, 3 September 1975.

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collective dismissals in 1976.49 Finally, during the mid-1970s the labor union movement, Labor Party, and three main confessional parties – which were to form a single group in parliament from 1975 onwards and formally merged into the CDA in 1980 – all considered proposals that centered around the idea that the unemployment problem could effectively be addressed by reducing the size of the workforce and number of working hours. These proposals included the introduction of part-time work on a large scale, a shorter working week, more vacation days, a flexible or lower retirement age for all citizens and early exit for older workers through creating a separate early retirement scheme. Of all these proposals to redistribute labor, the introduction of an early retirement scheme encountered the least resistance and rapidly developed into the most popular alternative. The idea of creating a separate early retirement scheme was first put forward in a concrete form by the Catholic union federation – the NKV – in a 1974 pamphlet entitled “Young for Old” (in Dutch: “Jong voor Oud”), in which it called for the introduction of a job replacement scheme that would grant workers over the age of 62,5 the option to retire early in exchange for a benefit similar to that currently enjoyed by unemployment insurance benefit recipients. Companies would subsequently have to hire a younger unemployed worker to fill the vacancy, who would be appointed in consultation with a regional employment office. Under the NKV’s proposal, the unemployed worker who was to fill the vacancy did not have to be given exactly the same function as the one previously performed by the retired older worker. According to the NKV, the attractiveness of the proposal lay in its ability to serve the double aim of granting older workers the ability to retire early on relatively generous terms while enabling younger workers who were currently unemployed to enter the workforce. A crucial selling point was also that the scheme would not be costly. After all, as it merely aimed to replace (currently active) older workers with (currently inactive) younger ones, the NKV argued that it did not alter the number of benefit recipients.50 From the start, there was much skepticism about the NKV’s claim that it would be possible to use the scheme to replace older workers with younger unemployed workers. For instance, as early as 1975, a government-appointed 49 See Martin Brink, “Legal Aspects of Industrial Relations in the Netherlands”, International Business Lawyer 12:11 (1984) 449; Jacobs, Labor Law and Social Security, 52; Patrick Emmeneger, The Power to Dismiss: Trade Unions and the Regulation of Job Security in Western Europe (Oxford: Oxford University Press, 2014) 160-161. 50 Original document in VNO, F75(105) VUT-regelingen 1970-1985: Discussienota sociaal pensioenen, gepubliceerd door N.K.V., 22 January 1975.

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committee of experts concluded that any attempt to force employers to replace older workers with unemployed ones would encounter fierce opposition from businesses, while voluntary participation would most likely result in many more “exits” than “entries”. As a result, it felt that the scheme’s costs would likely be much higher than NKV expected. At the same time, the committee cautiously noted that there might be social reasons for the introduction of a scheme along the lines proposed by the NKV, especially for workers with an arduous employment history.51 A second-chamber committee, various conservative backbenchers, and the employer federations expressed similar views at the time. The latter were particularly skeptical about the scheme’s ability to foster entry into the labor market and added to this that it would probably be very difficult to limit participation to specific groups of older workers. Whereas the NKV emphasized that the scheme could work to raise productivity levels, the employer federations pointed out that it was quite likely that the most productive older workers would run off in large numbers. After all, once the scheme was to be introduced, workers would rapidly start to view early retirement as an established right, which would make it very difficult for firms to control who were to make use of it.52 However, this is not to say that the employer federations were adamantly opposed to its introduction. Despite its overall skepticism, the largest employer federation – the VNO –felt that “if a choice has to be made between all the instruments aimed at redistributing labor […] an arrangement aimed at voluntary unemployment [it refused to describe the proposal as early retirement] would be preferable”.53 To the VNO and the other employer federations, the main problem with most of the other proposals to redistribute labor circling around at the time was that they applied to all workers rather than only older workers, which made them much more costly. This was important as the employer federations realized very well that the introduction of some kind of measure was inevitable.54 As long as it would be financed out of 51 See A. de Boon, Rapport van de commissie van externe adviseurs terzake van vervroegd uittreden van oudere werknemers (Den Haag: Ministerie van Sociale Zaken, 1975). 52 VNO, F75(105) VUT-regelingen 1970-1985: Interim-rapport van de werkgroep aan het bestuur van de Stichting van de Arbeid, 8 September 1977; Ibidem, Rapport inzake consequenties van vervroegd pensioneren in het kader van oplossingen voor oudere werknemers, no date; Ibidem, Regeling van vervroegd uittreden, 9 June 1978. 53 VNO, F75(105) VUT-regelingen 1970-1985: Notitie ten behoeve van de Centrale Commissie Arbeidsvoorwaardenbeleid, 15 June 1978. 54 VNO, F7(11) Cie Arbeidsduur 1975-1989: Kort verslag vergadering Commissie Overleg Ploegendiensten/Arbeidsduur, 4 August 1977.

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the margin for pay increases and would be completely private in character (this was important to the employer federations because a national scheme would be more difficult to terminate and would result in large transfers of income between industries, whereas a private scheme could be based on the financial capacities of individual industries), the main employer federations were in principle willing to support the introduction of such a scheme. Under these circumstances, some employer representatives even believed that a “clean-up” of the workforce could in certain situations lead to productivity increases, which could partially offset its costs.55 Following discussions with industry and labor union representatives, the Den Uyl government consequently decided to initiate various experiments with the introduction of early retirement schemes, first in the education sector in late 1976 and then in the construction industry in April 1976. Following the outbreak of industrial unrest in the Rotterdam port later that year, the government extended the experiment to shipping dockworkers and subsequently to metal workers. In these sectors, 63 and 64 year-old workers were allowed to retire early on a benefit of 80 percent of the previous wages. These experiments – which were partly financed by the government – confirmed what the employer federations and committee of external experts had already suspected: in only about fifteen percent of all cases did firms refill vacant positions with unemployed workers.56 However, at the same time, they illustrated the immense popularity of early retirement among workers. Therefore, various other industries introduced their own early retirement schemes in the following years. By 1980, some 20,000 older workers were already in receipt of an early retirement benefit and some 50 percent of all f irms in the private sector offered some form of early retirement as part of a collective bargaining agreement. In the collective sector, almost all workers were covered by a collective bargaining agreement that offered some form of early retirement by then.57 Despite labor union pressure for the introduction of a state-wide scheme under which stronger industries would partially subsidize the efforts of weaker industries, the early retirement schemes would continue to be 55 VNO, F75(105) VUT-Regelingen 1970-1985, Notitie van de werkgroep arbeidsduur aan het bestuur van de Stichting van de Arbeid, 8 September 1977; Ibidem, Regelingen van vervroegd uittreden, 9 June 1978; Ibidem, Rapport inzake consequenties van vervroegd pensioneren in het kader van oplossingen voor oudere werknemers, no date. 56 See Trommel, Korter arbeidsleven, 88. 57 At its peak, the early retirement schemes covered about 80 percent of all workers. See Paul van Ginneken, VUT: Vervroegde uittreding in ontwikkeling (Den Haag: Ministerie van Sociale Zaken, 1981) 8; Trommel, Korter Arbeidsleven, 3; Vroom and Blomsma, “The Netherlands”, 109-116.

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Table 7.2 Number of participants in various early exit pathways as a percentage of the number of non-employed men aged 60-64, 1975-1990

1975 1979 1985 1990

Industrial early retirement schemes (VUT)

Disability schemes (WAO and AAW)

Civil servants retirement scheme (ABPW)

Unemployment scheme (WW and WWV)

– 10.9 31.8 37.9

56.4 59.9 42.6 –

– 5.0 7.5 –

7.9 8.7 9.4 –

Sources: Bert de Vroom and Martin Blomsma, “The Netherlands: An Extreme Case”. In Martin Kohli, Martin Rein, Anne-Marie Guillemard, and Herman van Gunsteren, Time For Retirement: Comparative Studies of Early Exit From the Labor Force (New York: Cambridge University Press, 1991) 111

organized on an industrial level. The government’s role in their development first remained limited to its ability to extend collective bargaining agreements to entire industries. In an effort to placate the labor unions, a confessional-liberal government increased the government’s role in 1979 by granting industrial early retirement schemes the same favorable tax treatment as already enjoyed by occupational pension funds.58 Depending on their generosity and the number of older workers in a particular industry, their costs increased from about one percent of the wage bill during the early 1980s to about three percent one decade later.59 These costs were financed out of the margin for pay increases following wage negotiations between labor union and employer representatives in a particular sector. Despite their private character, the early retirement schemes were without exception financed on a pay-as-you-go basis. Responsibility for their operation lay with the industrial insurance associations, which meant that eligible workers were in principle selected as part of a joint effort by the social partners. To qualify for a benefit, workers generally needed to be employed by a particular firm or industry for at least ten consecutive years.60 During the first half of the 1980s, the generosity of the early retirement schemes further expanded as a result of wage agreements under which their age limit was lowered on an almost annual basis. By the mid-1980s, it was quite normal for a worker aged 60 to retire early on an early retirement 58 This meant that the benefits, and not the contributions, were taxed. For the consequences of this, see Wim Rodenhuis, VUT en fiscus. Alles over de financiële gevolgen van vervroegde uittreding (Deventer: Kluwer, 1982) 29-30. 59 See Dienst Collectieve Arbeidsvoorwaarden, Vervroegde uittreding in cao’s (Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid, 1990) 27. 60 See Van Ginneken, VUT, 9.

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benefit. In a few industries, workers were able to retire at the age of just 55. By extension, the number of early-retired workers also increased. Table 7.2 illustrates the growing importance of the early retirement schemes as an early exit pathway during the late 1970s and 1980s. By the mid-1980s, they had become the second most important early exit pathway, after the state disability insurance program. Following the abolition of the disability insurance program’s employability criterion, their importance further increased. At their peak in the mid-1990s, about 160,000 older workers were in receipt of an early retirement benefit. Despite its much smaller size, almost half of these belonged to the public sector.61 While the introduction of early retirement schemes did little to alleviate the problem of youth unemployment, it reduced redundancy-related inflow into the disability and unemployment insurance programs. Compared to these programs, the advantage of the industrial early retirement schemes was that they offered workers a sounder and more acceptable pathway out of paid labor. However, at the same time, they formed a pathway over which employers had much less control. As predicted by the employer federations in the mid-1970s, workers soon became to view early retirement as an established right, which meant that much of the inflow into these schemes had nothing to do with redundancy purposes. As unemployment decreased from the mid-1980s, businesses thus naturally became much more critical of the schemes’ costs and their consequences for the participation rate, although their immense popularity among workers made them quite resistant to change. As we will see in Chapter 7, serious discussion between the state, labor unions, and employer federations in terms of reducing the use of early retirement schemes did not start until the first half of the 1990s, when only fifteen percent of workers were still active by the time they reached the official retirement age.62 As we will see, the introduction of serious government measures did not come about until the turn of the century.

61 See Dienst Collectieve Arbeidsvoorwaarden, Vervroegde uittreding, 23. 62 Trommel, Korter arbeidsleven, 3.

8

Tackling the Inactivity Crisis

In 1986, the Swedish-born sociologist Göran Therborn published a critical analysis of European policy-makers’ response to the return of mass and long-term unemployment, titled Why Some People Are More Unemployed Than Others, in which he described the Netherlands as “perhaps the most spectacular employment failure in the advanced capitalist world”.1 In his book, Therborn among others pointed to the importance of hidden employment in the Netherlands as a result of the mass use of the disability insurance scheme for redundancy purposes. Indeed, if this were to be taken into account, the off icial unemployment rate – which peaked at 10.7 percent in 1983 – would have been significantly higher.2 Even more worrisome than the high level of either official or “real” unemployment was the increasingly uneven ratio between active and inactive members of society in the country. Between 1970 and 1980, this ratio increased from 50 to 68 benef it recipients for every one hundred active workers. By 1985, there were as many as 85 benefit recipients per 100 workers, of which just over half belonged to the working population.3 In that year, only about 45 percent of the Dutch population over the age of fifteen was actually employed, compared to over 70 percent in Sweden, the country with the highest employment rate in the advanced industrialized world at the time. 4 In other words, during the 1970s and 1980s, the Netherlands developed into one of the most extreme examples of a continental European “welfare state without work”. Increasingly, the term Dutch Disease was no longer only used to describe the loss of international competitiveness experienced by the Netherlands as a result of the steady increase in the value of the Dutch guilder due to the discovery of natural 1 Therborn, Why Some Peoples Are More Unemployed, 152. 2 At 698,000 and 832,000, respectively, the number of disability benefit recipients was slightly lower than the total number of unemployed persons. According to one estimate, about half of the total inflow into the disability insurance system resulted from redundancy considerations. See Hassink et al., “Dismissal through Disability”, 29-30. 3 Nota Sociale Zekerheid 1992 (Kamerstukken TK, 1991-1992, 22 32, nrs 1-2) 38. See also Roebroek and Hertogh, “De beschavende invloed des tijds”, 381; Visser and Hemerijck, “A Dutch Miracle”, 171; Nic Douben, Sociale Zekerheid: Een Economische Benadering (Leiden: Stenfert Kroese, 1984) 50. 4 At 3.5 percent, the Swedish unemployment rate was also quite low. On Sweden’s economic success in this period, see for instance Therborn, Why Some Peoples Are More Unemployed; Steve Dowrick, “Swedish Economic Performance and Swedish Economic Debate: A view from Outside”, The Economic Journal 106:439 (1996) 1772-79; Lars Mjøset, “Nordic Economic Policies in the 1970s and 1980s”, International Organization 41:3 (1987) 403-456.

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gas resources, but also to emphasize the unsustainability of Dutch social policy expenditure.5 While the increasing dependence on state benefits in the country resulted from a variety of factors – some of which were beyond the government’s direct control – there could be no doubt that the combination of generous benefits and lenient eligibility criteria strongly contributed to this. Moreover – and independent of the causes of increased benefit dependency – the increases in government spending and non-wage labor costs that accompanied the emerging inactivity crisis raised serious questions about the sustainability of the Dutch welfare state in its present form. The consequences of this for the politics of welfare reform in the Netherlands were immense. By the early 1980s, policy-makers’ main priority had firmly shifted towards reducing the costs of the welfare state and increasing labor force participation levels. While the latter also required the introduction of new programs such as family policies and activation measures in the form of training facilities and specific policies geared towards the reintegration of sick and unemployed workers, the overall tendency was overwhelmingly towards welfare retrenchment. Following a 30-year period in which all major political parties had endorsed – albeit to varying degrees – the need to improve state provision and care to increase the general well-being of Dutch citizens, including their ability to deal with major socioeconomic uncertainties in life, welfare reform now came to be viewed by many as synonymous with government policy aimed at reducing workers’ social rights. To reduce the reliance on state benefits and reduce welfare state spending in a direct manner, policy-makers of all kinds of political persuasions began to consider various retrenchment measures. These often took the form of direct reductions in entitlement rights. For instance, from the early 1970s onwards, both left-leaning and conservative governments began to experiment with cuts in benefit rates (which among others took the form of lower percentage rates for all or certain groups of recipients, temporary suspensions of the wage linkage, an increase in the use of the means-test, and the introduction of waiting days and deductibles in the sickness and health insurance programs, respectively) and decreases in the duration rate and entitlement to state benefits (either in general or based on age or individual contributory efforts). To make the use of the sickness and disability insurance programs for redundancy purposes less attractive, they eventually also 5 The term “Dutch Disease” was coined by the journal The Economist in “The Dutch Disease”, The Economist (26 November 1977) 82-93.

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partly conceded to the loudly professed employer federations’ demand to reintroduce premium differentiation among industries and individual firms. In addition, they increasingly came to redefine the obligations of benefit recipients and attach f inancial consequences to non-compliance with these obligations. Finally, from the early 1990s onwards, they embarked on various major reorganizations of the administration and supervision of the social insurance system. While these reorganizations were not presented as retrenchment measures, they were clearly introduced with the goal of reducing the inflow into the social insurance system and thus could be understood as such. While the severity of the inactivity crisis forced all involved actors to reconsider their stance on welfare reform, the major parties naturally took a very different stance on the extent and type of measures that this necessitated. To the Labor Party and other left-leaning parties in parliament, retrenchment posed a major dilemma for both electoral and ideological reasons, whereby it was only to be pursued as a last resort under economic and political circumstances that made the status quo impossible to maintain. By contrast, to liberal parties like the VVD and the newly established Democrats 66 (Politieke Partij Democraten ’66, henceforth D66), which represented a growing political force in parliament, retrenchment did not necessarily pose a major electoral risk. On the contrary, as parties that mostly catered to relatively well-to-do voters who often espoused conservative views on government spending, retrenchment also created much potential for electoral gains.6 The fact that retrenchment often resulted in a (partial) restoration of the link between individual contributory efforts and entitlement rights held major importance to this, in turn working to reduce the potential for risk and direct income distribution among different groups of contributors or citizens at large. There can be no doubt that this worked to the (perceived) material advantage of the average liberal-oriented voter. The VVD in particular realized this well and consequently came to present itself as the pre-eminent retrenchment party from the early 1970s onwards. As a result, the politics of welfare reform continued to be accompanied by much political conflict between the “left” and “right”.7 6 In recent years, various studies have argued that religious and liberal conservative parties might gain votes through retrenchment policies, although these have not taken redistributive considerations into account. See for instance, Armingeon and Giger, “Conditional Punishment”, 558-580; Giger and Nelson, “The Electoral Consequences of Welfare State Retrenchment”, 1-23; Schumacher et al., “Political Parties’ Welfare Image”, 1-21. 7 Some scholars have adopted the stance that the importance of political conflict between the left and right has diminished in recent years. While some have done so by arguing that

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The persistance of the left-right conflict in turn enabled confessional forces in parliament – which were now mainly represented by the CDA – to maintain their central position in Dutch politics for many more years to come. From its formation in 1980 until the early 1990s, the CDA received about 30 percent of the vote, giving it the same prominent position in the Dutch welfare landscape as previously occupied by the Catholic KVP. 8 The result of this was that the trajectory of Dutch welfare reform continued to be largely shaped by internal dynamics within the confessional camp. Within the CDA – which like most of its predecessors harbored both progressive and conservative elements – the onset of the inactivity crisis led to intense polarization between proponents of retrenchment and those who emphasized the need to maintain welfare spending due to anti-cyclical or social considerations or placate the labor union movement to obtain worker support for wage restraint. As the inactivity crisis deepened, the balance of power within the party slowly shifted in favor of more conservative elements. By the late 1980s, the CDA had come to espouse a much more conservative view on welfare reform, largely inspired by orthodox confessional ideas on subsidiarity and personal responsibility. Contrary to those of its early postwar predecessors, its version of subsidiarity and personal responsibility was strongly influenced by a liberal emphasis on economic incentives, mainly serving the practical aim of increasing the Dutch labor force participation rate.9 The presence of internal conflict within the CDA about the direction of welfare reform goes a long way in explaining why welfare retrenchment initially lacked direction and proceeded at a rather slow pace, despite the severity of the inactivity crisis. Just as it had taken many years before the early postwar emphasis on self-reliance and personal responsibility had given way to a societal view in which the government needed to play a crucial role by providing a “shield for the weak”, it would take quite some time before the balance of power within the confessional camp once again tilted in favor of those who held a more conservative welfare outlook. economic necessity forced all parties – including the left – to embark on austerity policies, others have taken the exact opposite position by arguing that even “rightist parties are in no position anymore to simply pursue their preferred agenda of rolling back the welfare state because they also face a constituency that has grown attached to the welfare state’s programmes”. Vis, Politics of Risk-Taking, 14. 8 On the CDA’s central role in Dutch politics in this period see Gerrit Voerman, De conjunctuur van de macht. Het Christen-Democratisch Appèl 1980-2010 (Amsterdam: Boom, 2011). 9 On the absence of material incentives-oriented thinking among confessional political parties until the 1970s, see for instance Therborn, “‘Pillarization’ and ‘Popular Movements’”, 212-213.

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The governments of the late 1970s and early 1980s were consequently as much characterized by strife within the confessional camp as they were by conflict between representatives of different party groups. The first major confessional shift towards the right occurred in the early 1980s, when the confessional-liberal “no-nonsense” government of Ruud Lubbers embarked on a major retrenchment program. To placate its own left-leaning party members as well as for electoral reasons, Lubbers initially refrained from embarking on major social insurance benefit cuts and focused more on reducing government expenditure than reducing benefit dependency. Truly ambitious reforms to increase labor market participation rates consequently had to wait until the early 1990s, when fears that the number of disability insurance recipients would hit the one million mark made more drastic welfare cuts inevitable. In addition to electoral considerations and the need to placate their progressive wing, the reform ambitions of various CDA-led governments were also severely constrained by the labor union movement’s strong resistance to retrenchment. Whereas the employer federations developed into major proponents of welfare cut-backs during the early 1970s and 1980s, their union counterparts continued to oppose any reduction in entitlement rights. Despite the growing severity of the inactivity crisis, they were in a relatively strong position to do so, given that the inactivity crisis was accompanied (and was indeed greatly aggravated by) a loss in external competitiveness, which forced all governments to seek labor union support for wage moderation. As everyone knew, this support was much less likely to be forthcoming when governments embarked on major cuts in the “social wage”. To the union movement, the decades-old tradition of financing social insurance benefits out of the margin for pay increases meant that entitlement cuts – if they were to be accepted at all – needed to be accompanied by adequate wage compensation to affected workers. This argument proved quite powerful due to both the threat it contained and because the confessional preoccupation with actuarial principles among others translated into a strong commitment to the social wage principle. For both reasons, governments could not easily renege on the welfare commitments made by their predecessors. Beyond attempting to dissuade governments from pursuing an overly ambitious reform agenda, labor union leaders also responded to actual retrenchment measures by seeking to persuade governments to introduce compensatory measures for vulnerable groups and attempting to increase private provision to fill emerging gaps in welfare entitlements during subsequent wage negotiations. As we will see, these efforts were quite successful. Depending on their perceived consequences for dependency rates – and as

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will be explained at length in this and the following chapters – this process of increased welfare privatization sometimes received active government support or even became an actual policy goal. At other times – and with various levels of success – governments tried to dissuade the social partners from attempting to replace public with private entitlements. This process of increased welfare privatization certainly did nothing for the self-employed. Moreover, while private supplements could be quite generous, they were often granted under rather strict conditions and lacked inter-industry solidarity. Nonetheless, as we will see, they played an important role in ensuring that net levels of welfare provision continued to be quite generous for the bulk of the working population. The fact that over 80 percent of all workers continued to be covered by collective wage-bargaining agreements held strong importance in this respect.10

The Struggle Over Retrenchment When the world economy underwent a series of exogenous shocks that eventually culminated in the outbreak of the first oil crisis in 1973, few policy-makers in the advanced industrialized world realized that these events formed the prelude to a long period characterized by economic adjustment and stagnation. Indeed, Dutch policy-makers were no exception to this. Despite the steady increase in inflation that accompanied the gradual collapse of the Bretton Woods system of fixed exchange rates from the late 1960s onwards, both the main confessional parties as well as the Labor Party initially predominantly viewed the crisis as a temporary setback that could best be alleviated by increasing public spending. As a result, major long-term plans such as the introduction of the net-net link between the minimum wage and minimum social benefit levels, a structural increase in the level of the minimum wage and the introduction of the General Disability Act simply proceeded as planned. In addition, as we have seen in the previous chapter, both the progressive Den Uyl government (through the introduction of the Act on Extension of the Unemployment Benefit Duration for the Elderly) and its confessional successors under the leadership of the Catholic politician Dries van Agt (by stimulating the introduction and expansion of industrial early retirement schemes) responded by expanding workers’ social rights in a major way. 10 For an excellent analysis of this, see for instance Van Ruysseveldt and Visser, Industrial Relations in Europe.

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To steer the economy through the crisis, the Den Uyl government among others introduced subsidies and “soft” loans for companies in distress and a series of ambitious employment programs. The latter often took the form of temporary subsidies to employers who hired specific groups of workers, such as workers over the age of 45, disabled workers, young workers, and those who had been unemployed for over a year. In addition, it offered wage supplements to all unemployed workers who were willing to accept a job below their previous pay level. By 1977, the twelve main employment programs introduced and expanded by the Den Uyl government amounted to almost five billion guilders, or some five percent of total government spending.11 These programs were maintained – in a somewhat more generic form – under its successor. At the same time, the Den Uyl government aimed to introduce a more active employment placement policy, which among others resulted in a reform of existing employment offices and the 1977 introduction of a semi-private employment agency called Start, which was to cater for specific groups of unemployed workers. However, as a result of both institutional deficiencies and a strong increase in the number of mass dismissals and the rate of long-term unemployment, these latter measures were not quite considered successful.12 As we will see in the following chapter, it would take until the early 1990s before a new government embarked on a much more ambitious overhaul of the employment placement system. Partly as a result of these anti-cyclical measures, the Netherlands performed somewhat better than most of its Western counterparts in the first years following the outbreak of the first oil crisis, in terms of both economic growth rates and employment.13 As pointed out by many scholars over the years, these measures were in turn partly financed by the increase 11 WRR, Activerend arbeidsmarktbeleid (Den Haag: Staatsuitgeverij, 1987) 68. According to Maarse, government spending on all twelve programs was as high as eleven billion guilders. See J.A.M. Maarse, “Arbeidsmarktbeleid: enkele trends en effecten”, Sociologische Gids 31:1 (1984) 99. See als Peter Hupe, Om de kwaliteit van de macht. Het werkgelegenheidsplan van minister Den Uyl in vijfvoud beschouwd (Arnhem: Gouda Quint, 1992). 12 On this, see for instance, Nicolette van Gestel, De onzichtbare overheid. Naar nieuwe vormen van sturing, het voorbeeld van de arbeidsvoorzieningswet (Delft: Eburon, 1994) 60-67; W.J.L. Molleman and A.M. Proos, Arbeidsmarktbeleid, inzicht in de complexiteit van de arbeidsmarkt (Deventer: Kluwer, 1990) 72-75; Visser and Hemerijck, “A Dutch Miracle”, 211-13; Els Sol, Arbeidsvoorzieningsbeleid in Nederland: de rol van de sociale partners (Den Haag: Sdu, 2000) 77-84; Johan van Gerven, Aparte coördinatie, samenwerking tussen arbeidsbureaus en uitkeringsinstanties (Amsterdam: Thela Thesis, 2001) 27. 13 The average growth rate in the Netherlands from 1973 to 1979 was 2.7 percent, compared to an average rate of 2.4 percent among other members of the Organization for Economic Co-operation and Development (OECD). See Van Zanden and Griffiths, Economische geschiedenis in de 20e eeuw, 257.

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in government revenue that resulted from the discovery of large natural gas reserves in the late 1950s.14 Large-scale exploitation of these reserves started in the mid-1960s and increased immensely in subsequent years. The government revenue that resulted from this further increased following the outbreak of the first oil crisis, as gas prices tended to be closely linked to oil prices. The Den Uyl government among others used this revenue to increase state transfers to the social insurance system from 5.2 percent in 1974 to 10.9 percent of overall spending in 1977.15 Over the years, various scholars have consequently suggested that the exploitation of natural gas enabled Dutch governments to refrain from introducing harsh austerity measures during the 1970s and early 1980s. However, the extent to which this was indeed the case remains a subject of debate, as this exploitation simultaneously increased pressure on the Dutch welfare system by prompting increased welfare spending in at least two ways. Both of these resulted from its contribution to the relative large increase in Dutch wage costs in this period.16 The first consequence of the increase was that minimum benefit levels – through their link to the minimum wage, which was in turn tied to average wage levels – increased more rapidly than would have otherwise been the case. Second – and perhaps even more importantly – it resulted in a rather large appreciation of the Dutch guilder, which was to have major consequences for national macroeconomic performance (and thus benefit dependency) in the long term.17 For this and other reasons, the new Dutch status as a semi-OPEC country did not prevent the Den Uyl government from turning a small government 14 Frans Wieleman, “De economische betekenis van het Nederlandse aardgas”, Economische en Statistische Berichten 76 (1982) 1012-16; Sonja Toirkens, Schijn en werkelijkheid van het bezuinigingsbeleid 1975-1986: een onderzoek naar de besluitvorming over bezuinigingen in de ministerraad en het gedrag van individuele ministers (Deventer: Kluwer, 1988) 32; Van Kersbergen and Becker, “The Netherlands”, 92; F.G. Vermeulen, “Tovercirkel: interview met mr. C. van Veen”. In Sociaal-Economische Raad, In overleg: Afscheid van prof. dr. D.B.J. Schouten als Kroonlid van de SER (Den Haag: SER, 1992); Visser and Hemerijck, “A Dutch Miracle”, 132. 15 OECD, Economic Surveys: the Netherlands (Paris: OECD, 1979) 33-34. 16 It did so in two ways: first, it contributed to overall productivity levels, which played an important role in collective wage negotiations; second, government transfers to the social insurance funds were used as bargaining counters during wage negotiations, which meant that government attempts to reduce the growth of non-wage labor costs by increasing state transfers to the social insurance funds were offset to a considerable extent as a result of higher wage claims. See OECD, Economic Surveys, 33-34. 17 See for instance, Wieleman, “De economische betekenis van het Nederlandse aardgas”, 1012-1016; Warner Corden, “Booming Sector and Dutch Disease Economics: Survey and Consolidation”, Oxford Economic Papers 36 (1984) 359-80; Sweder van Wijnbergen, “The ‘Dutch Disease’: A Disease After All?” The Economic Journal 94 (1984) 41-55.

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surplus into a reasonably large deficit from the time that it entered office in 1973 until it left in 1977.18 This naturally led to pressure to reduce government spending, including from members within the government itself. A public letter written by nine captains of industry in early 1976 calling for a “significant decrease in the collective burden – including taxes, social contributions, fees, and charges by the government” placed further pressure on the government’s spending policy.19 In the course of that year – and despite strong resistance to this, in particular from ARP Minister of Social Affairs, Jaap Boersma – the social-democratic Minister of Finance, Wim Duisenberg, consequently managed to persuade his fellow cabinet members to accept the principle that the growth of government spending – including social insurance contribution levels – was to be limited to one percent on an annual basis.20 While nothing came of this principle in practice, it signaled an important change in policy stance. To reduce the costs of welfare expenditure, the government among others considered reorganizing the administration and supervision of the social insurance system and reducing benefit levels for the long-term disabled to those currently received by the long-term unemployed. However, nothing ultimately came of this. In 1977, parliamentary elections brought an end to the most progressive government in Dutch history, as the main confessional parties opted to form a new government with the liberal VVD, despite a clear Labor Party victory. The growing budget deficit had been a major issue during the 1977 election, whereby the confessional choice for a coalition with the VVD was viewed as a clear choice for a more conservative welfare course. Nonetheless, in reality, divisions over austerity and welfare reform transcended party lines, which meant that the first Van Agt government did not radically break with the spending policies of its predecessors. The government’s coalition agreement held out the prospect of “responsible retrenchment measures” that would not affect the purchasing power of the lowest income groups, to which the government later added that higher income groups would be requested to make the largest sacrifices.21 The new government adopted 18 T. Braakman, M.C. van Schendelen, and R.Ph. Schotten, Sociale zekerheid in Nederland (Utrecht: Spectrum, 1984) 173. 19 Jan van den Brink, Zoeken naar een “heilstaat”. Opbouw, neergang en perspectief van de Nederlandse verzorgingsstaat (Amsterdam: Elsevier, 1984) 676-677. 20 The planned increased was 2.5 to 3 percent, which necessitated a massive cutback of between 8 to 10 billion guilders up to 1980. According to Therborn, only fourteen percent of these cuts were actually realized. See Therborn, “‘Pillarization’ and ‘Popular Movements’”, 216; and Toirkens, Schijn en werkelijkheid, 40. 21 Vording, Koppelingen, 103.

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the one-percent norm of its predecessor, embarking on an austerity program that mainly comprised minor and ad-hoc measures such as incidental reductions in the indexation of governmental official salaries and public benef its, as well as a further reduction in benef its over the minimum level through the introduction of a new calculation method. For electoral reasons, the government presented the latter as a correction to a flaw in the existing calculation method, rather than as a budgetary measure. At the same time, it introduced compensatory fiscal measures for the elderly and disabled and temporarily increased spending on employment policy.22 Parliamentary and public resistance to the government’s austerity measures were nevertheless fierce. While the government had indicated that further cut-backs were a distinct possibility if the economic situation became even less favorable, which proved to be the case, it was unable to do so owing to strong opposition to this from various confessional cabinet members as well as left-leaning confessional backbenchers. Internal disagreements on the matter eventually led to a clash between ARP Minister of Social Affairs and former union leader, Wil Albeda, and KVP Minister of Finance, Frans Andriessen, which resulted in the latter’s resignation. Throughout his period in office, Albeda kept insisting that social insurance benefit cuts would only work to aggravate the labor union movement and thus did not make sense as the key towards improving economic competiveness as well as the government’s financial situation lay in obtaining union support for wage moderation. He argued that if this were to be achieved, welfare expenditure growth would also be automatically curbed, given that as social insurance benefits were linked to wages, after all.23 To placate the labor union movement, Albeda among others introduced a Working Conditions Act (Arbeidsomstandighedenwet, or Arbo-wet) in 1980, which provided a series of procedures forcing all workers and employers to work on improving work conditions. In addition, he amended the existing Works Councils Act (Wet op Ondernemingsraden, or WOR) to reinforce the position of works councils by entitling them to information and codetermination on more important decisions within firms. Despite his well-cultivated relationship with the union movement, a renewed policy of long-term wage restraint would not come about during Albeda’s period in office. Following the election of 1981, the newly established 22 Ibidem, 107; Toirkens, Schijn en werkelijkheid, 60-62; Juliaan Woltjer, Recent verleden. Nederland in de twintigste eeuw (Amsterdam: Balans, 1992) 450-453. 23 Wil Albeda, Ik en de verzorgingsstaat. Herinneringen van Wil Albeda (Amsterdam: Boom, 2004) 201-203.

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CDA and VVD were two seats short of a majority, forcing Van Agt to negotiate a coalition with the Labor Party and left-liberal D66. Owing to personal rivalries and strong disagreements over the course of welfare reform, the relationship between the coalition partners was strained from the start. For a period of seven months, the three parties bickered over whether priority should be given to maintaining household spending and enhancing employment or reducing the budget deficit. Within the government at least, the CDA and D66 mostly sided together in their insistence on the latter. Increasingly isolated, the Labor Party eventually pulled out of the coalition, leaving the two remaining parties to govern with parliamentary support of the VVD. The most noticeable acts of the second Van Agt government had been the failed attempt of its Minister of Social Affairs, the previous prime minister Joop den Uyl, to expand the number of waiting days in the sickness insurance program from two to five days and force employers to abstain from adding private supplements to the public sickness benefit. Both proposals were strongly opposed by Labor’s natural ally, the FNV, which had been formed in 1976 as a merger between the socialist NVV and Catholic NKV.24 By the end of Van Agt’s last government, the budget deficit had increased to a whopping 6.2 percent of the gross national product.25 At the same time, the outbreak of the second oil crisis in 1979 removed any possible misperceptions that remained regarding the depth of the crisis. As the country plunged into a deep recession and unemployment doubled in just two years, it became much more difficult to view the crisis as a cyclical problem that could best be alleviated by attempting to maintain consumption levels and combating unemployment through the introduction of targeted employment policies.26 Within the CDA in particular, a gradual consensus emerged over the need to tackle the government deficit without increasing the financial burden of taxpayers. Along with its growing emphasis on the need to address “structural imbalances” in the Dutch economy, this ensured that the 24 Visser and Hemerijck, “A Dutch Miracle”, 141; Leo Aarts and Philip de Jong, “Evaluating the 1987 and 1993 Social Welfare Reforms: From Disappointment to Potential Success”. In Aarts, Burkhauser, and De Jong, Curing the Dutch Disease, 50. 25 Nicolette van Gestel, Paul de Beer, and Marc van der Meer, Het hervormingsmoeras van de verzorgingsstaat. Veranderingen in de organisatie van de sociale zekerheid (Amsterdam: Amsterdam University Press, 2009) 58. 26 As a result of the rapid increase in unemployment following the outbreak of the second oil crisis, it simply became impossible to afford running targeted employment policies. Between 1978 and 1982, and while total spending on employment policy remained more-or-less stable, the size of the budget that each employment office had at its disposal decreased from 4,300 to 1,500 guilders per unemployed worker. F. Huijgen, “The Training of Workers and their Occupational Level: the Qualitative Structure of Employment”, Journal of Social Sciences 26:2 (1990) 91-101.

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party – like its predecessors during the 1960s – developed a long-standing preference for governing with the VVD rather than the Labor Party, which meant that the latter would remain in the opposition benches for most of the decade. This second long period in opposition – and the realization that the centrist CDA always had the option of forming a center-right coalition – was to have strong consequences for the Labor Party’s take on government in later years, forcing it to adopt a more pragmatic stance on welfare reform. In 1982, following yet another electoral Labor victory, Van Agt’s successor Ruud Lubbers managed to form a new confessional-liberal coalition in just 57 days. The swiftness by which the two parties had managed to form a new government signaled their agreement on the need for retrenchment. The main difference with five years earlier was that the CDA members of the new government were now much more committed to this than their predecessors had been. The onset of the first Lubbers government thus constituted an important turning point in the history of Dutch welfare reform: for the f irst time, a government was able to develop a coherent retrenchment policy based on a common determination to reduce the size of the public deficit. The government’s ability to pursue a coherent retrenchment policy without being punished for this electorally played an important role in the CDA’s transition towards a more conservative party on matters related to welfare reform. Despite strong societal protests against the government’s austerity measures, the general election of 1986 resulted in a major victory for the CDA, which consequently felt strengthened in its conviction that it pursued a successful economic policy, even though most of its gains came at the expense of its junior coalition partner. The two parties consequently continued in government up to the late 1980s, which further facilitated the coherence of government retrenchment policy in this period. The CDA’s ability to implement major budget cuts without being punished for this at the polls can at least partly be explained by the increasingly dire economic situation in which the Netherlands found itself following the outbreak of the second oil crisis. Yet it was also important that it refrained from introducing harsh benefit cuts into popular social insurance programs in this period. Instead, it embarked on a broad austerity program that also affected areas such as health insurance, social care, housing, education, and public sector wages. While these measures were successful in reigning in government spending, they did not reduce the inflow into the social insurance system in a major way. On the contrary – and as illustrated in Chapter 5 –, the number of disability insurance benefit recipients in particular continued to grow during the 1980s (and in fact up to the mid-1990s). The absence of harsher entitlement cuts that could have reduced benefit dependency in this

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period can in part be attributed to electoral considerations. Nonetheless, it was also important that the government’s economic success continued to depend on its ability to cooperate with the labor union movement, which continued to resist any cuts in benefit entitlements. Finally, despite its increasingly liberal signature, there also continued to be much principled resistance within the CDA against harsh benefit cuts.

Towards a More Coherent Retrenchment Agenda Compared to the many proposals that were circling around in advisory and ministerial circles in this period, the welfare reforms of the first two Lubbers governments were indeed relatively mild. Among the most influential of these was the 1981 report of a government-appointed committee on industrial policy, named after its chairman, the former director of Royal Dutch Shell, Richard Wagner. In addition to propagating the introduction of more flexible dismissal procedures and a move towards a decentralized wage bargaining system, the report called for the abolition of benefit wage indexation. The latter proposal was also advocated by various ministerial working groups as well as the Bureau for Economic Policy Analysis (Centraal Planbureau, or CPB) – an independent government agency created in 1945 to deliver economic analyses and forecasts – as a particularly effective way of reducing government spending.27 These and other groups and bodies also suggested moving towards a two-stage system that combined flat-rate benefits for all workers or citizens with earnings-related supplements that would be granted under more strict entitlement rules or for a much shorter period. In line with these recommendations, the employer representatives to the Social-Economic Council in 1984 suggested reducing all social insurance benefits to a minimum level. Finally, most advisory bodies advocated benefit cuts that far exceeded those introduced by the first two Lubbers governments, with some – like the Scientific Council for Government Policy (Wetenschappelijke Raad voor Regeringsbeleid, or WRR) – pointing out that private insurance could do the job just fine for many workers.28 27 Under Den Uyl, the CPB had taken position that this was not necessary. 28 SER, Advies hoofdlijnen gewijzigd stelsel van sociale zekerheid bij werkloosheid en arbeidsongeschiktheid (Den Haag: SER, 1984) 145-155; Anton Rommelse, De arbeidsongeschiktheidsverzekering: tussen publiek en privaat. Een beschrijving, analyse en waardering van de belangrijkste wijzigingen in het Nederlandse arbeidsongeschiktheidsstelsel tussen 1980 en 2010 (Leiden: Academic Thesis, 2014) 165-166; Roebroek and Hertogh, “De beschavende invloed des tijds”, 385; Cox, The Development of the Dutch Welfare State, 190.

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Of all the proposals put forward at the time, the new government considered limiting the application of the wage indexation mechanism as the most feasible and effective way of reigning in government spending. Chapter 4 has already shown that the decisions to link net minimum benefit levels to that of the net minimum wage and the minimum wage to general wage increases had been controversial from the start, with both the CDA’s predecessors and the VVD worrying greatly about the consequences of this for government spending and workers’ reservation wages. For this reason, the “net-net link” was not officially established until the introduction of the Act on Adjustment Mechanism (Wet op Aanpassingsmechanismen, or WAM) in 1979, some five years after its de facto introduction. It is thus unsurprising that when government deficits first threatened to become a major problem during the mid-1970s, the confessional parties and VVD immediately turned to limiting and abolishing the wage indexation mechanism, respectively, as one of the most obvious ways to tackle these deficits. This first resulted in clashes between confessional and social-democrat forces under the Van Agt government, with the KVP demanding that the net-net link was to be included in discussions over welfare cut-backs and the Labor Party insisting that this was not necessary as long as wages could be kept in check. In addition to suggesting refraining from applying the wage indexation mechanism on an ad-hoc basis, various confessional ministers also suggested moving from full wage indexation to a system under which benefits would be adjusted based on a mixed index of prices and wages. However, this suggestion could not count on broad support, owing to principled Labor Party opposition to this idea, as well as many fearing that the government had even less control over inflation than over wages.29 In subsequent years, the issue of wage indexation developed into a major source of contention between the left and right. Whereas the Labor Party continued to insist on the need to ensure that benefit recipients also benefited from general productivity increases –which demanded an automatic application of the wage index mechanism – all other major parties wanted to limit the application of this mechanism in one way or another by the early 1980s. Within the Social-Economic Council, a majority of members also came to question the existing link between wages and benefits. To the council’s employer representatives, the rapid deterioration in government finances and increase in benefit dependency served as a confirmation of the need to replace the current wage indexation mechanism with one under which benefits were only adjusted in line with price levels. They 29 Vording, Koppelingen, 97; Toirkens, Schijn en werkelijkheid, 41-44.

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also called the automatic nature of adjustments into question and were most insistent on the need to decouple social assistance and minimum benefit levels from the minimum wage. Their insistence on the latter grew increasingly radical over the years. By the mid-1980s, the council’s employer representatives even went as far as arguing that a complete abolition of the minimum wage principle – at least for those sectors that were covered by collective bargaining agreements – should receive serious consideration. If that did not prove possible, the level of the statutory national minimum wage needed to be reduced by another fifteen to twenty percent in the next couple of years.30 While a majority of council members regarded these employer proposals as much too radical, most government-appointed members came to share their criticism of full wage indexation. In a 1976 report on the matter, they consequently proposed investigating the possibility of replacing the wage index with a mixed index of prices and wages, just as the KVP did at the time.31 To assuage the labor union movement, they proposed compensating lower income groups with targeted tax relief measures. However, this failed to convince the council’s union members, including those representing the confessional CNV, who continued to argue in favor of full wage indexation. As a result, the council consistently produced divided opinions on the matter during the late-1970s and early 1980s.32 This in turn made it much easier for governments to bypass the Social-Economic Council in this period. As we will see, the council also proved to be increasingly divided on many other welfare issues from the late 1970s onwards. While this did not necessarily reduce the influence of the social partners over welfare reform, it meant that the role of the council and consequently its ability to create broad societal support for reform was reduced.33 As the Labor Party became increasingly isolated on the matter, it was only a matter of time before a government came to refrain from applying the wage indexation mechanism in a major way. From 1976 onwards, 30 SER, Advies wettelijke minimumloonregeling (Den Haag: SER, 1985) 10. 31 SER, Advies inzake enkele beleidsvoornemens vervat in de nota over het te voeren beleid inzake de collectieve voorzieningen en werkgelegenheid (Den Haag: SER, 1976). 32 SER, Advies inzake enkele grondslagen voor een beleid gericht op redelijke inkomensverhoudingen (Den Haag: SER, 1978); SER, Advies inzake de aanpassingsmechanismen van minimumloon en minimumuitkering (Den Haag: SER, 1978); SER, Advies wetgeving inkomensvorming (Den Haag: SER, 1983); SER, Advies wettelijke minimumloonregeling. 33 On this, see among others Doreen Arnoldus, In goed overleg? Het overleg over de sociale zekerheid in Nederland vergeleken met België, 1967-1984 (Amsterdam: Aksant, 2007); Camphuis, Tussen analyse en opportuniteit, 545-552; Bas van Bavel, Joost Dankers, Jan Peet, and Teun Jaspers, SER 1950-2010. Zestig jaar denken voor draagvlak (Amsterdam: Boom, 2010).

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various governments had already introduced “discounts” on the extent to which benefits were adjusted in line with wage increases. When the second Van Agt government fell and the Labor Party returned to the opposition benches in 1982, the remaining governing party – the CDA – immediately announced that it would freeze the wage indexation mechanism altogether. Its successor adopted this as a general policy stance (its ability to coax the union movement into supporting another long round of wage restraint following the November 1982 Wassenaar Agreement did not reduce its determination to do so). While it never formally challenged the existence of the wage indexation mechanism, the first two Lubbers governments never applied the mechanism. Each year, parliament provided an exemption and often accompanied this by measures that aimed to compensate some of the low-income groups that were most seriously affected by this. Taking the form of specific tax exemptions or ad-hoc increases in childcare and other targeted benefits, these measures did alleviate the burden of austerity for low-income groups. Nonetheless, the gradual decrease in the relative level of the social minimum – which is illustrated in Figure 8.1 – had major consequences for the purchasing power of social assistance benefit and old-age pension recipients, as well as those disability insurance and unemployment insurance benefit recipients who received the social minimum.34 The government itself acknowledged this, arguing that these “temporary infringements on parallel income development” were simply an economic necessity.35 It was not until the social-democrats returned to power that parliament allowed the wage indexation mechanism to apply again. The first application of the wage indexation mechanism in almost a decade in 1990 resulted from a political compromise under which the CDA and Labor Party – which were to form the third Lubbers government – agreed to adjust minimum benefit levels in line with general wage developments unless wages increased by more than the sum of general productivity and prices increases, or the number of benefit recipients increased so rapidly that an increase in either contribution or general taxation rates was necessary. Under such circumstances, governments could choose to – but did not have to – refrain from applying the wage indexation mechanism. A majority of Social-Economic Council members (excluding all labor union members) also wanted to include the state of general government finances as a possible reason for not applying the indexation mechanism, although the government did not 34 On this, see also Hans Bosselaar, De sociale minima: trendstudie 1980-1994 (Den Haag: Ministerie van Buitenlandse Zaken en Werkgelegenheid, 1995). 35 Vording, Koppelingen, 141.

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Figure 8.1 The social minimum compared to average wages in industry, 1970-1995 0,85

0,8

0,75

0,7

0,65

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

0,6

Source: Coen Teulings, Romke van der Veen, and Willem Trommel, Dilemma’s van sociale zekerheid: een analyse van 10 jaar herziening van het stelsel van sociale zekerheid (Amsterdam: VUGA, 1997) 161

adopt this proposal.36 The Coupling with Adjustment Possibility Act (Wet Koppeling met Afwijkingsmogelijkheid, or WKA) passed parliament in 1991 and came into operation during the following year. The act’s explanatory memorandum added another condition by stating that benefits did not have to be adjusted in line with wage increases when the number of benefit recipients to active workers exceeded the ratio of 86 to 100, which was later lowered to 82.2 benefit recipients for every 100 active workers.37 As a result of this, parliament once again refrained from applying the indexation mechanism during the mid-1990s. For some social minimum benefit recipients, the consequences of nonapplication of the wage indexation mechanism were compounded by other retrenchment measures. This was particularly the case for social assistance benefit recipients. Even more than with the unemployment insurance and provision programs – which after all contained certain eligibility criteria – an increasing number of liberal and confessional parties had become worried about the consequences of the social assistance benefit’s increasing generosity 36 SER, Advies aanpassing minimumloon en sociale uitkeringen (Den Haag: SER, 1990). 37 For an overview of active to inactive worker ratios from 1972 to 1997, see Visser and Hemerijck, “A Dutch Miracle”, 187.

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on workers’ willingness to look for and accept work after becoming unemployed. It was for this reason that political parties like the VVD as well as – and as stated earlier – the employer federations were particularly insistent on abolishing the link between social assistance benefits and the statutory minimum wage.38 While the VVD did not manage to persuade its senior coalition partner to agree to this, the two parties introduced various other measures to reduce the generosity of the social assistance benefit. For instance, in 1983, the first Lubbers government for instance introduced a “house-sharers norm,” which reduced benefit levels for recipients who lived together and derived cost advantages from this but were not married or otherwise in a serious relationship. The introduction of this measure signaled a major shift away from the original approach of the General Assistance Act, which was based on individual assessments of need. At the same time, the Lubbers government invested much more heavily in detecting fraud compared to its predecessors.39 Its move away from an individual assessment of need, its preoccupation with fraud detection, and the accompanying rhetoric that emphasized the importance of self-help would all be extended by subsequent confessional-liberal governments. The first Lubbers government also displayed a ground-breaking ability to introduce major cuts in various other government programs that had hitherto never been subjected to major austerity measures. For instance, one of its first measures had been to dramatically reduce government spending on employment programs and end the open-ended commitment on the part of the central government to subsidizing existing municipality-organized social employment centers. However, the extent to which these measures succeeded in reducing government spending is unclear, as they naturally led to an increase in spending on unemployment-related income transfers. The same applies for a 1983 measure to introduce a small deductible on prescribed medicines, which greatly increased pharmacists’ administrative burden and prompted them to prescribe larger amounts of medicines to patients to reduce their costs. 40 The measure also led to broad societal 38 They had consistently done so from the moment when this link was introduced. When the economic situation rapidly deteriorated, the VNO thus took this as an opportunity to insist on the need to reconsider this link. See for instance VNO, F119(5): Cie Sociale Verzekering RCO: Kort verslag van de vergadering van de Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, gehouden op 12 January 1973; VNO, F118(21) Cie Sociale Zekerheid VNO: Verslag van de vergadering van de Commissie Sociale Verzekering VNO gehouden op 7 August 1974. 39 Cox, The Development of the Dutch Welfare State, 186-187. 40 The deductible equaled 2 guilders and 50 cents with an upper limit of 125 guilders per year. See Oscar van Heffen and Toon Kerkhoff, “Gezondheidszorg: van blauwdrukdenken naar incrementeel denken”. In Trommel and Van der Veen, De herverdeelde samenleving, 193.

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protest. Various pharmacies as well as one of the major health insurance providers publicly refused to cooperate with the measure and received broad sympathy for this in the press. Meanwhile, an action group named “stop the deductible” managed to collect 185,000 signatures in a fleeting attempt to force the government to retract the measure. It goes without saying that the main opposition party in parliament – the Labor Party – also opposed the introduction of deductibles. Nonetheless, the very fact that the Lubbers government had managed to introduce deductibles into the health insurance program shows the extent to which the political situation had changed over the course of the last decade. After all, two earlier attempts to do so had both failed. 41 Moreover, other measures introduced by the government in this period more clearly succeeded in reducing government expenditure. For instance, it broke new ground in 1984 by confronting hospitals with a strict budget freeze. To achieve this in the face of rising costs as a result of technological advance and population ageing, hospitals were to increase their operational efficiency and reduce the number of unnecessary medical procedures. While this measure also drew much protest, it proved a great success from a financial perspective. By 1985, government spending on hospital costs had actually decreased, as had the number of clinical operations. 42 As a result, the second Lubbers government introduced more budgetary measures and limited the total growth of the health care sector to one percent per year. At the same time, the government investigated the possibility of a more ambitious overhaul of the health care sector in this period. However, this failed to materialize, as a result of strong disagreements between the two coalition partners over the direction of reform. It would take another two 41 In 1966, KVP Minister of Social Affairs Gerard Veldkamp had proposed to introduce a deductible of 10 guilders during the f irst 30 days of hospitalization. Of the major parties in parliament at the time, only the VVD had come out in support of the proposal. Five years later – and as explained in Chapter 4 – negotiations between labor unions and employers over raising the level of the old-age pension benefit to that of the minimum wage also resulted in the intention to introduce some form of deductible in the health care program, although this never materialized into concrete proposals. See Johan van Merriënboer, “‘Jelle zal wel zien. Het overgangskabinet-Zijlstra”. In Van der Heiden and Van Kessel, Rondom de nacht van Schmelzer, 401-402; VNO, F75(105) VUT-regelingen 1970-1985: Rapport inzake consequenties van vervroegd pensioneren in het kader van oplossingen voor oudere werknemers; VNO, F119(5) Cie Sociale Verzekering RCO: Notulen Commissie Sociale Verzekering Raad van Bestuur in Arbeidszaken, 25 November 1971. 42 According to the General Court of Auditors (Algemene Rekenkamer), the government managed to reduce health care spending by almost ten billion guilders as a result of this measures. See J.P. van der Reijden, “Terugblik op de periode 1982-1986”. In J.C. Gerritsen and C.P. van Linschoten, Gezondheidszorgbeleid, evaluatie en toekomstperspectief (Assen: Van Gorcum, 1997) 35.

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decades before the CDA had moved so much further to the right that it had come to share the VVD’s insistence on the need to introduce more market competition among health care providers and insurers. The consequences of this will be explained in Chapter 8. To reduce the f inancial burden of what was rapidly developing into one of the largest spending departments, the Lubbers government also imposed austerity measures on the housing sector. For a variety of reasons – including the previously mentioned introduction and expansion of rent subsidies and attempts to stimulate housing production by increasing production subsidies – annual government spending on housing increased from about one billion guilders in 1970 to almost seven billion guilders in 1988. 43 The government’s ability to first stabilize and subsequently curb housing expenditure during the 1980s was facilitated by three factors that were largely beyond its own control. First, under the previously mentioned Wassenaar Agreement, the unions – for instance – not only committed themselves to another long period of wage restraint but also forfeited the right to automatic inflation-adjustment of rent subsidies. As a result, the government was able to reduce spending on rent subsidies while increasing rent costs. Both measures severely affected lower income groups. Second – and more important to the government’s austerity agenda – the housing sector slowly recovered during the mid-1980s, which enabled it to reduce production subsidies. Finally, its ability to reduce these subsidies was also facilitated by popular dissatisfaction with the sector as a result of a series of scandals that prompted the government to instigate a parliamentary inquiry into the housing sector in 1986, which subsequently revealed how easy it was to receive public subsidies. As the economic situation further improved, subsequent governments introduced various austerity measures of their own. As a result, the housing sector’s share in total government spending was to decrease from 8.7 percent in 1985 to only 2.7 percent in 1998. 44 Finally, the government attempted to restrict the growth of the social care sector by imposing budgetary measures on various social care programs. However, this sector continued to grow despite these measures, which were accompanied by an increasingly liberal rhetoric that emphasized the importance of self-help and personal responsibility. 45 Part of the reason for this was that municipalities increasingly used their own resources to 43 Brandsen and Helderman, “Volkshuisvesting”, 177. 44 Ibidem, 87. 45 See Radboud Engbersen and Ard Sprinkhuizen, “Welzijnsbeleid tussen flexibiliteit en versnippering”. In Trommel and Van der Veen, De herverdeelde samenleving, 232-233.

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compensate for reduced central government spending. The government in turn stimulated this by initiating a large decentralization under the 1987 Welfare Act (Welzijnswet), which gave much more responsibility to local municipalities for developing, financing, and implementing their own social care policies. While different governments would continue to hold different views regarding the conflicting need to allow for local flexibility and some degree of central supervision, in 1994 a new government introduced the New Welfare Act (Nieuwe Welzijnswet), which gave the central government a stronger hold on substantive aspects of social care policies. From the mid-1980s onwards, the dominant tendency was clearly one of increased decentralization of the social care sector.

The 1987 Reform of the Social Insurance System The popular backlash against the introduction of deductibles into the health insurance program left no doubt concerning the electoral risks involved in pursuing austerity measures that were clearly visible to voters, even when these did not influence their purchasing power in a major way. In this sense, the backlash may have worked to strengthen the government’s belief that it had been a sound decision to refrain from introducing visible cuts in social insurance entitlement rights during this period. However, as the number of social insurance benefit recipients further increased, this passive stance became increasingly difficult to maintain. This increase directly resulted from the deteriorating employment situation. In the first three years of the Lubbers administration – and partly due to its own austerity measures – the number of unemployment insurance and provision benefit recipients more than doubled to 652,000, thereby almost rivaling the number of disability insurance benefit recipients (which also continued to slightly grow in this period). At the same time, the number of general assistance and early retirement benefit recipients also continued to increase. Under these circumstances, even the CDA’s most progressive backbenchers came to accept the necessity of reducing social insurance entitlement rights in a more drastic manner. As the number of disability insurance and unemployment insurance and provision benefit recipients dwarfed those of the other major transfer programs, the government naturally turned to these programs first. The absence of serious measures to curb the number of disability insurance benefit recipients before the mid-1980s illustrates just how difficult it was to limit workers’ social insurance entitlement rights in this period. By 1980, the number of disability insurance benefit recipients had already

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reached 600,000, which was some three to four times more than the initial expectation. Nonetheless, despite the immense financial burden that this placed on employers and workers, even the act’s most controversial feature – the employability criterion – continued to operate in more-or-less its original form until 1987. 46 In 1981, the Van Agt government did add a section to the clause that enabled the industrial insurance associations to limit its use to a certain period. Nonetheless, given that they could still only do so when they were able to demonstrate that a partially disabled worker’s inability to find new work had nothing to do with his or her handicap, nothing changed in practice. In 1983, the Lubbers government was the first to actually reduce workers’ entitlement rights to the public disability insurance program by limiting the social minimum benefit to disabled breadwinners. This measure obviously also fell short of employer demands, who among others pushed for a complete abolition of the employability criterion, a reduction in the number of disability classes from seven to three and a much larger across-the-board cut in benefit rates.47 On the other hand, the labor unions staunchly continued to oppose any reduction in workers’ entitlement rights. Being well aware of this, when it finally decided to embark on what was to be the first of many serious overhauls of the social insurance system, the government took the unprecedented step of preparing legislation without consulting the Social-Economic Council about this. In 1985 and 1986, it first reduced the levels of the disability insurance and unemployment insurance and provision benefits from 80 to 70 percent of the previous wage. While doing so, it prepared legislation that would merge the existing unemployment insurance and provision programs into a single program, abolish the employability criterion and replace existing minimum disability, sickness, and unemployment benefit levels with a means-tested supplement. The benefit level of the new unemployment insurance program would gradually be reduced in line with the duration of unemployment on a half-yearly basis. The supplement that was to replace the existing minimum benefits would be financed out of general means and workers over the age of 50 would be entitled to a separate social minimum-granting supplement that was to be granted without an equity test. Finally, it took various measures to remove discriminatory principles. These included granting equal treatment 46 According to an employer estimate, the disability insurance program’s share of the contributory burden increased from 27 percent in 1965 to 42 percent in 1979. See VNO, Arbeidsongeschiktheidsregelingen, F5(6): Interne nota adviesaanvrage staatssecretaris sociale zaken aan de SER inzake de verdeling van de WAO-premies. 47 See Cox, The Development of the Dutch Welfare State, 190, 195.

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to married and unmarried couples under the General Assistance Act and removing the partner test for the General Assistance Act. 48 In 1985, it had already provided married women with an independent right to an old-age pension benefit. 49 As it was legally impelled to do so, the government consulted the Social Insurance Council and the General Assistance Act College (College Algemene Bijstandswet) on its proposals. Nonetheless, it subsequently sent the bulk of these proposals to parliament before the Social Insurance Council had been able to release its report. Undeterred, the council nevertheless provided strong criticism of the government’s proposal to lower benefit rates for the long-term unemployed. The Social-Economic Council – which, despite the government’s slight, published a report on its own accord in August 1985 – also came out in full opposition to this proposal. It is difficult to say for what reasons the two councils’ employer members proved willing to back their union counterparts on this. While this may have reflected strategic considerations to some extent, there seems to have been a genuine concern that the government’s proposal conflicted with the actuarial principles on which the social insurance system was based. For this reason, VVD backbenchers in parliament would also later single out this proposal for criticism.50 The two councils were much less critical of the government’s other proposals overall. For instance, their union members were completely 48 Until 1979, married women and women who were in receipt of a widows and orphans benefit were not entitled to a general disability insurance benefit. In addition, the General Disability Act granted different benefit levels to married couples, unmarried couples with children below the age of eighteen, unmarried couples without children, and disabled persons aged eighteen to twenty. In 1987, the act no longer provided different benefit levels to married and unmarried couples as the income and equity test for partners was removed, although an income and equity test for disabled persons who applied for supplementary benefits remained in place. See J.A. Duivenvoorden, C.A.M. Hermans, N.L. Hofman, G.M.H. Janssen, G.A. van Pelt, and J.C.M.J. de Vroom, Stelselherziening sociale zekerheid (Deventer: Kluwer, 1986) 93; Teulings, Van der Veen, and Trommel, Dilemma’s van sociale zekerheid, 136-137. 49 Until then, only unmarried women and married and unmarried men were entitled to an old-age pension benefit when they reached the age of 65. The abolition of these and other social insurance principles based on the breadwinner’s principle was both a response to the increasing labor market participation rate among women and pressure from the European Community (EC). As late as 1971, the Netherlands had the lowest female participation rate in Western Europe, whereby only one in ten married women was in paid employment. By the late 1990s this had increased to 50 percent. For the consequences of this and the influence of the EC directive, see P.W. Mol, J.C. van Ours, and J.J.M. Theeuwes, Honderd jaar gehuwde vrouwen op de arbeidsmarkt (Den Haag: Atelier Rijksbouwmeester, 1988); W.J.P.M. Fase, Gelijke behandeling van vrouw en man in de sociale zekerheid: een studie naar de invloed van de derde EG-richtlijn op de Nederlandse wetgeving (Deventer: Kluwer, 1986). 50 See Roebroek and Hertogh, “De beschavende invloed des tijds”, 394-396.

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isolated in their criticism of the government’s intention to abolish the employability criterion. Moreover, both councils stated their full agreement with the principle that the social minimum could be best guaranteed by a supplementary benefit financed out of general means.51 The government’s proposals encountered much public resistance and among others led to the creation of new organizations that aimed to represent disaffected groups, including various disability platforms and committees for female general assistance recipients.52 The Labor Party and smaller left-wing parties also strongly opposed the government’s proposals, including its intention to abolish the labor market consideration principle. The smaller confessional parties also opposed most proposals, while the liberal D66 only granted its support to the proposal to replace existing minimum disability, sickness, and unemployment benefit levels with a means-tested supplement. The government nevertheless did not find it difficult to obtain parliamentary approval for its proposals. After it modified its proposal to reduce the level of the unemployment insurance benefit on a half-yearly basis and added measures to prevent older and partially disabled workers (including the self-employed) from ending up on general assistance, the CDA and VVD provided integral support to all of its proposals. The first major austerity reform of the social insurance system consequently passed both chambers of parliament in 1986 and came into operation in January 1987. While all major social insurance programs with the exception of the General Old Age Act were affected in one way or another, its consequences were most severe for the unemployed. Under the New Unemployment Insurance Act (Nieuwe Werkloosheidswet or NWW), unemployed workers with a work history of 26 weeks in the last year were entitled to a benefit that equaled 70 percent of the previous wage for at least six months. Depending on the recipient’s work history, entitlement to a benefit could be increased to a maximum total of 54 months. When entitlement to a regular benefit expired, workers with a work history of at least three years in the last five were entitled to a non-means-tested benefit that equaled 70 percent of the minimum wage for a maximum of twelve months. For unemployed workers over the age of fifty, entitlement to the 51 See SER, Vervolgadvies gewijzigd stelsel van sociale zekerheid bij werkloosheid en arbeidsongeschiktheid (Den Haag: SER, 1985) 54-55; SVR, Herziening van het sociale zekerheidsstelsel. Samenvatting van het advies (Zoetermeer: SVR, 1985). 52 Rik van Berkel, Ouderen en uitkeringsgerechtigden in beweging: belangenorganisaties in kaart gebracht (Utrecht: Van Arkel, 1992); Ruud Vlek, Inactieven in actie: belangenstrijd en belangenbehartiging van uitkeringsgerechtigden in de Nederlandse politiek, 1974-1994 (Groningen: Wolters-Noordhoff, 1997).

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latter benefit ended when they reached the retirement age. Contrary to both of its predecessors and the old Unemployment Insurance Act, respectively, the New Unemployment Insurance Act also catered to part-time workers and the voluntary unemployed. The latter measure was accompanied by various additional conditions and more specific guidelines on sanctions in case of non-compliance.53 Finally, the act broadened the industrial insurance associations’ ability to redirect part of their funds for reintegration purposes.54 To ensure that unemployed, sick, and disabled workers would not fall below the social minimum, the government introduced a meanstested supplement under the Supplementary Benefits Act (Toeslagenwet, or TW). Older and partially disabled workers and self-employed persons could in turn apply for a separate – and non-means-tested – benefit under the Act on Income Provisions for Older or Partially Disabled, Unemployed Persons (Wet Inkomensvoorziening Oudere en Gedeeltelijk Arbeidsongeschikte Werkloze Werknemers, or IOAW) and Act on Income Provisions for Older or Partially Disabled, Former Self-Employed Persons (Wet Inkomensvoorziening Oudere en Gedeeltelijk Arbeidsongeschikte Gewezen Zelfstandigen, or IOAZ), respectively. The government defended the 1987 overhaul by arguing that it did not aim to reduce the total level of welfare entitlements as it expected the social partners to fill emerging gaps by increasing the generosity of private benefits. It specifically encouraged this partial privatization of the welfare system by calling on the social partner to “take their responsibility” in the area of welfare provision.55 Indeed, the number and generosity of privately bargained benefits rapidly increased in consecutive years.56 The government’s support for partial welfare privatization undoubtedly grounded in electoral considerations and should primarily be seen as an attempt to deflect public discontent with its reform measures. However, it also suggests that the government may still have been somewhat less concerned with reducing the number of social insurance benefit recipients than with reducing the system’s costs. After all, 53 In future years, the number of applications indeed rapidly increased, although a substantial share of this increase resulted from the increased openness to voluntary unemployment. See P. Mullenders, Werken sancties? Onderzoek naar het effect van sancties in de WW (Den Haag: VUGA, 1996) 25. 54 Van der Meer and Visser, “Arbeidsvoorziening”, 200. 55 Rommelse, De arbeidsongeschiktheidsverzekering, 190. 56 Dienst Collectieve Arbeidsvoorwaarden, Bovenwettelijke uitkeringen in cao’s. Een onderzoek naar de stand van zaken in 1984 en 1989 in cao’s van bovenwettelijke aanvullingen op uitkeringen ingevolge de ZW, WAO/AAW, WW en bij overlijden (Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid, 1991).

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by encouraging workers to repair emerging gaps during subsequent wage negotiations, it also undermined the effects that its measures could have in making social insurance programs less attractive to workers. As we will see in the following chapter, future governments would display much greater concern about the consequences of private benefits on the reservation wage of workers and would consequently actively work to limit their development. In terms of its effect on the number of benefit recipients, the 1987 overhaul of the social insurance system was not very successful. In fact, the largest group of beneficiaries other than old-age pensioners – the disabled – continued to increase in subsequent years. There were at least two reasons for this: first, despite the formal abolition of the employability criterion, many industrial insurance associations continued to apply labor market considerations in their disability assessments;57 and second, by reducing the generosity of the unemployment insurance program, the government indirectly increased the attractiveness of the disability insurance route as an alternative to dismissals. Both of these developments seem to have come as a surprise to the government. At the time of its introduction, it estimated that its overhaul would result in a 50 percent reduction in the annual number of disability insurance claims. Not only did this fail to materialize, but to make matters worse, the number of sickness absentees also rapidly increased during the late 1980s.58 In just two years’ time, the government thus had to admit that its estimate of the consequences of its reform on the number of social benefit recipients had been much too optimistic. Indeed, this in turn forced it to consider embarking on a much more serious overhaul of the social insurance system, which would have much greater consequences for workers’ entitlement rights, especially as far as the disability insurance program was concerned. This overhaul would eventually come about under a very different political constellation, as the CDA was forced to make a left turn following the general elections of 1989 as a result of both internal pressure from its left-leaning backbenchers and because its parliamentary majority with the VVD had become so small that a new confessional-liberal government seemed rather unstable.59 By forming a coalition with the Labor Party, it ensured that the 57 Van der Veen, De Sociale Grenzen, 109-110; Leo Aarts and Philip de Jong, Economic Aspects of Disability Behavior (Rotterdam: Academic Thesis, 1992) 329. 58 See Aarts and De Jong, “Evaluating the 1987 and 1993 Social Welfare Reforms, 60; SER, Ziekteverzuim en arbeidsongeschiktheid: Advies over het beleid ten aanzien van ziekteverzuim en arbeidsongeschiktheid (Den Haag, SER, 1991) 34, 37. 59 See Steven B. Wolinetz, “The Dutch election of 1989: Return to the centre‐left”, West European Politics 13:2 (1990) 280-286.

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latter had to assume political responsibility for major welfare cut-backs for the first time in its history. As the number of disability insurance recipients continued to further grow during the late 1980s, reaching 700,000 by the end of the decade, it proved impossible even for the Labor Party to continue to reject measures that would have adverse consequences for workers’ entitlement rights. By the early 1990s, all major political parties had come to accept that the Netherlands suffered from a severe inactivity crisis, which warranted a serious policy response. As a result, the decade witnessed a more radical overhaul of the social insurance system and related programs than had hitherto taken place. Moreover, as we will see, this played a major role in the radical transformation of the Dutch political landscape that came about in this period.

9

Towards an Active Welfare State

In late 1989, the Labor Party returned to government as a junior partner in a grand coalition with the Christian-democrats, following a campaign in which it had taken a firm stance against austerity. In little over a year after the new government came to power, the party nevertheless lent its support to a major overhaul of the public disability and sickness insurance programs. The overhaul was much more radical than anything to which the social insurance system had been subjected thus far, having particularly strong consequences for the country’s disabled. Furthermore, it was also deeply unpopular among voters. In October 1991, about one quarter of a million people came out in protest against the government’s reform proposals, which made it the largest union protest ever organized. The Labor Party itself was deeply divided over the matter, whereby internal protests eventually led to the resignation of the party’s chair, Marjanne Sint, and its Secretary at the Department of Social Affairs and Employment, Elske ter Veld, while party leader Wim Kok only managed to hold on to his position after organizing a special party congress in which he demanded (and eventually received) support from its members. The party eventually lost about one third of its members as a result of the internal crisis that ensued. Moreover, during the subsequent elections of May 1994, it lost almost one quarter of its seats. While this number was unprecedented, it was also much less than what the party had feared at the peak of the crisis.1 Another consolation was that the CDA lost even more seats, which enabled the Labor Party to hold on to power and form a “purple” coalition with the liberal VVD and liberal-social D66. Even though its massive electoral loss could clearly be attributed to the unpopularity of social insurance reform, the party continued to support a reformist course during the next eight years in which it was to act as a senior partner to the country’s first-ever socialist-liberal government. As long-term unemployment and inactivity due to sickness and disability, respectively, continued to remain high and even increased in absolute numbers, it was under enormous political pressure to do so. During the second half of the 1990s, both left-leaning and more liberal-oriented parties also increasingly 1 In August 1991, after it had become clear that the Labor Party had agreed to reduce the duration of the public disability insurance benefit it stood at 22 seats in the polls (compared to the 49 seats it had in parliament at the time). During the elections of May 1994, it eventually received 37 seats. See H. Anker, “Is de Nederlandse kiezer op drift geraakt?” In G. Voerman, Jaarboek Documentatiecentrum Nederlandse politieke partijen (Groningen: DNPP, 1994) 149.

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expressed concern over the ongoing process of population ageing, which further increased pressure for reform.2 While some of the solutions to these problems resulted in increased levels of government care and provision, the overall tendency was undoubtedly towards further retrenchment, de-collectivization and privatization of welfare responsibilities. To increase labor market participation levels, the purple government in power from 1994 to 2002 also strongly invested in active labor market measures and liberalized the labor market in a major way. For instance, in addition to increasing the possibilities for overtime work and temporary deviations from the general work routine, it enabled employers to make use of more flexible forms of employment.3 Finally, the government brought an end to almost one hundred years of industry involvement in the administration and supervision of the social insurance system. As responsibility for this was (initially) to be delegated to private organizations, the decision to do so also testified its overall liberal approach on welfare reform. The Netherlands was certainly by no means the only country that was forced to introduce harsh reform measures in this period. In many other continental European countries, the pace of welfare reform also picked up markedly during the 1990s. By the end of the decade, various scholars had come to conclude from this that economic pressure had narrowed (left-wing) parties’ choices to such an extent that political partisanship no 2 The process of population ageing had contributed to social insurance costs and inactivity members for a relatively long period before it emerged as a major political issue. Between 1975 and 1990, the public old-age pension and widows and orphans program account for about half of the growth in public benef it recipients. See Roebroek and Hertogh, “De beschavende invloed des tijds”, 381. The Scientif ic Council for Government Policy was one of the f irst to acknowledge the importance of this in a 1990 report on labor market participation and it would continue to warn about the consequences of demographic change in consecutive years. See WRR, Een werkend perspectief. Arbeidsparticipatie in de jaren negentig (Den Haag: WRR, 1990). See also WRR, Ouderen voor ouderen: demografische ontwikkelingen en beleid (Den Haag: WRR, 1993). From 1997 onwards, the Bureau for Economic Policy Analysis started to include “ageing sums” in its economic analyses. See CPB, Centraal Economisch Plan (Den Haag: CPB, 1997). Moreover, the Labor Party f irst formulated concrete policy proposals on the problem of population ageing in 2000. See Partij van de Arbeid, De kleur van grijs: een sociaal-democratische verkenning over jong en oud in een vergrijsde samenleving (Amsterdam: Partij van de Arbeid, 2000). 3 For extensive treatments of this, see for instance, Visser and Hemerijck, “A Dutch Miracle”, 201229; Ton Wilthagen and Frans Tros, “The Concept of ‘Flexicurity’: A New Approach to Regulating Employment and Labour Markets”, Transfer: European Review of Labour and Research 10:2 (2004) 166-186; Ruud Muffels and Joop Schippers, “Van ‘life-time employment’ naar ‘employability’”. In Wil Aarts, Han Entzinger, and Ruud Muffels, Verzorgingsstaat vaar wel (Van Gorcum: Assen, 2004) 123-138; and Hester Houwing, A Dutch Approach to Flexicurity: Negotiated Change in the Organization of Temporary Work (Amsterdam: Academic Thesis, 2010).

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longer played a major role in explaining welfare outcomes. 4 This argument makes some sense when applied to the disability insurance crisis of the early 1990s. When it became clear that the number of disability insurance recipients might actually come to approach one million (among a working population of about six million) in the near feature, even the Labor Party saw no alternative to harsh benefit cuts that affected workers’ entitlement rights in a serious manner. The fact that its coalition partner was fully committed to this held major importance and quite successfully managed to place pressure on the Labor Party by threatening to withdraw from the coalition to form a more reform-oriented government with the liberal opposition. In other words, in terms of disability insurance reform the Labor Party’s hands were effectively tied during the early 1990s and it could do little more than attempt to soften the measures proposed by its senior coalition partner. However, policy options were much less constrained with respect to almost all other matters. There certainly was no shortage of ideas concerning how to raise activity rates in this period, many of which were quite different from one another in terms of both their overall approach (for instance, regarding whether they implied more or less regulation and other forms of government interference) and social consequences. Strong partisan disagreement also persisted as to the required extent and direction of reform of existing social insurance programs and related government services. For instance, while the Labor Party supported the partial privatization of the welfare system, it had a very different interpretation of what privatization constituted, particularly compared to its liberal counterparts in parliament. In the broader area of labor market development, liberal (and to some extent confessional) demands for deregulation consistently clashed with the Labor Party’s insistence on the need to increase spending on activation measures as well as public employment programs and related tax incentives. Through its continuous participation in government, the Labor Party also managed to fend off confessional and liberal pressure for much more severe reductions in benefit levels and duration than those that eventually came about in this period. Throughout this period, political partisanship continued to hold major importance in determining the direction of welfare reform. 4 See for instance, Herbert Kitschelt, “Partisan Competition and Welfare State Retrenchment. When Do Politicians Choose Unpopular Policies?” In Pierson, The New Politics of the Welfare State, 265-340; Huber and Stephens, Development and Crisis of the Welfare State; Fiona Ross, “Beyond Left and Right: the New Partisan Politics of Welfare”, Governance 13:2 (2000) 155-183. See also Jonah Levy, “Vice into Virtue? Progressive Politics and Welfare Reform in Continental Europe”, Politics and Society 27:2 (1999) 239-273.

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In fact, its salience actually increased in at least two respects. First, during the 1990s the CDA lost its central position in Dutch politics following various electoral defeats; and second, it further shifted towards the right. By the end of the decade, few commentators would continue to refer to the CDA as a true “centrist” party. While the party continued to contain a progressive wing, the balance of power had shifted so clearly towards those who espoused a more conservative view on welfare reform that left-leaning voices were effectively sidelined. For instance, during the disability insurance crisis of the early 1990s, the CDA’s cabinet members were no longer constrained in their reform ambitions by their own members of parliament, as had often been the case in earlier years. Instead, as we will see, the CDA faction in parliament proved to be among the most vocal advocates of harsh benefit cuts. As a result of the CDA’s increasingly conservative welfare outlook, “left” and “right” preferences on welfare state reform came to be more clearly defined along party lines. Owing to the Labor Party’s continuous participation in government during the 1990s, the consequences of this were not immediately noticeable. However, this changed when the party returned to the opposition benches during the early 2000s, as we will see in the following chapter. The salience of political partnership also increased as various governments continued to reassert their primacy over welfare reform during the 1990s. Up to the 1970s – and as we have seen in previous chapters – welfare initiatives often originated and adopted a more-or-less definitive shape during negotiations between labor union and employer federations over the former’s wage demands. As the generosity of the welfare system increased and parliament became more concerned over its costs and the observed increase in benefit dependency, it naturally displayed a greater tendency to take matters into its own hands. The previous chapter showed that the Lubbers government of the early 1980s was the first to do so. Of course, its ability to bypass the social partners was greatly facilitated by the latter’s internal disagreement over the need and direction of reform. This disagreement certainly prevented the labor union and employer federations from continuing to act as initiators and de facto co-legislators of welfare reform. When the disability insurance crisis of the early 1990s resulted in broad public discontent with industry’s handling of disability insurance claims, this further undermined their ability to play a strong formal role in the process of public welfare development. In this sense, the new politics of welfare reform markedly differed from the period of welfare expansion that lasted until the late 1970s.

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Tackling the Disability Insurance Crisis When the third Lubbers government came to power in November 1989, it was by no means clear that it would soon implement social insurance benefit cuts that were truly unprecedented in their scope. By opting for a coalition with the Labor Party rather than the liberal VVD, the CDA had after all made a clear choice against further austerity and in favor of a more left-leaning course. The government’s coalition agreement testifies to this: contrary to its two predecessors, the agreement did not place top priority on reducing public expenditure, but instead outlined the government’s intention to increase benefit levels and facilitate economic recovery by investing in the environment, health care, and childcare. To increase activity levels and combat the problem of long-term unemployment, the government also announced its intention to develop a more active labor market policy and among others pointed to increased investment in schooling and facilitating the entry of women into the labor market by extending parental leave and childcare facilities as effective means of doing so. The two parties expressed their concern about the ongoing increase in the number of disabled and announced their intention to “counter” this trend. However, they did not explain what they meant by this, nor did they specify which measures they had in mind. The agreement merely mentioned that the CDA was somewhat more willing to ask the “social partners” to make sacrifices to stem the increase in disability benefit dependency compared with the Labor Party. At the same time, it emphasized that any reform measure would come about in close cooperation with organized industry.5 Initially then, the government was in no way committed to taking harsh measures. On the contrary, in the first year of its administration, it specifically looked for measures that did not further reduce entitlement rights. It found these in the proposals of a tripartite workgroup created following discussions between the previous government and Labor Foundation in January 1989.6 The workgroup’s proposals amounted to a classic compromise between the views of its employers and union representatives, with the former supporting union demands for more spending on prevention and reintegration and the latter relinquishing their long-standing opposition to the introduction of premium differentiation on a much larger scale. In 5 Ruud Lubbers, Regeerakkoord 1989: resultaat programmatische besprekingen informateur Lubbers (Den Haag: Sdu, 1989). 6 Tripartiete werkgroep volumebeleid arbeidsongeschiktheidsregelingen, Interim-rapportage (Den Haag: Stichting van de Arbeid, 1989).

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order to prevent having to embark on benefit cuts, the Labor Party likewise partially renounced its opposition to this. In March 1990, the government consequently informed parliament of its intention to grant workers and employers a stronger financial incentive to reduce the system’s costs through the introduction of firm-level sickness insurance premium differentiation and a bonus-malus system in the disability insurance program under which employers were to receive a subsidy when they hired a disabled worker and a fine when disabled workers were not offered substitute employment. In addition, it announced its intention to introduce a schooling budget for disabled workers and increase the level of the sickness insurance benefit for reintegrated workers who became sick during the first three years after returning to work.7 During the autumn deliberations of 1990, the government and social partners discussed the former’s plans and reached an agreement on the need to curb the number of disability benefit recipients. Following these deliberations, the government announced that it would formally consult the Social-Economic Council on its proposals. While the two coalition parties both supported doing so, they disagreed concerning whether the request should only refer to the government’s proposals or allow for a broader investigation of policy options. A complicating factor here was that the CDA’s own backbenchers were increasingly insistent that the number of disability benefit recipients could only be stemmed by partially restoring the link between individual contributions and benefit entitlement. The Labor Party strongly opposed this view. On its insistence, the CDA Minister of Social Affairs and Employment, Bert de Vries, eventually asked the Social-Economic Council to consider a wide variety of reform options that could reduce the number of disability insurance benefit recipients to the 1989 level (which was calculated as 785,000 benefit years) and reduce sickness leave by 1.5 percent by 1994.8 By doing so, the government firmly committed itself to taking harsh measures in case the number of disability benefit recipients continued to increase. Four months earlier, Prime Minister Ruud Lubbers had already promised to resign if the number of disability insurance recipients were to exceed one million.9 The government’s formal advice request was sent to the Social-Economic Council in February 1991. 7 Roebroek and Hertogh, “De beschavende invloed des tijds”, 398. 8 Anton Rommelse, Een Geschiedenis van het arbeidsongeschiktheidsbeleid in Nederland (Leiden: Leiden Law School, 2011) 91. 9 He had done so after VVD backbenchers challenged him to tie his political survival to stemming the number of disability insurance recipients. In turn, these backbenchers had done so in response to a lecture given by Lubbers in September 1990 in which he stated that “the

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Shortly after having submitted the request – and following the release of figures showing that the number of disability benefit recipients had further increased to almost 900,000 – the government came under immense pressure to take stronger measures, including from its own CDA backbenchers. Within the Social-Economic Council, a majority of employer and state-appointed members now also concluded that entitlement cuts could no longer be prevented. In the council’s July 1991 report, this majority argued in favor of relating benefit levels to claimants’ age and tightening eligibility terms by applying a broader employment criterion that defined disability levels in terms of claimants’ ability to do “any work” rather than their ability to do “similar work”.10 It also recommended giving employers a stronger financial incentive to reduce sickness absenteeism by making them individually responsible for the costs of sickness insurance during the first three to six weeks of sick leave and prohibiting the industrial insurance associations from topping up the standard benefit rate of 70 percent of the previous wage with a supplement following a request of one of their members. Following the decision of the council’s state-appointed members to side with its employer members on the matter, a rift emerged within the union movement concerning whether it was wise to continue opposing entitlement cuts. The CNV in particular feared that the government might find it much easier to impose its own preferences when the council’s recommendations were inconclusive.11 The FNV, CNV, and MHP eventually took a united stance and wrote a minority opinion in which they rejected the majority’s proposals and instead called for more measures based on the prevention and reintegration of disabled workers.12 Following the publication of the council’s report, the CDA placed immense pressure on its coalition partner to agree to additional reform measures. Its leader in parliament, Elco Brinkman, publicly demanded harsh benefit cuts and even went as far as suggesting that it might be necessary to Netherlands was sick … [and] faced the daunting prospect of a million disabled persons in 1994”. Sanneke Kuipers, The Crisis Imperative. Crisis Rhetoric and Welfare State Reform in Belgium and the Netherlands in the Early 1990s (Amsterdam: Amsterdam University Press, 2006), 150-151. 10 By calculating loss of earnings based on the claimant’s ability to do any work rather than suitable work, it would become much more difficult to define them as disabled. This effectively meant that only those disabled who would not be able to work long hours would be entitled to a full benefit. See Wim van Oorschot and Kees Boos, “Battle Against Numbers: Disability Policies in the Netherlands”, European Journal of Social Security 2:4 (2000) 346. 11 While the FNV had expressed similar concerns, it took a much tougher stance on the matter compared to the CNV, which was more closely affiliated to the CDA. See Kuipers, The Crisis Imperative, 152. 12 SER, Advies ziekteverzuim en arbeidsongeschiktheid (Den Haag: SER, 1991) 10-16.

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abolish the existing system altogether and replace it with a flat-rate benefit that could be supplemented with private provision. The Labor members of government responded to this by threatening to leave the coalition.13 However, at the same time, they were no longer in a position to continue to reject serious benefit cuts. In July 1991, the government announced that it would send the proposals that it had disclosed in March of the previous year – with some minor modifications – to parliament within a month. In addition, it announced a series of complementary measures. In line with the Social-Economic Council’s majority proposal, it among others expressed its intention to make individual employers fully responsible for the costs of sickness benefits during the first three to six weeks of sickness leave. In addition, contrary to both the council’s majority proposal (which called for benefit differentiation based on age) and minority union position (which amounted to a rejection of any reduction in entitlement rights), it expressed its intention to reduce the duration of the disability insurance benefit to one year for workers under the age of 50, who would subsequently be entitled to a social minimum benefit under the General Disability Act. Under the government’s proposals, nothing would change for disabled workers over the age of 50. Disabled workers who were currently under this age would be entitled to a transitional arrangement. Finally, the government proposed to adopt the council’s majority recommendation on tightening eligibility terms by removing the commensurate job criterion from disability estimates. The government’s original proposals were far from controversial and passed both chambers of parliament with no difficulties under the Act on the Reduction of the Disability Volume (Wet Terugdringing Arbeidsongeschiktheidsvolume, or TAV) in December 1991 and February 1991, respectively. The act came into operation in March 1992, expanding the use of premium differentiation in the sickness insurance act by allowing the industrial insurance associations to charge rates that differed from the standard industrial rate in case the level of sickness leave in an individual firm was significantly higher or lower than the average industrial rate. It also prohibited the industrial insurance associations from topping up the standard benefit rate of 70 percent of the previous wage with a supplement following a request of one of its members, unless the request related to a reintegrated worker who had taken up employment less than three years ago. In the latter case, sick workers might possibly receive full benefit replacement. Finally, the act entitled employers to a bonus that could amount to 50 percent of the gross wage when they hired a disabled worker for at least a year and 13 Kuipers, The Crisis Imperative, 152-153.

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forced them to pay an equally large fine in case one of their workers became (partially) disabled and was not offered a suitable work alternative or allowed to continue to work with his or her remaining work capacity. Following strong protests from individual employers and a court ruling that declared this latter part of the law invalid, the government officially abolished the “malus” a few years later.14 By contrast, the government’s supplementary proposals – and in particular its proposal to reduce the duration of the disability insurance benefit for workers under the age of 50 – were immensely controversial. When the union federations got wind of them, they responded with absolute outrage. Having already made it clear that they viewed the majority position of the Social-Economic Council’s employer and state-appointed members as an affront, they now announced that the government could best prepare itself for a “hot autumn” that would be characterized by mass protests and strikes.15 The Labor Party rank and file – which had until the very last moment been led to believe by the party’s leadership that drastic benefit cuts were out of the question – was similarly incensed. In response, Labor backbenchers downplayed their approval for the government’s proposals and announced that they would seek to ease the reduction in benefit duration and spare all current beneficiaries. By the second week of August, the party nevertheless polled at 21 seats, which was less than half of the number of seats that it currently occupied in parliament. To make matters worse, electoral competitors like D66 and the newly founded Green Left (Groenlinks) spoke out against the government’s proposals in parliament, with the former requesting that the government renounced them unless it could demonstrate that alternative measures would have no effect and the latter proclaiming that the proposal to reduce the duration of the disability insurance benefit could only result in the government’s downfall. The smaller confessional parties likewise spoke out against the proposals.16 The Labor Party leadership subsequently found itself in the awkward position of having to reconsider its support for the proposals while its coalition partner – whose popularity had barely been affected by the government’s actions – publicly reaffirmed its commitment to them. The two parties 14 The bonus system in turn did not meet the government’s expectations. By comparison, whereas the government had only paid 26 million guilders in euros as bonuses, it received 225 million guilders in penalties in 1994. See Tijdelijk Instituut voor Coördinatie en Afstemming, Jaarverslag Algemeen Arbeidsongeschiktheidsfonds (Amsterdam: Tijdelijk Instituut voor Coördinatie en Afstemming, 1995). 15 Vlek, Inactieven in actie, 296-297. 16 Roebroek and Hertogh, “De beschavende invloed des tijds”, 400.

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nevertheless reached a new compromise in late August. The government now proposed limiting the duration of the benefit for disabled workers under the age of 33 to one year, while only disabled workers over the age of 58 were entitled to a benefit for as long as their disability lasted or when they reached the retirement age. Disabled workers who were no longer entitled to a regular earnings-related benefit could apply for a follow-up benefit that equaled 70 percent of the minimum wage multiplied by 1.75 percent of the difference between their previous wage and the minimum wage for each year that a disabled worker was older than eighteen years of age from the moment that he or she had become disabled. As had been the case with the government’s initial proposal, disability benefit recipients who were currently over the age of 50 would not be affected. The new proposal (initially) received support from all but three Labor backbenchers, although it did not convince the union movement, which in October 1991 organized the largest union protest in the history of the Netherlands. Moreover, it also did not assure the party’s rank and file, whereby the discontent forced party leader Wim Kok to organize a special party conference in September 1991 in which he asked for a formal vote of confidence. As all conference members realized that his departure would do little to improve matters and would only work to further throw the party into crisis, he eventually received a confidence vote of 80 percent.17 However, the vote of confidence did not end the discussion; rather, the unions’ protests, the need to consult consultative bodies like the Council of State, the Social Insurance Council and Social-Economic Council and ongoing discussions within the Labor Party all continued to complicate matters. The latter received a strong impulse following the party’s decision to institute an internal committee on the matter. In January 1992, this committee – which comprised senior party members and social-economic experts and was named after its chairman Dirk Wolfson – produced a report in which it spoke out against the government’s retrenchment proposals.18 Labor’s leader in parliament, Thijs Wöltgens, immediately voiced its approval for the report and subsequently attempted to derail matters by proposing to reform the administration of the social insurance system. A few months later in the annual Labor Day speech of 1 May 1992, Labor’s deputy leader in parliament, Frans Leijnse, went even further by stating that current beneficiaries were not to be affected by the government’s reform proposals. 17 For an extensive overview, see Peter Rehwinkel and Jan Nekkers, Regerenderwijs. De PvdA in het kabinet Lubbers-Kok (Amsterdam: Bert Bakker, 1994) 253-275. 18 Dirk Jacob Wolfson, Niemand aan de kant: om de toekomst van de verzorgingsstaat (Amsterdam: Partij van de Arbeid, 1992).

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This statement – which has been described as an internal “coup” – came about following discussions among only a few Labor backbenchers and purportedly came as a total surprise to the party’s government members.19 A couple of days later, the complete Labor Party group in parliament came out in public support of Leijnse’s position. In response, the Christian-democratic backbenchers announced that they could only agree to this in exchange for larger cut-backs on new disability insurance claimants. When the social-democrats rejected this, the coalition found itself in a new crisis. This crisis persisted for another eight months and was only solved when the Christian-democrats moved to seek support for their proposals outside of the coalition in January 1993. In response to this move – which followed on Labor’s rejection of a new compromise proposal drafted by Lubbers – the two parties came to a final agreement. In late January and July of 1993, respectively, the Act on the Reduction of Disability Arrangement Claims (Wet Terugdringing Beroep op de Arbeidsongeschiktheidsregelingen, or TBA) passed the second and first chambers of parliament. The act – which came into operation in August 1993 – tightened eligibility terms by removing the commensurate job criterion from disability estimates and emphasized that benefits would only be granted if the causal relationship between impairment and disablement were objectively assessable.20 Moreover, disabled workers were now first entitled to an earnings-related benefit that equaled 70 percent of the previous wage for a few years (for a person aged 50 the duration was two years and for a person aged 58 it was six years or up to the moment he or she reached the retirement age) and subsequently a follow-up benefit that equaled the social minimum for benefit recipients (which amounted to 70 percent of the minimum wage) plus a supplement that equaled two percent of the difference between their previous wage and the social minimum for each year that a disabled worker was over the age of fifteen from the moment that he or she was entitled to a disability insurance benefit.21 Disabled workers 19 For an elaborate discussion of events, see Kuipers, The Crisis Imperative, 158-160. 20 Strictly speaking, the latter did not entail a break with the past as this was implicitly already the case. By stating this in an explicit manner, the government hoped to induce medical officers to take a stricter line. However, the act did not introduce guidelines that could help medical officers to assess disability levels in an objective manner, rather merely hinting at the possibility of tightening existing protocols and making greater use of peer reviews. On this, see Teulings, Van der Veen, and Trommel, Dilemma’s van sociale zekerheid, 59. 21 For an elaborate description, see Teulings, Van der Veen, and Trommel, Dilemma’s van sociale zekerheid, 59. See also Aarts and De Jong, “Evaluating the 1987 and 1993 Reforms: From Disappointment to Potential Success”, 62-63.

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under the age of 33 were not entitled to an earnings-related benefit and immediately received the follow-up benefit. Current beneficiaries were not affected by the new benefit rules, although those under the age of 50 were to be subjected to a reassessment based on the new eligibility criteria. The act also stated that the benefit rights of all recipients would be reassessed every three years. In the years following its introduction, the union movement worked frantically to repair emerging gaps in welfare entitlements by negotiating occupational supplements. The government seems to have worried greatly that this undermined its efforts to increase financial work incentives. Therefore, in contrast to in 1987, it did not encourage this practice and actually considered prohibiting employers from increasing the generosity of private benefits. However, it eventually refrained from doing so for a variety of reasons. One of these was probably that it was quite hesitant to place further strain on its relationship with the labor union movement. At the same time, it took the position that private benefits were much less important in reducing work incentives compared to public benefits, given that the former were generally financed by firm-level contributions. It also pointed out that reducing the generosity of existing supplements to the earnings-related benefit would at least partly finance these repairs. As a result of the latter, wage costs would also continue to decrease. Finally, it pointed out that not all workers would be able to negotiate private supplements.22 Nonetheless, it soon became clear that it had underestimated the latter’s ability to do so. Within a year, the unions had managed to repair the gap in benefit entitlements that had emerged for some 85 percent of all workers.23 Government ministries had been among the first to accede to this.24 The fact that the government’s views on welfare privatization mainly depended on the perceived consequences for its overarching aim to reduce benefit dependency also became clear in November 1992, when it introduced the Act on Sickness Absenteeism Reduction (Wet Terugdringing 22 Rommelse, De arbeidsongeschiktheidsverzekering, 197-198. 23 See ibidem, 199; Aarts and De Jong, “Evaluating the 1987 and 1993 Social Welfare Reforms”, 64; and Mara Yerkes and Kea Tijdens, “Social Risk Protection in Collective Agreements: Evidence from the Netherlands”, European Journal of Industrial Relations 16:4 (2010) 369-383. 24 During the same meeting in which the Secretary at the Department of Social Affairs and Employment, Elske ter Veld, announced her plan to reduce the generosity of the disability insurance program for workers, her colleague and fellow Labor Party member Ien Dales seem to have tried to calculate how much it would cost her to compensate her civil servants at the Department of Internal Affairs, who would surely demand that she tried to repair the gap in welfare entitlements that resulted from this. See Kuipers, The Crisis Imperative, 156.

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Ziekteverzuim, or TZ) into parliament. The act forced employers to take responsibility for the costs of sickness benefits during the first six weeks of sickness – or two weeks when they had fewer than sixteen employees. As some 90 percent of all instances of sickness lasted less than six weeks, this meant that employers were to assume responsibility for the bulk of all sickness insurance spending. The goal was to induce employers into investing more heavily in sickness prevention. At the same time, the act forced them to develop a reintegration plan in close cooperation with a certified health and safety service within thirteen weeks after their worker first reported his or her sickness. If it did not prove possible for workers to resume their activities, employers needed to consider whether it was possible to offer them substitute labor. The act came into operation in January 1994 and was a resounding success. From 6.7 percent in 1993, the number of workers on sickness absence decreased to 5.5 percent in 1994.25 In the first three years following the introduction of the Act on the Reduction of Disability Arrangement Claims in 1993, the number of disability benefit recipients likewise decreased, from 14.4 percent to 12.7 percent of the working population.26 While these numbers were impressive and thus widely celebrated by the Lubbers government in the last year of its administration, it by no means enabled policy-makers to rest on their laurels. For instance, when compared to the situation in other countries, both sickness absence and disability benefit dependency continued to be quite high.27 More importantly, by the mid-1990s both were once again on the increase. 28 This meant that the Lubbers government’s successor – which was to be headed by Labor leader Wim Kok – would continue to have to direct much of its energy towards finding ways to reduce the number of disability and sickness benefit claimants. Yet its efforts were by no means limited to this. To further its agenda of increasing labor market participation levels, the new government also made various changes to other social insurance and related programs. Moreover, it embarked on a major overhaul of the administration of the social insurance system. This overhaul – which was precipitated by the disability 25 Visser and Hemerijck, “A Dutch Miracle”, 199. See als Bannink, “Het Nederlandse Stelsel”, 75. 26 Trommel, “Van beschermend naar activerend arbeidsmarktbeleid”. In Trommel and Van der Veen, De herverdeelde samenleving, 109. 27 Philip de Jong, “De WAO 1967-2006. Over de opkomst en ondergang van een sociale arbeidsongeschiktheidsverzekering”, Tijdschrift voor Politieke Economie 26:1 (2004) 14; OECD, Sickness Disability, and Work. Breaking the Barriers (Paris: OECD, 2009) 16-18. 28 The number of disability insurance recipients in the Netherlands actually peaked at 957,000 in 2000, although as a percentage of the working population it had reached its peak in the early 1990s. See for instance, De Jong, “De WAO 1967-2000”, 8.

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crisis of the early 1990s – proved a lengthy process and followed a rather unpredictable trajectory: whereas the Kok government initially took the line that benefit dependency could best be reduced by introducing a regulated market system under which private administrative agencies would compete with one another for the award of public contracts, it eventually opted for the creation of a completely public system of social insurance administration.

The Long Road Towards Administrative Social Insurance Reform During the 1980s, it had become increasingly clear that the rapid growth in benefit dependency could not only be attributed to the generosity of the welfare system, but also to the way in which it was administered. The fact that the social partners were largely responsible for both the implementation and supervision of worker insurance programs, the principle of industry implementation and the administrative system’s complexity were all increasingly seen as contributing to the government’s inability to stem the emerging inactivity crisis.29 However, it would take quite some time before this prompted parliament to take firm action. The social partner’s strong resistance to any measure that would reduce their influence on the administration of the social insurance system, the widespread belief that an insurance approach demanded industry-level responsibility for the implementation of social insurance programs and parliament’s lack of agreement on alternative ways to manage the system (which came down to either stronger state involvement or a greater reliance on the market) all worked as major obstacles to reform. As late as 1988, Secretary of Social Affairs and Employment and former vice chair of the union federation CNV, Louw de Graaf, actually produced a policy document that advocated granting the social partners an even stronger role in the management of the social insurance system. The document was discussed in parliament, where it among others received a critical reception from the Labor Party, although nothing was subsequently done with it as the second Lubbers government fell and parliament branded the issue of administrative reform as too controversial to be treated by a government that had already resigned.30 29 For an extensive overview of thinking on administrative reform from the mid-1960s until the late 1980s, see Roebroek and Hertogh, “De beschavende invloed des tijds”, 409-419. 30 The Social Insurance Council and Social-Economic Council had already voiced their support for the overall direction of proposed reform by this stage. See SER, Herziening uitvoering sociale zekerheid (Den Haag: SER, 1990); SVR, Voorontwerp van een wet voor een nieuwe organisatiewet sociale verzekering (Zoetermeer: SVR, 1990).

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When the third Lubbers government subsequently came to power in November 1989, it initially displayed the same lack of urgency on the matter of administrative reform as its predecessors had done. In December 1992, it sent a minor reform bill out for advice to the Council of State (Raad van State), although it also took the line that more fundamental reform had to wait until the discussion about administrative responsibility between the government and social partners had been completed.31 Nonetheless, this wait-and-see attitude soon proved impossible to maintain. During the disability insurance crisis that erupted over the summer of 1991, the agencies responsible for the implementation of worker insurance programs came under heavy fire for their inability to stem the growth in disability benefit recipients. As a result, parliament – which had only considered expanding the social partners’ role in the management of the social insurance system three years ago – now suddenly adopted a very different stance. In September 1991, Labor Party backbencher Flip Buurmeijer put forward a resolution that asked the government to bring the implementation of the social insurance system under public control. The resolution was cosigned by backbenchers from the VVD, D66, and two smaller confessional parties and received support from all other parties, with the exception of the CDA.32 Some four months later – and as mentioned earlier – Labor’s leader in parliament, Thijs Wöltgens, similarly urged parliament to make haste on the matter of administrative reform. To their CDA counterparts, the sudden interest of Labor backbenchers in administrative reform merely constituted “yet another trick” to persuade the government to refrain from introducing major disability insurance benefit cuts.33 Given its timing, there can be little doubt that this indeed played a role to some extent. To Labor Party members, it must have been quite tempting to argue that the growth in the number of benefit recipients did not lie in the system’s generosity, but rather in the way in which it was administered. However, at the same time, reform-minded backbenchers like Buurmeijer seem to have been genuinely concerned about the lack of government scrutiny of the implementation of the social insurance system.34 Parliamentary concern over this further increased as the General Court 31 Rommelse, Een geschiedenis, 110. 32 Roebroek and Hertogh, “De beschavende invloed des tijds”, 418; G. Riemen, “Toezicht op de uitvoering van de sociale verzekeringen”, PS 11 (1992) 841. 33 Kuipers, The Crisis Imperative, 155-156. 34 The Labor Party was – perhaps only naturally – quite divided over the extent to which harsh measures were necessary to reduce the number of benefit dependency during the early 1990s. On this, see for instance Rehwinkel and Nekkers, Regerenderwijs.

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of Auditors (Algemene Rekenkamer) published a report in March 1992 in which it concluded that the Social Insurance Council’s supervision of the social insurance system had been quite inadequate in 1988 and 1989. Although the General Court of Auditors did not place specific blame on the social partners, its report highlighted their dominant role in both the administration and supervision of the social insurance system. This proved sufficient to persuade all parliamentary parties that some kind of action was in order. In April 1992, the CDA published a memorandum in which it renounced its opposition to the introduction of an independent supervisory body.35 Other parties wanted to go much further and presented plans for a single and completely independent administrative body that was to be organized on a regional basis.36 The General Court of Auditors’ report also prompted parliament to launch a parliamentary inquiry into the matter, which it did in September 1992, appointing Buurmeijer as its chair. Following a lengthy investigation that took almost a year, the committee published its findings on 7 September 1993. It argued that all involved agencies had failed to perform their tasks optimally and spoke of the “crippling grip” between them that had prevented necessary reform from coming about. Whereas the industrial insurance associations had paid far too little attention to getting workers back to work and had clearly failed to administer worker insurance programs in an expedient and effective manner, both the Social Insurance Council and various governments had consistently condoned their behavior, including the use of the disability insurance program for redundancy purposes. Like the General Court of Auditors, the Buurmeijer Committee did not single out the social partners for criticism, although it did point out that they had stood in the way of reform. The committee also came up with various recommendations, which including replacing the Social Insurance Council with a completely independent organization, privatizing the sickness insurance program, removing social partner responsibility for the administration of the disability insurance program, and reducing the latter’s generosity, organizing the administration of the employment insurance program on 35 In exchange, it demanded that the social partners received even greater influence on the administration of worker insurance programs. The memorandum suggested doing so by granting them complete control over the implementation of the sickness insurance program. Werkgroep Kolnaar, Sociale zekerheid en verantwoordelijkheid (Den Haag: CDA, 1992) 43-54. 36 This proposal was put forward by the VVD, D66, and Green Left. See Ina Brouwer, Robert Linschoten, and Arthie Schimmel, Naar een nieuwe uitvoeringsorganisatie van de sociale verzekeringen (Den Haag: Sdu, 1992). The Labor Party merely argued for more government supervision and a more customized approach. See Wolfson, Niemand aan de kant, 12.

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a regional basis and taking measures to prevent employers from adding private supplements to public insurance benefits.37 The labor unions predictably responded with absolute outrage to both the committee’s findings and its recommendations, although they found themselves lacking leverage following the public revelations of the parliamentary inquiry. Their employer counterparts similarly rejected the committee’s criticism of their role in the management of the social insurance system, but supported most of its recommendations on the reform of the main worker insurance programs, which were after all quite liberal in orientation. In parliament, the situation was the exact opposite: while all parties supported the committee’s findings, most of its reform proposals were immediately brushed aside. As the coalition partners had only just managed to agree upon the main outline of sickness insurance reform and were still at odds about the main outlines of disability insurance reform, they showed little interest in further complicating matters by also engaging in lengthy debate over the Buurmeijer Committee’s recommendations on this. All parties agreed upon the need to remove social partner responsibility for the supervision of the social insurance system and assessment of disability insurance claims. They also broadly agreed upon the need to integrate social insurance administration and work placement policies. Finally, with the exception of the CDA, all parties spoke out in favor of a more regional-oriented approach towards the administration of social insurance benefits and in November 1993 consequently supported a Labor Party resolution that in effect called for the abolition of the industrial insurance associations.38 As had been the case during discussions about the original Social Insurance Organization Act, socialist and liberal views on administrative reform were in key ways closer to one another than they were to those of the Christiandemocrats. However, in contrast to the late 1940s, the latter no longer disposed of the parliamentary leverage that was necessary to impose their views. Under the temporary New Social Insurance Organization Act (Nieuwe Organisatiewet Sociale Verzekeringen, or NOSV) that came into operation in January 1995 – which passed the second chamber of parliament when the CDA was still in power – the industrial insurance associations remained administratively responsible for the management of worker insurance programs, although their actual implementation was to be outsourced to private yet governmentsanctioned administrative agencies that were to compete with one another. 37 Commissie BuurMayjer, Enquête naar het functioneren van de organen belast met de uitvoering van de sociale verzekeringen (Den Haag: Sdu, 1993). 38 Roebroek and Hertogh, “De beschavende invloed des tijds”, 425-426.

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The act also replaced the Social Insurance Council with the Social Insurance Supervision Committee (College van Toezicht Sociale Verzekeringen, or CTSV), an independent supervisory body comprising only three members that were to have no formal links with the labor union movement or employer organizations.39 When the first Kok government that came to power in August 1994 passed another Social Insurance Organization Act some two years later, the industrial insurance associations were abolished altogether and replaced with the tripartite National Institute for Social Insurances (Landelijke Instituut voor Sociale Verzekeringen, or LISV). The act also allowed representatives of union and employer organizations to create sectoral councils, which could lend advice regarding to whom they should award contracts.40 The most controversial aspect of the administrative reform undoubtedly lay in the attempt to create a regulated market for administrative agencies. There had been much opposition to this from the outset and the principle only just made it into the 1997 act. 41 Within the Labor Party in particular, its introduction had been accompanied by much debate. While some Labor backbenchers had been among the strongest proponents of regulated market competition, others were quite skeptic concerning its professed ability to improve effectiveness and create incentives for providers to invest in work re-integration. 42 The latter view grew progressively stronger as the decade came to an end. To the government’s dismay, few private parties proved willing to enter the social insurance administration market, which meant that it was soon dominated by one large party that had previously undertaken the administration for various industrial insurance associations. 43 39 The Social Insurance Council’s advisory and coordinating tasks were delegated to another newly created body, the tripartite Temporary Institute for Coordination (Tijdelijk Instituut voor Coördinatie en Afstemming [TICA], which later became the National Institute for Social Insurances [Landelijke Instituut voor Sociale Verzekeringen, or LISV]). 40 See Lei Delsen, Exit poldermodel? Sociaal-economische ontwikkelingen in Nederland (Assen: Van Gorcum, 2001) 133-134; Frans Leijnse, “Over het nut van ideologie: privatisering van de sociale zekerheid”, Socialisme & Democratie 5 (1998) 203-212. 41 Hans Bekke and Nicollette van Gestel, Publiek verzekerd: voorgeschiedenis en start van het Uitvoeringsinstituut Werknemersverzekeringen (Apeldoorn: Garant, 2004) 52. 42 One of its strongest proponents had been Flip BuurMayjer, who – despite his key role as f irst chair of both the Temporary Institute for Coordination National Institute for Social Insurances – failed to play an important role in this debate. See Van Gestel, De Beer, and Van der Meer, Het hervormingsmoeras, 83-84. 43 By the mid-1990s, thirteen of the eighteen industrial insurance associations had awarded contracts to an administrative agency called GAK Nederland BV, the successor of the General Administrative Office, which had previously also undertaken the administration for various industrial insurance associations. For a lengthy overview of the failure of the operation, see Bekke and Van Gestel, Publiek verzekerd, 47-63.

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It also became quickly apparent that the principle of regulated market competition was difficult to reconcile with the aim of creating a one-stop shop for employment agencies, municipalities, and administrative agencies. Finally, various incidents showed that privacy protection by the major administrative agencies often fell short.44 For all of these reasons, even the liberal Secretary of Social Affairs and Employment, Hans Hoogervorst, had come to the conclusion by the late 1990s that privatization did not work well in this area. 45 More importantly, so had a majority in parliament and government. In response, the government first considered splitting up the organization of the worker insurance programs into a public part that was to be responsible for benefit assessment and a private part for premium collection, administration, and benefit payment. When this proved unworkable, it made a dramatic volte face and brought forward a proposal to merge the existing administrative agencies and National Institute for Social Insurances into a single public organization – the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, or UWV) – in November 1999. The proposal clearly came about as a compromise between the Labor Party and its main coalition partner. To maintain some sense of market competition, the agency was to outsource responsibility for work reintegration activities to private reintegration companies. In addition, the Labor Party agreed to completely abolish any remnant of social partner influence on the administration of worker insurance programs (which was effectively brought about through the abolition of the National Institute for Social Insurance) and further open up the market for work placement. The latter meant that the remaining public employment agencies were to be privatized. 46 The Labor Party’s willingness to surrender on this naturally outraged the labor union movement and led to a new low point in the relationship between the two allies. The Employee Insurance Agency came into operation in January 2002. 44 See Van Gestel, De Beer, and Van der Meer, Het hervormingsmoeras, 82-84. 45 See Bekke and Van Gestel, Publiek verzekerd, 81-82. 46 During the 1990s, the third Lubbers and purple government struggled with the question of whether work placement activities should be organized in a public manner (as currently was the case) or whether either the social partners or private companies should play a greater role in this. While the third Lubbers initially opted for a model under which the social partners were to play a greater role, the second purple government eventually decided that both reintegration activities and general work placement should largely be performed by private agencies. For some excellent overviews of this discussion, see Visser and Hemerijck, “A Dutch Miracle”, 206-217; Van der Meer and Visser, “Arbeidsvoorziening”, 183-244.

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The transition to a publicly administered social insurance system had not been an ideologically inspired one; indeed, it came about because its two alternatives – social partner administration and a regulated market system – had proven not to work well. Based on similar practical considerations, the second Kok government also decided to integrate the Social Insurance Supervision Committee into a government service that was part of the Department of Social Affairs and Employment, the Inspection Service for Work and Income (Inspectie Werk en Inkomen, or IWI), after a major scandal had tarnished the former’s reputation. 47 While parliament went to some length to incorporate safeguards to ensure that the inspection would be able to perform its duties independently from the minister, the move nevertheless reinforced the system’s overall public nature. The move towards a publicly administrated system proved a durable one. In subsequent years, various governments would embark on further changes to the administrative system, although none of these were as fundamental as those that came about during the second half of the 1990s and early 2000s. For instance, it would take another full decade before the option of social partner responsibility for the administration of the social insurance system – in a more minor form – was once again on the bargaining table.48 However, in the meantime, the privatization of the social insurance system would continue in two other forms: first, as we will see below, employers were to be granted an even large role in the provision of sickness benefits; and second, as we will see in the following chapter, the labor union movement would continue to respond to public benefit cuts by seeking to expand occupational welfare provision.

The Purple Government’s Work Strategy The purple government that governed the country from 1994 to 2002 had come about for a variety of reasons, including the staggering size of the Christian-democrats’ electoral defeat and the determination of one of 47 See Bekke and Van Gestel, Publiek Verzekerd, 52. 48 The 2013 social agreement between the social partners and government mentioned the possibility that the former would come to play a role in the administration of the unemployment insurance program. Shortly after, the then Minister of Social Affairs and Employment, Lodewijk Asscher, announced his intention to investigate whether they could also play a role in the administration of other worker insurance programs. However, this has not led to follow-up measures to date. See for instance, F.J.L. Pennings, “Sociale partners en uitvoering sociale zekerheid: terug naar af of nieuwe mogelijkheden?” Tijdschrift Recht en Arbeid 12 (2013) 5-11.

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the then key players in parliament – the liberal-social D66 – to break the Christian-democrats’ long-standing hold on government. At the same time, both the government’s formation and durability can partly be attributed to the increasingly favorable economic constellation in which the country found itself. The most important indicator of this may have been that the unemployment rate continued on its downward trend following a minor economic setback during the early 1990s, falling below four percent by the end of the decade. From the mid-1990s onwards, even long-term unemployment – which had hitherto been relatively obstinate – rapidly decreased.49 As the entry of women into the labor market also picked up in this period, the Netherlands had completed its transformation to a high employment rate country before the decade was over. At the same time, benefit dependency continued to increase in absolute numbers. By the time that the new government came to power, the number of benefit recipients had increased to almost two million compared to 1.8 million at the beginning of the decade. About half of these were in receipt of a disability benefit.50 This meant that the new government continued to have to take measures to reduce the rate of benefit dependency, although it could do so without having to reduce entitlement rights in a major way, which had been a key Labor Party demand during its formation. Instead, it further extended individual employer responsibility for the costs of disability and sickness benefits and stepped up efforts to force employers and sick workers to invest more heavily in working on the latter’s reintegration into the workplace. For instance, in March 1996, the government extended the duration under which employers were individually responsible for the costs of sickness benefits from six to 52 weeks by introducing the Act on the Extension of Wage Payment during Illness (Wet Uitbreiding Loondoorbetalingsplicht bij Ziekte, or WULBZ). While the act did not abolish the existing Sickness Act, it effectively ensured that it would continue to cater only to workers who did not qualify for an employer benefit for a variety of reasons, which amounted to about fifteen percent of the employed workforce.51 Employers 49 During its peak in 1983, some 350,000 people had been in receipt of an unemployment benefit for over a year. From just under 200,000 in 1993, this number halved to just under 100,000 in 1997. See Van der Meer and Visser, “Arbeidsvoorziening”, 191; 50 This figure does not include recipients of old-age pension benefits, which numbered around 2.3 million people in 2000. See Van Gestel, De Beer, and Van der Meer, Het hervormingsmoeras, 76-77. 51 Wim van Oorschot and Peter Abrahamson, “The Dutch and Danish Miracles Revisited: A Critical Discussion of Activation Policies in Two Small Welfare States”, Social Policy & Administration 37:3 (2003) 293.

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were allowed to insure themselves against the costs of sickness. The act’s introduction was accompanied by much criticism from the left and the right. Whereas small and medium-sized employers in particular worried that they would be unable to carry the costs of sickness and disability benefits on their own, the labor union movement feared that employers would consequently place pressure on sick and disabled workers or refuse to hire workers who belonged to categories with a greater risk of becoming sick (e.g. older workers and those with a medical history). For this reason, the FNV opposed any move that would extend individual employer responsibility for the costs of disability and sickness benefits. The other two union federations adopted a more practical stance and supported the Social Insurance Council’s majority recommendation to limit the period under which employers were responsible for the costs of sickness benefits to 26 weeks. This attempt to soften the act’s outlines initially received support from Labor Party backbenchers, many of whom were openly critical of the act.52 However, this was to no avail as the party’s liberal coalition partners held on to the original agreement.53 In a similarly controversial move, the government also extended premium differentiation into the disability insurance benefit two years later. The 1998 Act on Premium Differentiation and Market Regulation (Wet Premiedifferentiatie en Marktwerking bij Arbeidsongeschiktheidsverzekeringen, or PEMBA) introduced more f irm-level premium variation during the first five years of disability and allowed employers to opt out of the public system during this period.54 They were also allowed to insure themselves against the costs of disability during these five years. For administrative reasons, the government also abolished the universal General Disability Act, replacing this with the Act on Disability Insurance for the Self-Employed (Wet Arbeidsongeschiktheidsverzekering Zelfstandigen, WAZ) and the Act on Disability Benefits for Young Disabled Persons (Wet Arbeidsongeschiktheidsvoorziening Jonggehandicapten, or Wajong).55 The latter act 52 See Bekke and Van Gestel, Publiek Verzekerd, 52-53. 53 In a move illustrating that the politics of welfare reform is indeed about blame avoidance, the CDA – which had previously been so hawkish on social insurance reform – also supported softening the act’s content. When it returned to power some six years later, it immediately starting preparing legislation to extend the period under which employers were responsible for the costs of sickness benefits from one to two years though. See Chapter 8 on this. 54 Premium levels depended on the benefit burden caused by a company, and could be up to three times the average premium level for firms with fewer than fifteen employees and up to four times the average premium level for larger employers. See Rommelse, Een geschiedenis, 105. 55 As the General Disability Act was universal in nature and thus catered to both workers and the self-employed (the Act on Disability Insurance added a supplementary benefit to this for workers), this greatly complicated attempts to introduce premium differentiation. Following

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catered to all persons who had become disabled before reaching the age of seventeen and were still disabled by the time they turned eighteen. As both acts were introduced for purely administrative reasons, they did not bring about material changes for these groups: both the level and duration of the benefit were the same for the self-employed and young disabled persons as had been the case under the General Disability Act. Finally, in 2002 the second purple government introduced the Gatekeeper Improvement Act (Wet Verbetering Poortwachter), which outlined the reintegration obligations of employers and sick workers more specifically, improved supervision of their efforts and increased the consequences of non-compliance. In the case of employers, the result could be a financial sanction, whereas for sick workers it meant that they could be fired when they did not sufficiently invest in their reintegration. The three reforms proved quite successful in inducing employers to work harder on sickness and disability prevention and the reintegration of sick and incapacitated workers. A clear sign of this can be found in the marked increased emphasis on physical and organizational work conditions as well as stress at work and the prevention of sickness absence in collective bargaining agreements in the years following their introduction.56 As a result, sickness absence levels indeed scaled down during the early 2000s. However, at the same time, there is ample evidence that the reforms also induced employers to pay more attention to potential health problems of workers during the hiring process. The consequences of this have been most severe for older workers – who were perceived to be much more likely to call in sick or experience long-term health problems than their younger counterparts – as well as workers with a history of health problems.57 As a result, both the the introduction of the Act on Disability Insurance for the Self-Employed, disability insurance for workers and employers were completely separated. The introduction of the three acts also greatly simplified matters from an administrative perspective: from then onwards, the disability insurance program was completely financed by employer contributions, the disability insurance program for the self-employed by contributions from the self-employed, while benefits under the young disabled persons program were financed from general means. To ensure that the move towards complete employer financing did not affect the distribution of income between employers and workers, the latter paid a one-off transfer allowance. See P.S. Fluit, Verzekeringen van solidariteit (Deventer: Kluwer, 2001) 179. 56 For specific numbers on this, see Yerkes, Transforming the Dutch Welfare State, 57. 57 For evidence of this in response to the reforms of the third Lubbers government, see for instance, T.J. Veerman, S. Andriessen, and M.K. Koster, Verzuimbeleid voor eigen risico. Gedragsreacties van grote werkgevers op de financiële prikkels in de ziektewet (Zoetermeer: Atelier Rijksbouwmeester, 1995). For later studies see for instance Guus Heerma van Vos, “Loonbetaling bij ziekte: echt alternatief voor de ziektewet?” In Ton Hartlief and Rinus Mendel, Verzekering en Maatschappij. Juridische beschouwingen over de maatschappelijke rol van verzekeringen en

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labor unions and various employer organizations continued to display a critical stance towards the three reforms and occasionally called for a (partial) recollectivization of insurance against the financial consequences of sickness for workers in particular. In addition to taking measures to reduce sickness and disability benefit levels, the purple government also further constricted the new unemployment insurance program and the general assistance program. Most of these reforms took place before the unemployment rate dramatically declined. For instance, the government tightened eligibility rules in 1995: from then onwards, entitlement to the earnings-related benefit depended on a work history of 26 weeks in the last 39 weeks (rather than 52), while entitlement to the subsequent flat-rate benefit depended on a work history of at least four years (instead of three) in the last five years. One year later, the Law on Penalties and Measures (Wet Boeten en Maatregelen) introduced a more rigid and systematic implementation of existing sanctioning policies. A few years earlier, the third Lubbers government had already tightened control rules and increased the number of investigating offices. In addition, it had reduced the period under which workers were allowed to look for suitable – as opposed to any – jobs. Other measures introduced by the third Lubbers government and purple governments included limiting entitlement to an unemployment insurance benefit to workers over the age of twenty-one and obliging unemployment and general assistance benefit recipients with children over the age of five (this used to be twelve years) to look for work. In addition, administrative agencies were to play a much more active role in helping unemployment benefit recipients to find new work and schooling. The government’s 1996 reform of the General Assistance Act followed on the publication of a rather disturbing report from a government-appointed committee on its administration, which showed that as many as 50 percent of all recipients had been out of work for at least three years. Indeed, some ten percent of them had been in receipt of a general assistance benefit for over ten years. The committee concluded from this that the social assistance act had become a permanent means of existence for a substantial number of recipients, highlighting that this was clearly at odds with the act’s intention. verzekeringsmaatschappijen (Deventer: Kluwer, 2000) 464-465; Lucy Kok, Aran Heyma, and Marloes Lammers, “Verlaag kosten loondoorbetaling voor kleine bedrijven”, TPEdigitaal 7:3 (2013) 4-17; Boukje Cuelenaere and Theo Veerman, “De zoektocht naar optimale loondoorbetaling bij ziekte”, TPIdigitaal 7:3 (2013) 18-34; Guido Brummelkamp, Lennart de Ruig, and Willemijn Roozendaal, Prikkels en Knelpunten. Hoe werkgevers de loondoorbetalingsverplichting bij ziekte beleven (Zoetermeer: Ministerie van Sociale Zaken en Werkgelegenheid, 2014) 38-41.

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In addition, it voiced its suspicion that fraud took place on a large scale.58 The committee’s conclusions were all the more damning because its chair, Arie van der Zwan, was a prominent Labor Party member. In response, the purple government decided to invest more heavily in activation measures and fraud detection and reduced benefit rates to 50 percent for single recipients (this used to be 70 percent), 70 percent for single-parent families (which used to be 90 percent) and 90 percent of the minimum wage for couples that lived together (rather than a full 100 percent). The municipalities were allowed to provide supplements that brought the benefit up to its previous level for the first two groups of benefit recipients, although they had to finance this themselves. The benefit reduction was to have strong consequences for the income of assistance recipients, of which around one third were already in debt.59 These measures were to some extent softened through the introduction of various job placement programs. Some of these simply extended measures that had been introduced by the previous Lubbers government. In 1991, the Lubbers government had for instance introduced a Job Guarantee Act (Jeugdwerkgarantiewet, or JWG) for unemployed workers under the age of twenty-three who had been unemployed for at least six months and had less than one year of work experience, which offered a combination of schooling and work experience. Some six years later the first purple government merged this program with previously voluntary training and employment programs for older long-term unemployed workers, which were now made compulsory for them. It did so through the introduction of the Jobseekers Employment Act (Wet Inschakeling Werkzoekenden, or WIW), which came into effect on 1 January 1998. Refusal to participate in the program could result in the withdrawal of benefits. While the act did not cater to “regular” unemployed workers, who were supposed to look for work independently, it greatly increased government spending on activation measures. By the late 1990s, the Netherlands no longer was a laggard in this field. In subsequent years, it would become one of the largest spenders on labor market activation measures together with the Scandinavian countries and Belgium.60 58 Commissie van der Zwan, Het recht op bijstand: naar een beheerst proces bij toekenning van bijstand (Den Haag: VUGA, 1993). 59 During the early 1990s, 33 percent of general assistance benefit recipients had to go into debt to make ends meet, compared to fourteen percent for unemployment insurance benefit recipients and two percent for the general population. See Y.B. Bommeljé and G.J. Schep, Een kwestie van geld: over de financiële positie van cliënten van de sociale dienst (Den Haag: VUGA, 1994) 71. 60 See, for instance, John P. Martin, “Activation and Active Labor Market Policies in OECD Countries: Stylized Facts and Evidence on their Effectiveness”, IZA Policy Paper 84 (2014) 1-34;

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The third Lubbers government had also introduced so-called “job pools”, which were minimum wage jobs in the public sector. The purple governments expanded these programs and offered various tax breaks for workers who hired unemployed workers. They also created various new job placement programs, including so-called “Melkert jobs” named after the then Minister of Social Affairs and Employment, Ad Melkert. By the late 1990s, these various types of job placement programs financed some three percent of all paid labor, or almost 200,000 jobs.61 From the start, these programs were criticized by liberal and Christian-democratic forces for failing to help workers to move on to a regular job – including the Labor Party’s own coalition partner, the VVD. When its main protagonist – the Labor Party – went out of office in 2002, they were consequently strongly reduced in scope. By the late 2000s, the number of workers in various job placement programs had been reduced to about 100,000, of which the bulk worked in one of the municipality-led social employment centers introduced in the 1960s to cater to workers with diminished work capacities (see Chapter 3 on this). Finally, the purple governments also took various measures to increase the security of part-time workers and workers on fixed-term contracts. The former group had been on the increase since the 1980s as women started to enter the labor market in large numbers to shore up household incomes in response to the increase in unemployment and wage stagnation that characterized this period, but for a variety of reasons chose to do so on a part-time basis. One of the most important of these was the absence of affordable childcare. Despite its promise to improve childcare facilities, the third Lubbers government had done little in this area, although it had extended parental leave from twelve to sixteen weeks with full earnings replacement.62 The second purple government did prepare legislation on Veronica Escudero, “Are Active Labour Market Policies Effective in Activating and Integrating Low-skilled Individuals? An International Comparison”, ILO Working Paper 3 (2015) 1-41. For the weakness of active labor market policy in the Netherlands up to the 1990s, see, for instance, Henk Spies and Rik van Berkel, “Workfare in the Netherlands Young Unemployed People and the Jobseekers’ Employment Act”. In Ivar Lødemel and Heather Trickey, “An Offer You Can’t Refuse”: Workfare in International Perspective (Bristol: The Policy Press, 2000) 105-132. 61 This figure includes workers who worked in existing social employment centers, which numbered about 83,000 at the time. See Visser and Hemerijck, “A Dutch Miracle”, 222. 62 The act also introduced an (unpaid) optional leave for up to 24 weeks. Moreover, a couple of years later the f irst purple government also introduced a statutory entitlement to unpaid parental leave. Men are entitled to two days of paid leave immediately following the birth of their child. At sixteen weeks for women and two days for men, the duration of paid parental leave is among the shortest in the OECD. Various collective bargaining agreements do entitle employees to paid parental leave for a certain period. On this see, for instance,

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the matter, but failed to enact on this before it fell. In the end, it would take until 2005 before a government passed legislation that provided state childcare subsidies and obliged employers to do the same. In the meantime, the growth in childcare mainly proceeding through collective bargaining: in 2003, 89 percent of all collective bargaining agreements contained childcare subsidies as compared to 31 percent in 1995.63 This growth was strongly endorsed by the purple governments, which also took measures to shore up collective bargaining coverage among part-time workers. In as early as 1989, the bipartite Labor Foundation had published an opinion on the growth of part-time work in which it described this trend as a positive development that should not be halted. To make sure that part-time work did not remain limited to certain sectors or job types the report recommended the introduction of measures aimed at improving part-time workers’ work conditions, wages, and career prospects. In addition, it suggested giving full-time workers the right to reduce their working hours.64 After some deliberation the first of these recommendations received broad support in parliament, with the first purple government eventually introducing legislation forcing employers to provide equal treatment in wages, overtime pay, holidays, bonuses, occupational pensions, and training to part-time workers. The Prohibition of Discrimination by Working Hours Act (Wet Verbod Onderscheid Arbeidsduur, or WVOA), which came into operation on 1 November 1996, also eliminated the working hours threshold for entitlement to the statutory national minimum wage. By upgrading the position of part-time workers the act also greatly improved the popularity of this type of work: nowadays some three quarters of female and about a third of male employees work part-time. The transition towards a part-time economy received a further boost as the second purple government in June 2000 gave employees in firms with ten or more employees the legal right to adjust their working hours by twenty percent from full-time to part-time or the other way around, unless businesses could demonstrate that this would seriously undermine their ability to operate. While the growth in part-time employment could in principle count on broad parliamentary support, the simultaneous – albeit more modest – growth in fixed-term employment proved to be much more controversial. As Willem Adema, Chris Clarke, and Valérie Frey, “Paid Parental Leave: Lessons from OECD Countries and Selected U.S. States”, OECD Social Employment and Migration Working Papers 172 (2015) 1-113. 63 For the increase in collective bargaining subsidies of childcare facilities, see Yerkes, Transforming the Dutch Welfare State, 82; and De Boer and Duyvendak, “Welzijn”, 36. 64 Stichting van de Arbeid, Nota deeltijdarbeid (Den Haag: Stichting van de Arbeid, 1989).

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a result, the first purple government did not manage to produce legislation to improve the position of workers on fixed-term contracts. As the Labor Party had principled objections to relaxing existing restrictions on fixedterm employment, the government decided to ask the Labor Foundation for advice on the matter. It did so just before the social partners signed the first collective agreement for temporary workers, which introduced a right of continued employment and pension insurance after four consecutive contracts or 24 months of employment. This novel collective agreement prepared the ground for the 1996 agreement on “Flexibility and Security”, which in turn served as a basis for the 1999 Act on Flexibility and Security (Wet Flexibiliteit en Zekerheid, or WFZ). The Act relaxed restrictions on fixed-term contracts while improving their legal position by stating that they were entitled to the “usual” rights and benefits. Under the Act the relationship between agency workers and the agency was subjected to that of a standard employment contract after 26 weeks. Moreover, after three consecutive contracts or 36 months of employment, contracts automatically became open-ended.65 By ensuring that workers on part-time and fixed-term contracts were subjected to the same rules and benefits as regular workers, the Netherlands would manage to liberalize its labor market without witnessing the coming about of strong differences between labor market “insiders” and “outsiders”, or at least not to the extent that this occurred in various other continental European countries.66 Yet this is not to say that the growth of non-regular employment was to be without problems. The rapid increase in the number of workers on fixed-term contracts in future years would prove to be a particularly contentious issue that was also to have strong consequences for efforts to offer adequate security against labor market risks for all workers. The next two chapters will outline these difficulties.

65 On the specifics of this act see, for instance, Lans Bovenberg, Ton Wilthagen, and Sonja Bekker, “Flexicurity: Lessons and Proposals from the Netherlands”, CESifo DICE Report 6:4 (2008) 9-14; Elke Viebrock and Jochen Clasen, “Flexicurity and Welfare Reform: A Review”, Socio-Economic Review 7 (2009) 305-331. 66 On this, see for instance Palier, A Long Goodbye to Bismarck; Emmeneger et al., The Age of Dualization; Thelen, Varieties of Liberalization.

10 Population Ageing and the Need for Further Reform By the time the second purple government left office in the early 2000s, the Netherlands found itself in a very different economic position compared to two decades earlier. The country that had once been described as one of the most spectacular employment failures in the Western world could now boast having one of the highest labor market participation rates in the industrialized part of the world and a benef it dependency ratio significantly lower than that of most neighboring countries. Mostly owing to this employment miracle, Dutch levels of social spending – which had been the highest in the world up to the mid-1980s – were now also below the average of neighboring countries. While the number of benefit recipients continued to be high in absolute numbers, the size of the active workforce had increased so dramatically in the preceding decade that this no longer presented a major constraint on the Dutch economy.1 As a result, from the second half of the 1990s onwards, the Netherlands once again started to attract significant attention from foreign commentators and policy-makers. However, this time these foreign observers did so for very different reasons: rather than serving as a prime example of a “welfare without work” society, the Netherlands – whose welfare system continued to be quite generous and comprehensive for international standards – now served to show that welfare generosity did not have to conflict with successful macroeconomic performance.2 However, this did not mean that pressure for further welfare reform abated in subsequent years: on the contrary, the various CDA-led coalitions chaired by prime minister Jan-Peter Balkenende that governed the country until 2010 pursued a reform agenda that was just as ambitious as the one pursued by their predecessors one decade earlier. The first two of these Balkenende 1 In absolute numbers, the number of benefit recipients was only slight lower in 2002 (1.7 million) than it had been in the early 1990s (when it was about 1.8 million). Nonetheless, as the size of the active labor force had substantially increased, the ratio of active to inactive workers had significantly improved. In 1990, the active labor force numbered about 5.6 million people, whereas by the early 1990s this had increased to 6.9 million. Most of this 23 percent increase in the size of the active labor force could be attributed to the mass entry of women into the workforce. 2 On foreign interest in the Dutch “poldermodel” from the late 1990s on, see Visser and Hemerijck, “A Dutch Miracle”; Jaap Woldendorp, The Polder Model: From Disease to Miracle? Dutch Neo-corporatism 1965-2000 (Vrije Universiteit Amsterdam: Academic Thesis, 2005).

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governments – which were of a confessional-liberal signature – pursued a particularly radical agenda that revolved around harsh benefit cuts and further de-collectivization and privatization of existing welfare programs. Nonetheless, its successors – including those under which the Labor Party was part of the coalition – also adopted various sweeping reforms that were often quite painful to welfare constituents. Initially, the impending ageing crisis served as the main catalyst for these reforms. By the early 2000s, as explained in the previous chapter, all major political parties had come to recognize the possibility that population ageing would make existing welfare commitments unsustainable in the foreseeable future and consequently presented proposals to deal with this problem. Following the outbreak of the financial crisis in 2008, a serious and long-standing economic downturn exerted further pressure on governments to reform the welfare system. As a result of European commitments to keep the government deficit in check, including during a period of crisis, this inevitably translated into further cuts in benefits and care provided by the government. As the problem of population ageing became a more pressing concern, right-wing parties in particular not only set out to further increase the employment rate by pushing for yet more changes in worker insurance and general assistance programs that had already been subjected to significant reform in preceding years; moreover, they now also set their sights on areas that had hitherto largely escaped sweeping reform. These included the immensely popular health care system as well as (early) retirement provision. As a result, these areas now became the subject of classic partisan conflict. Whereas conservative and liberal parties like the CDA and VVD emphasized that health care and old-age pension spending would reach unsustainable levels in the foreseeable future unless these areas were subjected to drastic reform, the Labor Party and other parties on the left resisted this alarmist stance as well as the proposed direction of reform, which centered on more market competition (in the case of health insurance), de-collectivization and direct entitlement cuts. Up to the end of the decade, when it experienced another major electoral defeat from which it did not recover in subsequent years, the CDA continued to play a central role in this debate through its ability to alternately form coalitions with parties on both sides of the political spectrum. At the same time, its new-found emphasis on personal responsibility, labor market participation, and subsidiarity continued to push the party into a more conservative direction on matters relating to welfare reform. Even more than during the early 1990s – when the need for reform had been more pressing and harsh benefit cuts were largely limited to one area (namely that of disability and sickness insurance) – the party demonstrated

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that it was not afraid to push for the significant retrenchment of popular social programs. It did so based on the conviction that voters also appreciated what it viewed as economically responsible behavior and that the electorate also expressed a material interest in lowering the collective burden. While this thinking may or may not have been correct (the fact that the party won three elections in a row on a rather conservative platform lends some support to this), it suggests that electoral considerations imposed much less of a constraint on party behavior than much of the literature on welfare state retrenchment has assumed.3 As mentioned earlier, this was certainly the case for liberal parties that mostly catered to middle- and higher-paid groups like the VVD and D66. Nor – for that matter – did these parties necessarily have to develop sophisticated blame avoidance strategies to implement retrenchment. The situation was certainly quite different for parties on the left side of the political spectrum. For both ideological and electoral reasons, these parties were much less inclined to accept the need for retrenchment, which meant that assuming government responsibility was much more likely to prove a risky and painful affair for them. As the largest party on the left side of the political spectrum, the Labor Party in particular would continue to struggle with this dilemma. The ongoing pressure for welfare reform likewise continued to put the labor union movement on the defensive. However, at the same time, the unions continued to act as a powerful counterweight to those who pressed for welfare retrenchment. This became particularly clear during the mid-2000s when they managed to force the second Balkenende government to partially renege on its reform agenda following a union-organized demonstration that attracted as many as 300,000 people and was accompanied by union threats to take a non-accommodating stance during subsequent wage negotiations unless the government reduced its reform ambitions. The latter threat among others had the effect of giving the employer community a strong stake in finding a compromise that was acceptable to the union movement. In other words, despite being somewhat less closely involved in the policy process compared to previous decades, the union movement continued to exert substantial political influence. In subsequent years, it continued to use its political and economic leverage to outright block welfare reform or 3 Part of the reason for this may be that governments can create momentum for reform by pointing to a strongly deteriorating economic situation, as the CDA certainly did during the first half of the 2000s. This in itself suggests that parties might be less constrained in their welfare options than the proponents of the “new politics of welfare reform” school suggest. See also Chapter 7 on this.

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force governments of various political constellations to reduce their reform ambitions, seek compensatory measures for vulnerable groups and negotiate private benefit expansion to fill emerging gaps in welfare entitlements.

The Reform Agenda of the Second Balkenende Government The early 2000s proved a particularly turbulent period in the history of Dutch politics. Following a period of eight years in which left and right divisions had become less pronounced as a result of a government coalition of which the two largest members were in many ways each other’s ideological opposites, partisan divisions regained their clarity and obtained new dimensions in the run-up to the parliamentary elections of May 2002. The elections resulted in a massive defeat for the three governing parties and most prominently for the Labor Party, which lost almost half of its parliamentary seats. Mainly owing to the emergence of a new populist right-wing party, whose leader Pim Fortuyn had been murdered just nine days before the elections, all left parties combined received a smaller share of parliamentary seats than they had obtained since the early 1970s. 4 A further complicating factor was that economic growth levels had staved off since the late 1990s, which resulted in a gradual increase in the unemployment rate and necessitated austerity measures to ensure that the government deficit would not exceed the maximum rate set by the Stability and Growth Pact.5 For the first two Balkenende governments, the slowdown in economic growth only served to reinforce their commitment to further welfare state reform. As the first of these governments fell after just 68 days following a stunningly rapid implosion of one of the main coalitions parties, it was the second Balkenende 4 The Pim Fortuyn List (Lijst Pim Fortyn, henceforth LPF) that entered parliament on a liberal-populist platform entered parliament with 26 seats. Many of these seats came from former Labor Party voters. As the CDA went from 29 to 43 seats, a strong majority in favor of liberal welfare reform emerged. See Robbert Coops, Een politieke aardverschuiving (Alphen aan de Rijn: Kluwer, 2003). 5 It is unclear to what extent this pact formally constrained Dutch government spending in this period, as the Dutch government itself was one of the strongest proponents of a strict interpretation of the Stability and Growth Pact and acted accordingly. See for instance, Leila Simona Talani, “A Dead Stability and Growth Pact and a Strong Euro: There Must be a Mistake!” In Leila Simona Talani and Bernard Casey, Between Growth and Stability: the Demise and Reform of the European Union’s Stability and Growth Pact (London: Edward Elgar 2008) 95; Martin Heipertz and Amy Verdun, Ruling Europe: the Politics of the Stability and Growth Pact (Cambridge: Cambridge University Press, 2010) 144; Bart van Riel, “De Europese Commissie en de handhaving van het Stabiliteits- en Groeipact”, International Spectator 65:11 (2011) 593-597.

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government that eventually set out to launch an ambitious agenda centering on further reform of the social insurance system.6 In its coalition agreement of May 2003, the new government emphasized the need to further increase the labor market participation rate and stated that this required making further “improvements” to the disability insurance system, unemployment insurance program and general assistance scheme. In addition, it announced its intention to abolish the favorable tax treatment of early retirement schemes and force employers to maximize private and public pension buildup at a maximum of 70 percent of the previous wage. The coalition partners further revealed their intention to introduce a basic health insurance system that would be based on market principles, as well as investigating the possibilities for simplification and deregulation of existing social legislation, including dismissal protection legislation.7 Finally, they proclaimed their intention to introduce the Basic Childcare Provision Act (Wet Basisvoorziening Kinderopvang, or WBK), which had been in preparation since the mid-1990s and was to create a tripartite financing system for and government supervision of childcare facilities. The act was to come into operation in January 2005.8 Accordingly, the 6 On the implosion of the LPF and events surrounding this, see for instance Sarah de Lange and David Art, “Fortuyn versus Wilders: an Agency-based Approach to Radical Right Party Building”, West European Politics 43:6 (2011) 1229-1249. 7 In 1998, the Flexibility and Security Act (Wet Flexibiliteit en Zekerheid, or WFZ) had already reduced the level of employment protection by allowing employers to hire workers on fixed-term contracts for a period of up to three years, allowing the social partners to deviate from statutory regulations on fixed-term contracts and temporary agency work in collective bargaining agreements, reducing the maximum notice period from six to four months and reducing the maximum duration of the procedure to obtain administrative permission for dismissals from six to four weeks. The Balkenende government now wanted to replace the seniority principle with the reflection principle, drop the evaluation of the economic necessity of dismissals for economic reasons by the regional employment policy in case the social partners had already reached consensus on the need for this and give the social partners the right to determine their own criteria regarding collective dismissals. The first of these two proposals came into force in March 2006. Two years later, the government also introduced an act that limited severance pay to 75,000 euros for employees under the age of 40 and 100,000 euros for employers over the age of 40. See Emmeneger, The Power to Dismiss, 263-267. 8 The act had been in preparation since the 1990s and by 2001 the second Kok government had agreed on its main outline. The fact that it had taken so long to introduce the act can be attributed to three factors: first, the rapid progress through collective bargaining agreements reduced its political urgency; second, there had been strong disagreement on how to distribute costs and even more concerning whether the employer subsidy was to be compulsory; and third, the premature fall of the second Kok and first Balkenende governments further delayed matters. The eventual act created a tripartite financing system under which employers, the state, and parents would each on average contribute one third of childcare costs. The size of the allowance

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government’s reform agenda largely revolved around the retrenchment of existing social programs, whereby the labor union movement consequently largely rejected it. The employer federations supported the main features of the government’s program, although like the union movement they were worried that the new government would bypass the social partners in its hurry to implement its reform agenda. These suspicions were soon confirmed. In August 2003, the CDA Minister of Social Affairs and Employment, Aart Jan de Geus, abolished the flat-rate follow-up benefit of the regular unemployment insurance benefit without first consulting the Social-Economic Council. When the union movement responded with absolute outrage, the government retorted that the measure was irrevocable and that the social partners would be given the opportunity to respond to its other plans for reform of the unemployment insurance program, which included reintroducing the job search requirement for workers aged 57.5 and over, reducing the level of the regular benefit from 75 to 70 percent of the previous wage and tightening eligibility criteria by only allowing workers to receive a benefit when they had worked for 39 out of the last 52 weeks (rather than the current 26 out of 39 weeks).9 However, it was unwilling to discuss these or any other of its proposals in the form of tripartite negotiations, instead negotiating separately with the labor union and employer federations. These in turn viewed this deviation from customary practice as a sign that the government was not taking them seriously.10 Subsequently, in September 2003 the government confirmed that it would only partly adopt the Social-Economic Council’s May 2002 recommendation on further reform of the disability insurance program for workers. This recommendation had been the outcome of a delicate compromise between the Council’s union and employer representatives, which had taken almost a year to negotiate. To obtain an agreement, both sides of industry had made painful concessions and the government’s decision to deviate from this balanced compromise was viewed by both as a major affront. Once again the union movement responded most fiercely, for good reason. that was given to parents depended on their combined income. Parliament initially wanted to introduce concrete norms for leader to child ratio’s, maximum group sizes, etc., although a confessional-liberal majority eventually blocked this. Following strong criticism, some of these norms were incorporated in later years. See Yerkes, Transforming the Dutch Welfare State, 82; and De Boer and Duyvendak, “Welzijn”, 36. 9 Two of the coalition partners – the VVD and D66 – had wanted to go further than this but were rebutted by De Geus. See Jan-Willem van den Braak, Dagboek van een poldercrisis. Met een terugblik op twintig polderjaren (Assen: Van Gorcum, 2006) 3-4. 10 See Hazenbosch, Voor het volk, 690-692.

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Under the council’s proposal, the mandatory wage payment for sick workers would be extended to two years in exchange for the abolition of disability insurance premium differentiation, the regular benefit would only be granted to permanent and fully disabled workers while its level was to be increased to 75 percent of the previous wage and the partially disabled (who were now defined as experiencing a loss of work capacity between 30 and 80 percent) were to be given an employer-financed wage supplement that equaled 70 percent of their previous wages over the part of their work capacity for which they had been declared disabled. Partly disabled and unemployed workers could first apply for an unemployment benefit and then for a government-financed and non-means-tested benefit that equaled 70 percent of the minimum wage. The government now essentially pushed for an even more austere version of this proposal. Under its proposal, the supplementary wage benefit would only be granted to partially disabled workers who were able to make full use of their remaining work capacity, while the follow-up benefit for partially disabled and unemployed workers was to be subjected to a partner income test and reduced in generosity from 70 percent of the minimum wage to 70 percent of the minimum wage over the percentage of disablement.11 In addition, both the abolition of premium differentiation in the disability insurance program (which was important to the employer federations) and increase in the level of the regular disability insurance benefit to 75 percent of the previous wage (which was important to the unions) would only possibly come about after five years, when it had become clear that the aim of a substantially lower inflow had been reached. Finally, the government insisted on reassessments of existing claimants according to stricter eligibility criteria.12 It adopted the councils’ recommendation to extend the wage payment obligation for sick workers to two years, although at the same time it decided to limit their obligation to pay at least the minimum wage rate to the first year of sickness. The Act on Extension of Wage Payment during Illness (Wet Verlenging Loondoorbetalingsverplichting bij Ziekte, or WVLZ) came into operation on 1 January 2004. Despite the government’s harsh stance on welfare reform, it managed to obtain conditional labor union support in October 2003 for a policy of wage moderation under which wages would not increase for a period of two years. 11 In practice, this meant that a worker could only receive a supplement when he or she earned as much now as before the start of disability, which was seldom the case. See Bert de Vries, Overmoed en onbehagen. Het hervormings-kabinet Balkenende (Amsterdam: Bert Bakker, 2005) 193. 12 See Rommelse, Een geschiedenis 134-137; De Vries, Overmoed, 193-195.

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However, seven months later, subsequent negotiations collapsed when the unions failed to persuade the government to substantially soften its plans for reform of the early retirement schemes. In this area as well, the unions’ view on the matter was that the government simply asked too much from workers in too little time. From the late 1990s onwards – and following negotiations on the matter with the then Labor-led government – the social partners had already started to convert existing pay-as-you-go schemes into funded schemes to ensure that younger workers no longer had to pay for benefits of which they might themselves never make use. By the mid-2000s, this process was almost completed.13 The result was a system that should have fitted neatly in the thinking of the new confessional-liberal government: due to the transition to funding, the ability of workers to retire early now in principle depended on their own responsibility and ability to save for this. Nonetheless, in September 2003, the government announced its intention to abolish the fiscal deductibility of all early retirement schemes from January 2006 onwards, for largely fiscal reasons, which essentially meant that they would become unaffordable for workers.14 In addition, it reiterated its intention to cap private and public pension buildup at 70 percent of the previous wage. While it proved willing to make minor concessions over this in the coming months, this did not prove sufficient to prevent the negotiations with the union movement from collapsing in May 2014. Following this, the latter decided to resort to collective action. To illustrate that the union federations did not believe that further negotiations could be successful, they suspended all activities in the Social-Economic Council and Labor Foundation. At the same time, they announced their intention to organize a series of slowly escalating protests. While many stakeholders – including various labor union leaders – initially had doubts about their ability to force the government to come to terms by organizing protests, this changed when they managed to draw large numbers of people to local protests and as many as 300,000 people to a national demonstration in October 2004.15 These protests resulted in a wave of sympathy for the union movement and illustrated how broad the resistance to the government’s proposal was. Perhaps even more importantly, it illustrated the labor union movement’s capacity for collective action. Immediately following the 13 Bert de Vries, Overmoed, 236. 14 The measure would improve the government budget by 1.5 billion euros, which represented around one third of the government’s total austerity package. See NRC, Akkoord: 4 miljard bezuinigingen, 21 August 2003. 15 For union doubts on their ability to do so, see Hazenbosch, Voor het volk, 695-701. For similar doubts in employer circles, see Van den Braak, Dagboek van een poldercrisis, 68.

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national protest, the FNV thus began to draw up plans for large sectoral strikes and some union leaders openly spoke of the possibility to organize a general strike. In addition, the union federations announced that they would be seeking reparations for any cuts in social insurance entitlements, which presented a troublesome prospect in a period that called for wage moderation, as the employer federations made clear to the government.16 As a result, the latter saw no alternative to reopening negotiations with the union movement. In turn, this meant that it had to make additional concessions, which would inevitably further water down its reform agenda. The scale of these concessions became clear in November 2004 when the government and social partners came to an agreement. Under the agreement, the early retirement schemes would effectively be replaced by, or integrated with, regular private pension schemes and so-called life cycle schemes (in Dutch: levensloopregelingen) under which workers could save for a certain period of paid leave.17 This meant that workers would continue to be able to retire early for the foreseeable future. In addition, workers would continue to be able to receive a total pension benefit that granted complete earnings replacement. The government also agreed to give the Social-Economic Council six months to come up with an alternative for its public unemployment insurance proposal. When the council did so in April 2005, the government lived up to its promise, even though the proposal was somewhat more costly than agreed.18 Under the council’s proposal, the minimum duration of the earnings-related benefit was to be reduced to three months in exchange for an increase in the level of the benefit from 70 to 75 percent of the previous wage, entitlement to this benefit was to depend on a work history of at least 26 weeks in the last 39 weeks (instead of 39 out of 52 as the government had wanted) so that workers with half-year contracts would continue to be entitled to a benefit and the maximum duration of the benefit was reduced from five to three years and two months. When the government adopted the proposal in its entirety, it passed both chambers of parliament without much difficulty and came into effect on 1 October 2006. 16 For an excellent account of employer views on this, see Van den Braak, Dagboek van een poldercrisis, 56-99. 17 Despite their favorable fiscal treatment, these life cycle schemes proved much less popular than expected and were discontinued within six years after their creation. See Anja Eleveld, “Botsende denkcategorieën en de teloorgang van de levensloopregeling”, Tijdschrift voor Recht en Arbeid 3:2 (2011) 5-11. 18 The proposal yielded 100 million euros less than the government’s proposal. See SER, Ontslagpraktijk en werkloosheidswet (Den Haag: SER, 2005).

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Finally, as part of the November 2005 agreement, the government also agreed to water down its disability insurance reform proposals. Its willingness to do so partly resulted from the realization that previous reforms had been much more successful in reducing the number of disability insurance claimants than initially expected. In addition to watering down its reassessment criteria for existing claimants, it consequently agreed to increase the level of the regular benefit to 75 percent of the previous wage and abolish premium differentiation after an eighteen-month trial period (rather than five years), as well as granting a supplementary wage benefit to partially disabled workers when they made use of at least 50 (rather than 100) percent of their remaining work capacity. In exchange, the social partners agreed to limit the use of supplementary sickness benefits so that a worker could not receive more than 170 percent of his or her previous wage over the two-year period under which employers were now responsible for providing a benefit to sick workers. For legal reasons and owing to strong social partner opposition to this, compliance with the latter was not to be guaranteed through statutory means. As a result – and despite a formal statement on this in the Labor Foundation in December of that year – only about 50 percent of future collective bargaining agreements were to fully live up to this promise.19 Shortly after the November agreement, minister De Geus sent a reform bill to parliament. Despite strong opposition from the left, which questioned the rationale for further reform given the steady decrease in disability insurance claimants in the last couple of years, as well as unexpectedly heated discussion among the coalition partners over how to administer the new program, the Work and Income According to Work Capacity Act (Wet Werk en Inkomen naar Arbeidsvermogen, or WIA) passed both chambers of parliament by the end of the year and came into operation on 29 December 2005.20 The act only catered to workers who had become sick after 1 January 19 In practice, this meant that sick workers would generally receive a full replacement rate during the first year of sickness and 70 percent of their wage in the second year. The government had wanted to go further than this and ban all supplements, although it backed down following criticism from the International Labor Organization (which pointed out that it was not allowed to place statutory limits on private provision) and social partners. About half of future collective agreements were to state that sick workers received 70 percent of their previous wage in general and up to 90 or 100 percent when they participated actively in a reintegration trajectory. Some 22 percent of collective agreements created entitlement to more than 170 percent without asking for any conditions, and a further 37 percent did so if the employee worked actively on his or her reintegration. See Yerkes, Transforming the Dutch Welfare State, 62-63; Rommelse, Arbeidsongeschiktheid, 203. 20 A complicating factor here was that the main coalition partners – the CDA and VVD – disagreed on how to organize the new act. Whereas the CDA opted for private implementation,

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2004. When their entitlement to a sickness benefit ended and they had little to no chance of recovering from a disability that reduced their work capacity by at least 80 percent, they were entitled to a benefit that equaled 75 percent of the previous wage under the Income Insurance Program for the Fully and Permanently Disabled (Inkomensverzekering voor Volledig en Duurzaam Arbeidsongeschikten, or IVA). When they suffered from a disability that reduced their work capacity by at least 35 percent and made use of at least 50 percent of their remaining work capacity, they were entitled to a wage supplement or benefit under the Return to Work Scheme for the Partially Disabled (Werkhervatting Gedeeltelijk Arbeidsgeschikten, or WGA), which was similar in generosity and duration to the public unemployment insurance benefit.21 In other words, the act’s introduction mainly worked to the disadvantage of the partially disabled, who could not find employment for their remaining work capacity or who had lost less than 35 percent of their work capacity. For the permanently disabled among them, the only long-term recourse was to apply for a general assistance benefit. Had there not been such strong labor union opposition to the government’s reform proposals then retrenchment in this area would undoubtedly have been much more severe. Indeed, the events of late 2005 illustrated that the union movement remained a force to be reckoned with in matters that affected the material interests workers. The flipside of this was that governments found it much easier to proceed with welfare reform in instances in which this was not the case. For instance, when the second Balkenende government announced its intention to abolish the Act on Disability Insurance for the Self-Employed in May 2003, this did not raise anything like as much opposition compared to its other reform proposals. By doing so, the government illustrated that it did not believe that risk underestimation, risk selection, or unaffordable contributions levels were major problems that warranted compulsory membership of a disability insurance for the self-employed.22 Despite opposition to this from the main left-wing the VVD feared that this would increase costs and thus argued for public implementation instead. They eventually came to a compromise in which the public Employee Insurance Agency received a monopoly during the first year and private insurers were allowed to enter the market in the second year. See De Vries, Overmoed, 189-199. 21 As a result, it applied the same eligibility criteria as the unemployment insurance benefit, including the 26 out of 39 weeks work history rule. See Rommelse, Arbeidsongeschiktheid, 138-139. 22 When the purple government introduced the Disability Insurance for the Self-Employed it came to a different conclusion as it felt that if the self-employed would be given the choice to insure themselves against the risk of long-term disability, many of them would not do so either because they did not have sufficient income to do so or because they would estimate their risk to optimistically. Important was also that private insurers could not guarantee that all of the

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parties in parliament, it managed to revoke the act without difficulty in August 2004. The abolition could count upon strong support from major organizations representing small businesses such as MKB Nederland and LTO Nederland.23 Many of the members of these organizations constituted higher-paid self-employed persons who complained that the contribution level (which related to gross income levels) was too high for them in relation to the level of the benefit (which related to the net minimum wage). As a result, the abolition of the act also had a decidedly redistributive flavor. On the government’s request, the Associations of Insurers (Verbond van Verzekeraars) created a guarantee scheme for those self-employed persons who would not be accepted by insurers under normal circumstances.24

The 2005 Overhaul of the Health Insurance System To left-leaning critics of the second Balkenende government, the main problem with the aforementioned reforms was that they lacked a strong urgency, given that the Netherlands could boast having one of the highest employment rates in the Western world by the early 2000s, while the costs of public protection against the financial consequences of sickness, disability, and unemployment had also steadily decreased over the years. During the early 1980s – and as can be seen in Figure 10.1 – public spending on these programs peaked at about fifteen percent of gross national product. By the time that the first Balkenende came to power, this had decreased to less than ten percent. This decrease can be explained in two ways: first, as the economy recovered from the crisis of the early 1980s and women entered the labor market in large numbers during the 1990s, the size of the active workforce increased immensely, which resulted in less spending on social benefits as a percentage of gross national product; and second, social self-employed would be given access to affordable insurance. The purple governments view was in line with considerations that has led to the introduction of an insurance for the self-employed in the 1970s. In the mid-1960s, the Council for Small and Medium Sized Enterprises (Raad voor het Midden- en Kleinbedrijf) had for instance also concluded that the risk of (long-term) disability could not be fully covered by private insurers. That the Balkenende-government came to a different conclusion is therefore quite remarkable. Part of the reason for this was that it took the principled stance that the self-employed were entrepeneurs who were responsible for their own risks. Memorie van Toelichting, Wet einde toegang verzekering WAZ, Handelingen Tweede Kamer, 2003/2004, 29497, nr. 3. 23 Philip de Jong, Lone van Meyenfeldt, and Apostolos Tsiachristas, Evaluatie Einde WAZ (Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid, 2009) 10-11. 24 Ibidem, 11-12.

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spending also decreased due to efforts to reduce the generosity of existing social insurance and general assistance programs and other measures to reduce the inflow into these programs. As a result, many contemporaries questioned the alarmist stance of the first two Balkenende governments, including various members of the leading coalition partner, the CDA.25 In their view, neither the mild recession of the early 2000s nor population ageing warranted a fundamental reform of existing social insurance programs. As evidence of the latter, they could also point to the remarkably stable nature of spending on the public old-age pension program since the 1980s. Despite a steady increase in the number of old-age pensioners in this period – and as illustrated by Figure 10.1 – public old-age spending as a percentage of gross national product was actually lower in the early 2000s than it had been in the early 1980s. The reasons for this were that the steady increase in the size of the active workforce and decrease in the generosity of the public old-age pension benefit (which in turn mainly resulted from the frequent non-application of benefit indexation) had worked to reduce its relative costs. At the same time, another major source of government expenditure had steadily increased in this period. As a result of population ageing, ongoing medical advances and rising quality standards public health care spending had outstripped income growth during most of the postwar period and by the early 1980s had come to overtake old-age pension provision as the single most importance source of government social spending. In the following years, public spending on health care continued to grow despite government efforts to impose austerity on the sector. Throughout this period, only the introduction of strict budgeting under the third Lubbers government temporarily succeeded in stabilizing health care cost. However, this resulted in long waiting lists, which proved so unpopular with voters that the second purple government was forced to change course and loosen budgets during the late 1990s.26 This move immediately resulted in a massive increase in public health care spending, as can be seen in Figure 10.1. By 2005, the government actually spent more money on health care than on all major social insurance and assistance programs minus the public old-age pension combined. Moreover, as most of the underlying factors of increased 25 For an excellent example of internal criticism of this, see De Vries, Overmoed, 86-106. 26 However, it would take several years until these waiting lists were a thing of the past and in the meantime their existence continued to be a popular source of criticism of the second purple government. The populist politician Pim Fortuyn consistently referred to this. See for instance, Pim Fortuyn, De puinhopen van acht jaar paars: de wachtlijsten in de gezondheidszorg. Een genadeloze analyse van de collectieve sector en aanbevelingen voor een krachtig herstelprogramma (Uithoorn: Karakter, 2002).

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Figure 10.1 Public spending on old-age pension provision, health care, and other social programs as a percentage of the gross national product from 1980 to 2015 18

16

14

12

10

8

6

Old age

Health care

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

4

Other social spending

Sources: OECD Social expenditure and health expenditure (Paris: OECD, various years)

government spending could be described as autonomous developments over which governments had little control, health care costs were expected to further grow in subsequent years, which indeed proved the case.27 Possibly the most important side effect of the introduction of budgeting and the waiting lists that resulted from this was that they created momentum for more far-reaching reform, which had taken a long time in coming. As had been the case with most of the other major areas of social spending, concerns over the increasing collective burden had brought wholesale reform of the 27 On the autonomous nature of health care costs growth, see for instance Joost Trienekens, Gijs van der Vlugt, Patrick Jeurissen, and Margriet Germin, “Analyse stijging zorguitgaven”, Economisch-Statistische Berichten 97:4643 (2012) 533-534; L.J.R. Vandermeulen, A. Beldman, and A.J.J. van der Kwartel, Productiviteitswinst in de zorg. Who gets what, when and how? (Utrecht: Kiwa Prismant, 2012).

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health care sector back on the political agenda since at least the early 1980s. In 1987, a government-appointed committee named after its chair, the former CEO of Philips Wisse Dekker, came forward with the first concrete proposal to do so. By arguing for the introduction of a compulsory basic insurance for all citizens, accompanied by regulated competition among insurers, releasing the latter from their obligation to conclude contracts with care providers and increasing the use of deductibles, the Dekker Committee lay out a course that would be followed by the second Balkenende government some two decades later. However, the report’s proposals were viewed at the time as being far too liberal. Almost all representatives from the field rejected important parts of the report, as did all parties on the left.28 The governing CDA also took a critical stance towards some of its features, whereby the second Lubbers government voiced its support for the report but at the same time proceeded with little haste, also announcing that some of the proposals could not be introduced at this time.29 When the second Lubbers government fell in 1989 and the CDA made a left turn by forming a new coalition with the Labor Party, the Dekker proposals were off the table, at least in their original, liberal form. Instead, the new government came forward with plans to introduce a basic insurance with a much broader coverage level that allowed for some market competition between insurers on a regional basis. However, this proposal – which was named after the secretary of Health, Welfare and Culture, Hans Simons – likewise faltered, as major representatives from the field as well as employers and the CDA faction in parliament spoke out against the introduction of what they viewed as a de facto “people’s insurance”.30 Ultimately, the government consequently mainly sought recourse to a stricter form of budgeting. At the same time, it gradually introduced more elements of market competition; for instance, by abolishing geographical limitations on the operation 28 These included the Association of Health Insurance Funds (Vereniging van Ziekenfondsen, or VNZ) as well as the organizations of pharmacists, dentists, and physicians and most specialized medical practitioners. See Karel Companje, Convergerende belangen: belangenbehartiging van de zorgverzekeraars in historisch perspectief, 1900-2001 (Zeist: Zorgverzekeraars Nederland, 2001) 260-283. 29 See H.C. van der Hoeven, Om Welzijn en Winst: 100 jaar ziekenfondsen en sociale zekerheid (Deventer: Kluwer, 1993) 362-362. 30 Under the Simons proposal, 95 percent of what was currently provided by health insurance funds and under the General Act on Exceptional Medical Expenses would be included in the basic insurance, compared to 85 percent under the Dekker proposal. See Companje et al., Two Centuries, 334. See also T.E.D. van der Grinten, “Stelselherziening van de Nederlandse gezondheidszorg: een analyse van het hervormingsbeleid”, Tijdschrift voor Gezondheidswetenschappen 4 (2007) 217-233.

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of health insurance funds as well as these funds’ obligation to conclude agreements with health care providers within their area of operation. The subsequent purple governments largely continued on this course. The more market-oriented orientation of health insurance funds that resulted from this may have played an important role in reducing their opposition to a more fundamental reform of the health care system in subsequent years. This fundamental overhaul finally came about when the second Balkenende government came to power in 2003. Contrary to its purple predecessors, this government was in full agreement on the need for and direction of wholesale reform, which centered around the introduction of a private insurance with a compulsory benefit package for all citizens. This package – the content of which was to be determined by the government – would replace both the existing public insurance and private insurance schemes that currently catered to workers whose income was above a certain wage limit. The insurance was to be compulsory and the insured were allowed to switch between insurers each year. Insurers were not allowed to apply risk selection by rejecting applicants or setting different contribution levels for different groups of insured. At the same time, they were allowed to refrain from signing contracts with care providers under certain conditions. The latter was meant to ensure that the introduction of the new scheme would lead to increased competition among care providers as well as insurers. The reform would be income-neutral as the nominal contribution rate for the insured would be accompanied by a government allowance – the size of which depended on the income of households – and half of the insurance rate would be covered by a percentage rate paid by employers up to a certain wage limit. The self-employed would pay a lower rate and the government was to finance health insurance costs for children under the age of eighteen.31 The Dutch Healthcare Authority (Nederlandse Zorgautoriteit, NZa) would monitor market competition among health care insurers and providers. Whereas the government presented these proposals as the only way forward to reduce costs without having to resort to budgeting, others had great doubts concerning their professed ability to stimulate efficiency and cost-awareness among consumers and health care providers. For instance, some skeptics highlighted that it was not at all clear that a market system 31 Households with an income over 32,900 euros and wealth of 82,900 euros would not receive an allowance. This meant that the number of households that received an allowance was limited to four million. The costs of this were about four billion euros. The contribution rate for employers equaled 6.95 percent of the wage bill up to a limit of 52,000 euros. The rate for the self-employed was 4.95 percent. Flip De Kam, Het land van beloften. Opbouw, crisis en toekomst van de verzorgingsstaat (Amsterdam: Uitgeverij Atlas, 2015) 213.

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would result in increased competition among health care insurers and providers as the outcome could very well be the formation of an oligopolistic market or one characterized by regional monopolies. If that were to be the case, they argued that the government’s desired efficiency gains would never materialize.32 Others warned that the new system might be much more administratively complex and might stimulate health care providers to increase production, whereby it would increase rather than reduce costs. These latter concerns were often raised with reference to the situation in countries that already had a largely private health care system, like the United States and Switzerland, where health insurance costs tended to be substantially higher than in countries with mostly public systems.33 Finally, there were those who worried that a private system would inevitably reduce consumer choice. While most of these skeptics could be found on the left side of the political spectrum, various CDA members initially also professed doubts about the government’s proposals.34 Nonetheless, the government managed to steer its plans through parliament without difficulty, whereby its Health Insurance Act (Zorgverzekeringswet, or Zvw) passed the second and first chambers of parliament in December 2004 and June 2005, respectively, entering into operation in January 2006. Only the Labor Party, Green Left (Groenlinks), and the Socialist Party (Socialistische Partij, henceforth SP) had opposed its introduction. However, it soon became clear that the concerns of these parties had not been without validity. Following the act’s introduction, health insurance costs continued to rapidly increase, as can be seen in Figure 10.1. Moreover, whereas much of the rapid increase in health care costs up to 2005 could be explained by efforts to eliminate waiting lists following the purple government’s decision to loosen budgets in the late 1990s, this was no longer the case for the cost increases of later years.35 The reason for this was that the Health Insurance Act not only prompted health care providers to increase their efficiency, but also stimulated them to increase production. In response to this problem, a liberal Minister of Health under a different government 32 See Jos Kuijs, “Tegen de slechte zorgwet”, Socialisme en Democratie 26:6 (2005) 8-9; De Vries, Overmoed, 111. 33 See for instance, Agnes Kant, “Marktwerking maakt zorg duurder”, Economisch-Statistische Berichten 87:4355 (2002) 283; J. Breemer ter Stege and C. Breemer ter Stege, “Nederland bewandelt verkeerde weg: ziekenhuiskapitalisme verslechtert zorg in Verenigde Staten”, Medisch contact, 61:50 (2006) 1-3; De Vries, Overmoed, 111. 34 See De Vries, Overmoed, 111. 35 Trienekens et al., “Analyse stijging zorguitgaven”, Economisch-Statistische Berichten 97:4643 (2012) 533-534.

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successfully reintroduced a system of budgeting in 2012.36 By that time, the oligopolistic tendencies of the health insurance market were also confirmed, with four main insurers controlling 90 percent of the national market and various health care providers having developed effective regional monopolies.37 For this and other reasons, the health care system remained an area of major concern to governments of all kinds of political persuasions and will most likely continue to do so. At the same time, as we will see later in this chapter, it was an area that continued to divide left-wing and right-wing forces.

Old-Age Provision and the Challenge of Population Ageing After the Health Insurance Act came into operation in January 2006, the only major social insurance program that had not yet been subjected to a major overhaul since the 1980s was the public old-age pension. Part of the reason for this undoubtedly lay in the popularity of this program, along with the fact that it was closely intertwined with occupational pension schemes, whereby fundamental reform would likely be a messy affair that would have to come about in close cooperation with the social partners. For this reason, subsequent governments looked for other – less visible – ways of ensuring that the program would continue to be affordable in the long term. One measure that facilitated this goal has already been explained in Chapter 6. From the late 1970s onwards, various governments had introduced “discounts” regarding the extent to which minimum benefits were adjusted in line with wage increases or they simply suspended the wage indexation mechanism altogether. This greatly reduced the relative value of the old-age pension benefit, which in turn goes a long way towards explaining why public spending on old-age pensions as a percentage of gross national product remained more-or-less stable since the early 1980s (see above). Following the introduction of the 1992 Coupling with Adjustment Possibility Act – and as can be seen in Table 10.1 – the practice of non-application of the wage indexation mechanism became somewhat less frequent but still took place now and then. As a result, the relative value of the public old-age pension 36 See M.F.M. Canoy, A.G.M. ten Have, W.J. Oortwijn, and M.C.J. Romme, “Zorgkosten onder controle?” In Wim Drees Stichting Openbare Financiën, Jaarboek Overheidsfinanciën 2011 (Den Haag: Sdu, 2011) 101. 37 On the lack of competition and emergence of oligopolies, see OECD, Fiscal Sustainability of Health Systems: Bridging Health and Financial Perspectives (OECD: Paris, 2015) 248-251; Autoriteit Consument en Markt, Concurrentie op de markt voor zorgverzekeringen (Den Haag: Autoriteit Consument en Markt, 2016).

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Table 10.1  The use of the wage indexation mechanism since 1980 Application

Period

Frequency

Fully applied Partially applied Not applied (benefit freeze)

1990-1991, 1996-2003, 2006-2015 1980-1983, 1992 1984-1989, 1993-1995, 2004-2005

22 times 5 times 11 times

Source: Flip de Kam, Het land van beloften. Opbouw, crisis en toekomst van de verzorgingsstaat (Amsterdam: Uitgeverij Atlas, 2015) 195

benefit continued to decline, from just over 80 percent of average wages in industry for a married couple in 1980 to about 65 percent in 2015.38 The frequent non-application of the wage indexation mechanism during the 1980s and less frequent benefit freezes of later years certainly did not come about as a result of concerns over the affordability of the public pension benefit in the face of population ageing; rather, they resulted from much broader concerns over the sustainability of government finances and the competitiveness of Dutch industry. It was not until the second half of the 1990s that various parties began to contemplate reform in direct relation to population ageing; indeed, when they did, they looked for different solutions to this problem. One such solution was to further invest in efforts to increase the activity rate of the working population. As noted earlier, this was one of the reasons why the second Balkenende government continued to insist upon further reform of the public disability, sickness, and unemployment insurance and social assistance programs, as well as so strongly insisting upon the need to reduce the practice of early retirement. It consistently motivated these reforms by referring to an impending ageing crisis.39 Some ten years earlier, the first purple government had somewhat fleetingly referred to the problem of population ageing when it replaced the Widows and Orphans Act with the much more austere General Survivors Act (Algemene nabestaandenwet or ANW), which granted an income-tested benefit to survivors with disability or children. As a result, the number of beneficiaries of this program was cut in half in about ten years. 40 38 As the public old-age pension program was by far the largest social transfer program and handed out a flat-rate benef it, the non-application of the wage indexation mechanism had particularly strong consequences for old-age pensioners. 39 On this see for instance De Vries, Overmoed en onbehagen, 33-42; Hazenbosch, Voor het volk, 686-692. 40 The new rules only applied to those born after 1950, whereas those born before this date continued to be entitled to a benefit under the much more generous Widows and Orphans Act. See De Kam, Het land van beloften, 191.

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The same government also effectively broadened the tax base of the public old-age pension by limiting the contribution rate to 17.9 percent of the gross wage up to a certain income limit, which meant that an increasing part of the pension was to be financed out of general taxation. By 2005, this was the case for some twenty percent of its costs. The second purple government had even considered further increasing the tax share of the public pension, although it eventually refrained from doing so as it feared that old-age pensioners (who did not have to pay pension contributions as they had already retired but did have to pay general taxation, which meant that they would be worse off if the latter’s share in financing the old-age pension benefit was to increase) would resent this move. 41 For electoral reasons, because increasing the tax-financed share of the old-age pension benefit conflicted with actuarial principles, and because it opposed the progressive redistributive consequences of such a move, the first Balkenende governments never gave serious consideration to this. Moreover, when the Labor Party presented concrete plans to do so in early 2006, the remaining members of what was then called the third Balkenende government – the CDA and VVD – strongly criticized these plans as being unfair to old-age pensioners. They continued to do so after the Social-Economic Council spoke out in favor of increasing the tax share of the public old-age pension.42 The so-called “elderly tax” subsequently developed into an important issue during the parliamentary elections that took place later that year. At the same time, both parties neglected to mention that they favored – or at least seriously considered – increasing the statutory retirement age as a solution to the strain placed on the old-age pension system by population ageing. 43 The social-liberal D66 was the only one to openly argue in favor of this during the run-up to the parliamentary elections of November 2006. 41 The second purple government had considered increasing the tax share even further, but eventually refrained from doing so fearing an electoral backlash following the start of the Fortuyn revolution. See Koen Caminada and Kees Goudswaard, Verdeelde zekerheid: de verdeling van baten en lasten van sociale zekerheid en pensioenen (Den Haag: Sdu, 2003) 187-188. 42 It had already done so in 2005 and repeated this one year later. Furthermore, it also argued that it was not yet necessary to consider raising the retirement age. See SER, Van alle leeftijden: een toekomstgericht ouderenbeleid op het terrein van werk, inkomen, pensioenen en zorg (Den Haag: SER, 2005). 43 The VVD had considered taking this up in its election program, but eventually refrained from doing so. CDA leader Jan-Peter Balkenende publicly pledged that the public old-age pension would be “safe” with the CDA during the campaign leading up to the November 2006 elections, although he then proceeded to argue in favor of raising the retirement age in the following months during subsequent discussions with the Labor Party and Christian Union (Christenunie, or CU) over the formation of a new government. One year later, the party actively pushed to

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Eventually, a new Balkenende-chaired government comprising the CDA, Labor Party, and Christian Union (Christenunie, or CU) – a smaller reformed political party – proceeded to do both. In its coalition agreement of February 2007, the government first announced that old-age pensioners with supplementary pension receipts of more than 15,000 euros (which equaled about half of average wages) per year were also to be asked to contribute to the old-age pension. Its successor later replaced this with a more general tax increase for wealthier old-age pensioners. 44 Subsequently, in 2008 the CDA minister of Social Affairs and Employment, Piet Hein Donner, began developing plans to raise the retirement age. He initially toyed with the idea of offering a higher benefit to old-age pensioners who would postpone their retirement for up to five years. Yet as the Dutch economy headed towards recession following the outbreak of the financial crisis that year, this rapidly developed into a proposal to raise the statutory retirement age from 65 to 67 years in various incremental steps. In December 2008, the government came to an agreement on this, whereby workers with a work history of at least 42 years were to be exempted from the increase, while the coalition partners agreed that they would explore the possibility of making further exemptions for professions that took a heavy physical toll on works. The government then proceeded to inform the employer and labor union federations of its pension reform proposals. Whereas the former responded enthusiastically to the government’s proposals, the latter immediately rejected them as unacceptable and responded by threatening with collective action. Following this rejection, the government gave the Social-Economic Council until October 2009 to come up with an alternative for the proposed increase in the retirement age. However, as the economy steadily deteriorated, the employer federations strongly supported the proposed increase and consequently had little incentive to come up with alternatives, and the union federations themselves took a rather uncompromising stance, the council failed to do so. While the union federations came up with various alternatives of their own, these were all rejected by the government as the Bureau for Economic Policy highlighted that they yielded much less than increase the retirement age. See Sytze Faber, De wet van de koestal. Gereformeerden in Den Haag (Amsterdam: Uitgeverij Balans, 2007) 113. 44 Under this “sustainability contribution” (houdbaarheidsbijdrage), the second tax bracket would no longer be fully indexed, which meant that they ended up in a higher tax bracket sooner. In 2012, a government-appointed committee on tax reform named after its chair Kees van Dijkhuizen suggested to speed up this process. See Commissie inkomstenbelasting en toeslagen, Naar een activerende belastingstelsel: interim-rapport (Den Haag: Commissie inkomstenbelasting en toeslagen, 2012).

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the government’s proposal.45 In November of that year, Donner subsequently presented parliament with a slightly altered proposal for a somewhat slower increase in the retirement age to 67 years, from which professions that took a heavy toll on workers were to be exempted. It would be up to the social partners to decide upon the professions for which this would apply. When it became clear that a broad parliamentary majority supported the proposal, the union federations realized that they had to view an increase in the retirement age as a political reality and adopted a more accommodating stance to influence events. They were given an opportunity to do so in February 2010 when the government fell and parliament declared the area of pension reform as too sensitive to be dealt with by a resigned government. Following this, the union and employer federations resumed discussions over pension reform, doing so in the Labor Foundation this time. In June of that year, they came to an agreement. Under the Foundation’s agreement, the statutory retirement age would be raised to 66 years in 2020, with a further possible increase five years later. From then onwards, the retirement age would be linked to the average life expectancy of workers. There were to be no exemptions for professions that took a heavy toll on workers; instead, it would be possible to retire earlier or later than the statutory retirement age in exchange for a lower or higher benefit. To reverse the steady deterioration of the old-age pension benefit as a result of the frequent non-application of the wage indexation mechanism in recent decades, the benefit was to be raised by 0.6 percent on top of regular indexation between 2013 and 2028. Finally, the social partners agreed that occupational pension benefits were to be more closely linked to the financial position of pension funds. 46 While all union federations signed the agreement, two of the largest FNV affiliates spoke out against it, announcing that they would seek reparations during subsequent wage negotiations if these plans were to be implemented. This resulted in further negotiations over the Foundation’s proposal on occupational pension benefits, which these affiliates described as bringing about “casino pensions”. More importantly, it effectuated a strong internal crisis within the FNV, which forced its chair, Agnes Jongerius, to resign and weakened the union movement for years to come. 47 45 According to the Bureau for Economic Policy, the government’s proposal would reduce government expenditure by four billion, which equaled 0.7 percent of the gross domestic product. See CPB, Houdbaarheidseffect voorstel verhoging AOW-leeftijd (Den Haag: SCP, 2009). 46 Stichting van de Arbeid, Pensioenakkoord voorjaar 2010 (Den Haag: Stichting van de Arbeid, 2010). 47 On this, see for instance Paul de Beer, “Dutch Trade Union Confederation in Crisis”, Transfer 19:1 (2013) 129-132.

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However, the protests of these affiliates did not bring about major policy changes. On the contrary, as the economic situation further deteriorated, the political commitment to raising the retirement age only increased. Roughly a year after the social partners came to an agreement, a new liberal-confessional government chaired by VVD prime minister Mark Rutte announced that it would completely adopt the Foundation’s proposals, although it subsequently fell before it could do so. Eventually, the Foundation’s proposals were implemented by a new purple government comprising the VVD and Labor Party, which came to power in November 2012. By that time, the economic situation had deteriorated so much further that the new government actually felt forced to speed up the process of increasing the retirement age by several years. A bill on this passed both chambers of parliament with broad support in June and July 2012. The first increase in the retirement – by a month – consequently took place on 1 January 2013. Workers under a certain income limit who were currently in receipt of an early retirement benefit were entitled to a transitional arrangement. 48

The Changing Landscape of Social Welfare Provision The outbreak of the financial crisis in 2008 not only settled the debate on the need for fundamental pension reform and how to achieve such reform; the crisis also served as a further catalyst to the decentralization process of the organization of social provision and care programs, which had gradually obtained pace in preceding decades. From the immediate postwar period onwards – and as described at length in previous chapters – subsequent governments had long imposed an ever-larger degree of central supervision on the organization of local welfare programs and placed the organization of a few social care programs into their own hands. This centralization process only came to a halt during the late 1980s. From then onward, local municipalities gradually received increased responsibility for developing, financing, and implementing various welfare policies. The proponents of this not only argued that municipalities’ closer proximity to citizens and better understanding of local labor markets placed them in the best possible position to deliver high-quality assistance, but also that they could do so most efficiently. As a result, the process of decentralization was closely intertwined with the 48 The act increased the statutory retirement age by one month per year in 2013, 2014, and 2015; three months per year in 2016, 2017, and 2017; and four months per year in 2019, 2020, and 2021. This was to result in a statutory retirement age of 66 years in 2018 and 67 years in 2022.

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goal of reducing the collective burden. For this and other reasons, critics of the decentralization process have consistently raised concerns about the possibility that it would undermine solidarity and lead to an under-provision of care. These concerns increased as subsequent governments gradually came to place increased emphasis on stimulating participation and less on providing adequate levels of assistance and care to its citizens. For instance, the 2004 Work and Social Assistance Act (Wet Werk en Bijstand, or WWB) – introduced by the second Balkenende government against strong opposition from left-wing parties in parliament – explicitly stated that participation in the labor market was more important than income maintenance.49 It also further toughened job-seeking requirements by replacing the suitable work criterion with the principle that benefit recipients should accept all “generally accepted” work and revoked exemptions to the job-seeking condition that had previously existed for certain groups. In addition, it forced municipalities to invest more heavily in fraud reform. Finally, it stimulated municipalities to invest even more heavily in active labor market measures. During the early 2000s, the second purple government had already introduced the practice of contracting agreements with municipalities that set performance targets for the number of benefit recipients who participated in such measures. Two years later, it had forced municipalities to outsource these activities to private (for-profit) companies, thereby depriving public employment agencies of their role in doing so. The 2004 Act retracted this obligation and left it almost completely up to the municipalities themselves how to organize activation measures. To stimulate them to work efficiently and invest in labor market activation, they were allowed to keep surpluses and had to complement any shortages that occurred. Furthermore, they obtained direct access to a general reintegration fund, which they could spend at will on subsidized employment, education and training, direct reintegration measures, and voluntary work. In subsequent years, different governments forced municipalities to offer work and education programs rather than benefits to assistance claimants under the age of 27, asking them to perform certain duties in return.50 The first assessments of these reforms indicate that they have been moderately successful in reducing the number of benefit recipients, while also 49 The Labor Party, Socialist Party, Green Left, and Christian Union eventually voted against the bill. Together, these parties – which can be viewed as the “hard” left – held 62 out of a total of 150 seats in parliament at the time. 50 The Youth Investment Act (Wet investeren in jongeren, or WIJ) was abolished in 2012, although the reciprocal work obligation proved a more lasting – but contentious – reform.

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leading to strong variation in the way in which different municipalities deal with social assistance claimants. For instance, whereas some municipalities have refrained from asking benefit recipients to perform certain tasks at all or limited these tasks to a few hours per week, others have asked benefit recipients to perform extensive duties in terms of both their severity and duration. In some municipalities, the work inspection of the Ministry of Social Affairs and Employment also found clear cases of replacement of general jobs by tasks performed by social assistance benefit recipients, even though this is clearly not allowed.51 The union movement also uncovered various instances of regular work displacement, which prompted the liberal-socialist second Rutte government to draft clear norms regarding the obligatory duties performed by benefit recipients. In addition, the Work and Social Assistance Act gave municipalities a strong incentive to classify claimants as sick or disabled as this meant that they would not have to finance benefits for them out of their own budget. Among others, this meant that the number of people in receipt of a benefit under the disability benefits for young disabled persons program (Wajong) massively increased, from about 100,000 at the time of its introduction in 1998 to about 200,000 by 2011.52 In response, the second Rutte government introduced the Participation Act (Participatiewet), which came into operation in January 2015 and effectively merged the social assistance, disability benefits for young disabled persons, and social employment programs into a single program. The act limited entitlement to a youth disability benefit to fully and durable disabled workers (as was the case with the general disability insurance benefit for workers) and introduced an income test. It also froze the number of workers who were currently working in one of the country’s many social employment centers. In exchange, the government announced 51 This has predictably led to much bickering among the liberal and socialist coalition partners of the second Rutte government, with the former complaining about municipalities that did not require (certain groups of) social assistance benef it recipients to perform certain tasks and the latter strongly worrying about the potential for general work replacement. On this variation among municipalities, see Inspectie SZW, Gemeentelijke aandacht voor verdringing bijstandsgerechtigden (Den Haag: Miniserie van Sociale Zaken, 2015). 52 According to calculations by the Central Bureau for Statistics, about one third of the inflow into this program could be explained as a result of substitution from the general assistance benefit. This means that the program’s rapid growth could not only be attributed to substitution efforts; in fact, with its lenient and vaguely defined eligibility criteria, generous nature, and lack of attention for stimulating participation, the program looked much like the old disability insurance program for workers that grew so rapidly during the 1970s and 1980s. On the program’s growth, see Daniel van Vuren, Frank van Es, and Gijs Roelofs, Wajong groeit explosief. Samenhang met bijstand belangrijk (Den Haag: Centraal Bureau voor Statistiek, 2011) 2 and 10.

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that it would work with the private sector to create 125,000 jobs for persons with a reduced work capacity between 2015 and 2026. To convince employers to hire more disabled workers, the government among others introduced a wage costs subsidy and threatened to introduce a statutory quota that would be accompanied by fines when its goals were not met. Despite widespread skepticism about the government’s ability to deliver on this promise, the Act passed both chambers of parliament with a broad majority.53 Following a period of over two decades in which various governments alternately centralized and reduced the government’s hold on the organization of social care policies, a new process of decentralization of the social care sector set in during the second half of the 2000s. As had been the case with the first large decentralization wave during the late 1980s (see Chapter 6 on this), this process was accompanied by strong rhetoric emphasizing the importance of self-help and personal responsibility. For instance, the 2007 Social Support Act (Wet Maatschappelijke Ondersteuning, or WMO) explicitly stated that participation and not income protection lay at the heart of the welfare system, speaking of the need to stimulate self-reliance and compensate citizens in case of reduced participation opportunities. Furthermore, it not only transferred tasks from the central government to local authorities but also limited the former’s role to ensuring that some general goals that were laid out in the act were met. This effectively meant that the central government could no longer call on local authorities to meet certain requirements; in fact, there were no specific requirements as the act merely laid out some broadly defined goals and left it up to the local authorities to decide how to meet them. As a result, the act’s critics worried that it would result in sub-optimal and unequal provision of care. At the same time, they highlighted that various municipalities lacked the expertise and organizational capacity to deliver optimal social care and worried that the act’s introduction might actually lead to more rather than less bureaucracy, especially in smaller municipalities.54 Despite these reservations, the act passed parliament with a broad majority. The fact that most parties supported the general idea behind the act – namely that municipalities had a closer relationship with citizens compared to the central government and thus were better equipped to 53 Only the Socialist Party, Freedom Party (Partij voor de Vrijheid, or PVV), Green Left, 50PLUS, and Party for the Animals (Partij voor de Dieren, or PvdD) voted against the reform. Together, these parties held 38 seats in the second chamber of parliament. 54 See for instance, Duco Bannink, Willem Trommel, and Hans Bosselaar, Crafting Local Welfare Landscapes (Den Haag: Eleven International Publishing, 2013); De Kam, Het land van beloften, 239-242.

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deliver customized and both high-quality and efficient care – held strong importance in this respect. In addition, despite the reform’s aim to reduce long-term spending on social and medical care, it did not involve major budget cuts. The Social Support Act not only replaced the 1994 New Welfare Act (which had served the opposite purpose of giving the central government a stronger hold on social care spending) but also granted municipal responsibility to areas such as home care for the sick, elderly, and handicapped, which had previously been part of the centrally organized General Act on Exceptional Medical Expenses. The Act also replaced the Act on Services for the Handicapped (Wet voorzieningen gehandicapten, or WVG) and the Act on Collective Public Health Prevention (Wet Collectieve Preventie Volksgezondheid, or WCPV), for which the municipalities had already been responsible. Finally, as many of those who were eligible for home care made use of the possibility to purchase their own care with personal budgets made available by the government, the municipalities also became responsible for delivering these budgets.55 Shortly after the introduction of the Social Support Act, it became clear that many of the concerns raised at the time were indeed valid.56 In addition, the act had various unforeseen consequences that created hardship for either patients or workers. A good example of the latter could be found in the home care industry, where the act’s introduction resulted in the practice of public tendering, which in turn prompted a genuine race to the bottom on wages among home care organizations competing over 55 These personal budgets were introduced and added to the General Act on Exceptional Medical Expenses to better customize care to the preferences of citizens and increase efficiency. It meant that care recipients were no longer dependent on in-kind care but could also buy care at their own discretion. While such customized care was indeed cheaper than in-kind care (by some 15 percent on average), it also led to a surge in requests from people who had otherwise not requested care because it did not fit their preferences. In addition, the lack of control over the delivery of these budgets led to massive fraud. In response, the government announced major budget cuts by reducing accessibility (which was based on much broader criteria than in neighboring countries with similar programs) and placed responsibility for the administration of the budgets with the Social Insurance Bank (Sociale Verzekeringsbank, or SVB). Its decision to do so led to much unrest in 2015. On the development and growth of these personal budgets, see K. Sidiraj, D. Oudijk, H. van Kempen, and J. Stevens, De opmars van het pgb. De ontwikkelingen van het persoonsgebonden budget in nationaal en internationaal perspectief (Den Haag: SCP, 2011). 56 For a general evaluation of the act, see Mirjam de Klerk, Rob Gilsing, and Joost Timmermans (eds.) Op weg met de WMO. Evaluatie van de Wet maatschappelijke ondersteuning 2007-2009 (Den Haag: SCP, 2010). See also Nicole Teeuwen, Mary van den Wijngaart, and Hans Moors, Blijven we een fatsoenlijk land? Gemeenten en de verzorgingsstaat (Den Haag: Boom Lemma, 2014); and Albert Jan Kruiter, Femmianne Bredewold, and Marcel Ham, Hoe de verzorgingsstaat verbouwd wordt. Kroniek van een verandering (Amsterdam: Uitgeverij Van Gennip, 2016).

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these tenders. This outcome came as a surprise to many policy-makers as the budget made available to the municipalities for the delivery of home care was roughly equal in size to the original budget. One of the reasons for this is that they had simply not expected the municipalities to be so price sensitive. The problem also had a European dimension, given that European rules force municipalities to launch these public tenders, which the government incidentally knew when it transferred responsibility for home care from the General Act on Exceptional Medical Expenses to the municipalities.57 In December 2014, the government reached a covenant with various stakeholders in the sector that among others committed the municipalities to meet certain price targets. In exchange, the government promised to make more money available for the sector. At this stage, it remains too early to assess the consequences of the covenant. Despite these consequences – and as a result of the need to reduce government spending in the wake of the financial crisis – the second Rutte government further decentralized the social care sector by transferring more long-term care facilities to local authorities in January 2015. The 2015 reform of the Social Support Act among others further increased municipal responsibility for the delivery of youth care and assistance to the elderly and handicapped. The latter of these were previously financed by the General Act on Exceptional Medical Expenses, which was now replaced with the more limited Act on Long-term Care (Wet Langdurige Zorg, or WLZ). As the 2015 reform had a clear austerity purpose, local authorities received a government subsidy to finance their new commitment that was substantially smaller than current expenditure on youth care, outpatient care for the elderly and handicapped, and general participation programs for these groups.58 In 57 This race to the bottom was nevertheless clearly an unintended consequence as the budget made available to the municipalities was roughly equal in size to the original budget. The main problem was that European rules forced municipalities to launch public tenders (which the government knew) and that municipalities proved much more price sensitive than expected. For a general evalution of the act, see De Klerk et al., Op weg met de WMO. Another good example of the way in which European Union membership reduced domestic policy options emerged in 2011 when a European directive stated that Dutch social housing corporations could not rent more than 10 percent of their accommodation to households with an income over 43,922 euros, which created a large group of people whose income was too high to be eligible for social housing and too low to obtain a mortgage from a bank. A complicated factor here was that the Dutch free rental market for housing is quite small, for reasons explained earlier in the book. See B. Hessel, “Woningbouwcorporaties en Europese regels voor staatssteun”, Bouwrecht 47:10 (2010) 771-816. 58 The government reduced the budget for outpatient care from four to three billion euros and for youth care from 4.4 to 4.3 billion euros. For general participation programs (including the social employment centers), the budget was reduced from 2.9 to 2.5 billion euros. See De Kam, Het land van beloften, 182.

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addition, the government reduced access to intramural care for the elderly and handicapped. Finally, the 2015 Social Support Act re-emphasized that those in need of care first had to look for voluntary caregivers in their own social network before they approached the municipalities with a request for assistance. The new Social Support Act received strong criticism from advisory councils such as the Council for the Judiciary (Raad voor de Rechtspraak), which among others highlighted that a further transfer of provisions to the municipalities would lead to fragmentation and thus legal inequality. Other critics pointed out that the government’s assessment of family and friends’ ability to provide voluntary care was far too optimistic. As a result, a substantial part of parliament rejected the act.59 Many of the concerns raised by the parties that did so soon proved valid. For instance, as a result of the steep budget cuts with which they were confronted, various local authorities were forced to offer lower levels of care or responded by introducing deductibles (often doing so without informing care recipients of this), tightening eligibility criteria, and introducing income tests, even though this often conflicted with the goals of the act. In addition, many of them lacked the willingness or ability to assess whether family members were able to provide voluntary care, which led to many instances in which requests for assistance were rejected altogether.60 Partly as a result of this, the 2015 reform of the Social Support Act far from settled the debate on how to organize the social care sector and the near future is quite likely to bring about more substantial reform.

59 The CDA, Green Left, Socialist Party, and Freedom Party – which together held 57 seats in the second chamber of parliament – opposed the act. 60 For various examples of this, see Teeuwen et al., Blijven we een fatsoenlijk land?; and Kruiter et al., Hoe de verzorgingsstaat verbouwd wordt.

Part IV Conclusion

11

The Political Determinants of Solidaristic Reform

The main aim of this study has been to explain the two major postwar transformations of the Dutch welfare state, which – after having acquired a reputation as a long-term laggard – grew into a remarkably generous and inclusive system of social protection during the 1960s and 1970s, before being subjected to various measures in subsequent years that successfully managed to reduce the growing dependency on benefits in the Netherlands. To account for these two remarkable transformations, the book has challenged conventional views on the political role of Christian democracy and the labor union movement, the importance of the political-religious segregation of Dutch society in the immediate postwar period, and the subsequent process of depillarization, as well as the relationship between welfare state development and collective wage bargaining. Moreover, it emphasized the extent to which the postwar introduction and transformation of social programs in the Netherlands came about through a system of institutionalized consultation with the top representatives of organized labor and business. During the first decades of the postwar period in particular, parliament often took a rather passive stance towards social insurance expansion and closely followed the recommendations that emerged through negotiations between labor union and business leaders. Like in most other affluent countries, the most constant and significant source of political conflict over postwar welfare reform in the Netherlands did not concern how the welfare system could best cater to “average” or middle-class citizens; instead it focused on how to ensure that low-income and otherwise economically vulnerable groups could also obtain adequate levels of care and protection against labor market risks. Whereas the labor market position of the bulk of voters meant that it did not prove difficult or controversial to assure increasingly generous levels of economic security for them, doing the same for all members of society required introducing measures that were much more contentious. These included expanding the compulsory coverage of social insurance programs to fragile groups (including self-employed workers), easing eligibility rules for them and devising a more redistributive way of relating benefits to contributions. In addition, it was necessary to complement these programs with tax-financed programs that often catered specifically to particularly vulnerable groups. Compared to the more market-oriented and actuarial alternatives that were

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sufficient to ensure generous levels of care and protection for middle-class groups, such measures had – or were perceived to have – much stronger consequences for people’s sense of personal responsibility, the distribution of income in society, as well as the costs and supply of labor. One of the key arguments advanced in this book is that these concerns were overall less pronounced in the Netherlands compared to many other Western countries, especially during the first half of the postwar period. While the strength of Christian democracy in the Netherlands initially resulted in a strong preoccupation with preserving people’s sense of personal responsibility, there was much less resistance to the consequences of progressive welfare reform for the distribution of risk and income among different societal groups. Of major importance to this was that the pillarized nature of Dutch society and solidaristic stance of the labor union movement prevented middle class groups from rallying against welfare initiatives that affected the distribution of risk and income in a major way. The unions’ solididaristic stance also facilitated the practice of financing welfare initiatives out of the social wage, which held great importance in assuaging parliamentary and employer concerns that they would add to the costs of labor. Finally, despite the Christian-democratic preoccupation with maintaining people’s sense of personal responsibility, for a long time parliament also displayed little attention to the consequences of generous welfare outcomes for economic incentives. Naturally, this does not mean that conflict over progressive welfare reform was largely absent in the Netherlands: on the contrary, like in all other Western countries there was consistent conflict over this. Nonetheless, this conflict is not well captured by conventional approaches that emphasize the importance of inter-party competition and the organizational strength of specific and well-defined societal groups that rally around a common interest. From the outset, the debate on progressive welfare reform had a strong normative component and political divisions over this often transcended class and party lines. Moreover, the positions of key actors in this debate were by no means necessarily constant. For instance, the welfare stance of the most powerful political force in the Netherlands during most of the postwar period – the Christian-democratic movement – was in constant flux due to internal divisions between those who emphasized the importance of self-reliance and personal responsibility and those who felt that the government should assume and maintain responsibility for the provision of welfare to provide a “shield for the weak”. This was particularly the case during the first decades of the postwar period, when the main confessional parties came to display a much more supportive stance towards progressive welfare reform than had previously been the case.

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Reconsidering the Uneven Trajectory of Dutch Welfare State Development The slow pace of this transformation partly explains why the pace of welfare reform continued to lag behind that of many other Western countries during the initial years of the postwar period. The other part of the explanation lies in the exceptionally long duration of the guided wage policy, whereby all major political actors – including the three main union federations – displayed a long-standing commitment to limiting the growth of labor costs, of which social insurance costs were obviously an important part. Rather than demanding welfare improvements as “quid pro quo” for wage moderation as various studies have argued over the years, the labor union movement and its pro-welfare allies thus continued to temper their welfare ambitions until the guided wage policy collapsed during the early 1960s. The confessional preoccupation with personal responsibility meanwhile manifested itself in various levels of principled resistance within confessional parties, employer organizations, and even labor unions to tax-financed and state-administered social programs, compulsory insurance programs and deviations from actuarial principles. Guided by teachings on social justice and their emphasis on broad worker solidarity, the confessional union federations were the first to overcome their reservations towards state intervention. For similar reasons, the Catholic KVP did so at an earlier stage, and to a somewhat greater extent than the Protestant ARP and CHU. However, by the time that these three parties first experienced significant losses in their voter shares during the late 1960s, all of them had long come to adopt a societal view that allowed the state to play a crucial role in providing a “shield for the weak”, even in forms that potentially undermined people’s sense of personal responsibility and the scope for self-help. For this reason alone, scholars should be careful to attribute the growing willingness of these parties to support the welfare demands of the “left” to increased electoral competition over the working-class vote following the collapse of the pillarized political system during the 1960s and 1970s. Another problem with this “depillarization thesis” is that it is by no means clear that the confessional preoccupation with personal responsibility actually reduced the overall electoral appeal of the three main confessional parties. After all, by the immediate postwar period at least, it did not prevent them from supporting the introduction of compulsory, pay-as-you-go financed and rather generous (if actuarially sound) public insurance programs for workers. This stance actually corresponded quite well with the material interests of most voters, including the majority of wage earners, who did not necessarily

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depend on a further loosening of the link between individual contributory effort and benef it entitlement to obtain adequate care and protection against labor market risks. However, such dependency did exist for economically vulnerable groups like the small self-employed and low-paid and relatively risk-prone wage earners. In subsequent years, much of the discussion with the “left” thus focused on the latter’s insistence on the need to grant compulsory membership of insurance programs to the self-employed (an electorally small group that included many who themselves strongly resisted compulsory membership for ideological and material reasons) and introduce specific measures to ensure that vulnerable groups could also obtain adequate care and protection against labor market risks. The latter demand not only conflicted with the confessional insistence on preserving the actuarial features on which the insurance system was based; it also had strong redistributive implications. As we have seen, these consequences would largely be carried by middle-class groups. This makes it quite problematic to argue that the transformation of confessional party views on welfare – with the KVP and ARP in particular gradually coming to place greater emphasis on social justice and solidarity with the less privileged rather than personal responsibility – resulted from electoral necessity. Instead, one can also argue the opposite by contending that the confessional transformation on welfare could only come about because the pillarized nature of Dutch society sheltered confessional parties against electoral competition from parties specifically geared towards middle-class interests. More often than not, these middle-class voters were also wage earners, which made it vitally important that the labor union movement likewise proved willing to pursue a solidaristic welfare course. Its willingness and ability to do so certainly did not come about as a matter of course. On the contrary, when the first Catholic-socialist government of the postwar period announced its plans to introduce a public unemployment insurance program, various unions representing relatively secure workers expressed concerns about the redistributive consequences of this and consequently argued for premium differentiation among different industries. Others went as far as objecting to the program’s inclusion of either their members or particularly risk-prone groups like agricultural and other seasonal workers. Nonetheless, these unions never represented a majority of the affiliates of any of the three union federations. Furthermore, their opposition to redistribution was never so strong that they were unable to accept their federations’ solidaristic stance. Undoubtedly, the fact that the largely sectoral and thus inclusive nature of labor union organization in the Netherlands

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suppressed the scope for organized worker resistance to redistribution held strong importance in this respect. In countries where higher-paid and more secure workers largely organized in separate unions, they tended to actively resist attempts to impose solidarity with the less privileged on them. A good example of this is the United Kingdom, where unions representing skilled workers consistently opposed any welfare initiative that redistributed risk and income in a major way.1 By contrast, in the Netherlands the labor union movement progressively became more insistent on the need to display a solidaristic welfare stance. This first had a major impact on the debate over welfare reform in 1950 when the KAB and CNV rallied behind a NVV plan to combine flat-rate benefits with contributions that were to be graduated by income to ensure that the scheme’s generosity would not be limited by what the lowest-paid contributors could afford. In order to ensure that small- or low-income self-employed workers and business owners could count upon an adequate old-age pension, the three union federations also agreed to exempt selfemployed persons whose earnings were below a certain threshold from having to pay any contributions. As the inclusion of these groups into the old-age pension program was to be financed by a government contribution, this further increased the financial burden placed upon middle-class wage earners. After all, in addition to having to pay social insurance contributions they also paid general taxation. Nonetheless, the three union federations encountered little internal opposition to their pension initiative, which they defended by invoking notions of broad worker solidarity and highlighting that a completely actuarial and non-redistributive system could simply not guarantee benefit adequacy for all. In subsequent years, the three federations continued to apply their sizable wage bargaining power and close bonds with affiliated parties to ensure that social insurance and allied programs not only catered adequately for workers with a strong position on the labor market, but also for lower-paid and more risk-prone wage earners. They simply took the redistributive consequences of this for granted; for instance, in addition to making various demands for overall increases in benefit generosity and less strict eligibility rates (which resulted in significant risk reapportioning), they pushed for 1 On this, see Oude Nijhuis, “Labor Divisions”, 66-79. This resistance to intra-worker redistribution also had severe consequences for the area of wage bargaining. On this, see for instance Pelling, A History of British Trade Unionism; Richard Scase, “Inequality in Two Industrial Societies: Class, Status and Power in Britain and Sweden”. In Richard Scase, Readings in the Swedish Class Structure (New York: Pergamon, 1976); Dorey, Wage Politics in Britain.

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increases in and the respective abolition of income limits to contributory efforts and membership of social insurance programs, the introduction of minimum benefit rates in the previously fully earnings-related disability, sickness and unemployment insurance programs, as well as the institution of the so-called net-net link, which linked net minimum benefit levels to the net minimum wage and the latter to general wage development. In addition, they came to accept the principle – despite not always living up to it in practice – that public insurance against non-work-related labor market risks was part of the social wage and should thus primarily be financed by workers themselves. This acceptance further meant that the financial consequence of efforts to expand the boundaries of the welfare state mainly affected the distribution of income among different categories of wage earners. The union federations certainly continued to pursue a solidaristic welfare course as the era of welfare expansion came to a close and the Dutch safety net was subjected to significant pressure for retrenchment. This pressure among others came from the powerful employer federations, which had increasingly come to express concerns about the consequences of progressive welfare reform for the costs and supply of labor. These concerns fitted well with their overall conservative view on welfare reform. While the employer federations did not outright oppose the principle of the social insurance as they for instance valued its ability to offer pay-as-you-go financing, they consistently adopted the position that social insurance programs needed to be lean and based on sound actuarial features to limit their costs and the scope for decommodification. They were certainly quite willing to deviate from their emphasis on the need to adhere to actuarial principles when this served to limit the system’s generosity, as was the case with their continual support for the breadwinner principle. But they never favored initiatives that aimed to loosen the link between individual contributory effort and benef it entitlement to improve the security of some or all workers against any of the major labor market risks. For similar reasons and sometimes also owing to the possibilities that this offered for the development of lucrative industries (which was most clearly the case in the area of old-age pension provision), they also tended to favor private over public welfare solutions. They later extended this preference to new policy areas such as active labor market policies and family policies like maternity and paternity leave and childcare. Nonetheless, the employer federations often responded in a conciliatory and receptive manner to demands for increases in the level and scope of public protection against labor market risks, mainly due to the value that they placed on maintaining a harmonious relationship with the labor union

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movement. When such increases were not expected to have a major impact on private benefit industries and the costs and supply of labor (ironically, this was the case with the Act on Disability Insurance, among others), it also proved relatively easy for them to do so. The union movement’s gradual acceptance of the need to finance social insurance improvements out of the margin for pay increases consequently goes a long way towards explaining the employer federations’ willingness to respond to many of its welfare demands in a receptive manner. Nonetheless, this willingness not only gave the employer federations less of an incentive to resist the unions’ welfare demands, but it also made it much more difficult for them to do so. After all, cost considerations were not only important to businesses; indeed, given their impact on firm profitability, they also greatly mattered to governments of all types of political persuasions. By offering to finance public welfare improvements out of the margin for pay increases, the unions thus greatly increased the likelihood of finding broad parliamentary support for their proposals. And this in turn acted as a further incentive to employers to respond in a receptive manner to these proposals. The area of old-age pension development serves as an excellent example of this. The entire postwar period reveals only two instances in which the employer federations actually adopted a proactive stance on progressive welfare reform by either supporting a more generous proposal over a less generous alternative or initiating a rather generous welfare proposal of their own. On both of these occasions they did so to prevent the emergence of a welfare alternative that threatened the existence of the private pension industry. The first of these instances came about in the early 1950s when they rallied behind the unions’ old-age pension plan against a competing government proposal that – while being less generous – would have also effectuated a continuation of means-testing, meaning that it presented a major threat to the development of the private pension industry. The employer federations consequently decided to favor the unions’ scheme while simultaneously exerting firm pressure to limit its generosity by among others insisting on the introduction of a low contributory income threshold. In subsequent years, they strongly resisted union efforts to increase the scheme’s generosity, as this would leave less room for the development of private pensions. They only changed course in the late 1960s when the unions presented a proposal that if enacted – would bring about an almost complete replacement of existing private pension funds by a public fund. To prevent this from happening, the employer federations instead proposed to raise the level of the existing benefit to that of the minimum wage and make membership of occupational pensions compulsory for all workers.

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Had the employer federations been more confident that the unions’ proposal for a secondary public pension layer would not receive broad parliamentary support, they would have almost certainly been much less forthcoming. Nonetheless, as it happens, they were not at all certain about that, largely because the unions offered to finance the supplement out of the margin for pay increases, which meant that it would not have a major impact on the competitiveness of Dutch industry. The employer federations realized the political consequences of this quite well. At the same time, they were far from certain that their insistence on the importance of occupational pensions for private investment still resonated broadly in parliament.2 The same applies for their insistence on the need to ensure that worker protection against labor market risks did not undermine work incentives, which was particularly relevant regarding the public unemployment and sickness insurance programs. As unemployment levels were quite low during the first three decades of the postwar period and both the socialist and confessional parties in parliament were by no means ideologically wired to emphasize the importance of material work incentives, such arguments simply did not resonate broadly in parliament. This obviously rapidly changed when benefit dependency increased following the outbreak of the first oil crisis and the golden years of high growth and low unemployment came to an end. As unemployment levels increased, so did the political leverage of the employer federations. However, this was not immediately the case; in fact, as unemployment levels increased during the 1970s, the unions first successfully pushed for an increase in the duration of the unemployment insurance benefit for elderly workers, who were also released from the obligation to look for work, before later successfully advocating the introduction of industry-wide early retirement schemes. In addition, they successfully insisted on the need to apply labor market considerations to disability assessments in a lenient or “broad” manner. While these measures effectively transformed these programs into early-exit pathways that enabled employers to buy labor acquiescence for their restructuring efforts, this book has found no evidence of the view that this outcome was to some extent intentional. The employer federations had in fact consistently warned about the financial consequences of this and only agreed to increase the duration of the unemployment insurance 2 On discussions regarding this, see for instance HDP, FCWV, 19: Korte samenvatting van het besprokene in de vergadering van de Commissie Sociale Verzekeringen van de FCWV gehouden op woensdag 2 april 1969; HDP, FCWV, 18: 2e ontwerp nota inzake aanvullende pensioenverzekering, 17 October 1969.

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benefit for older workers to prevent the unions’ preferred course of action from coming about, namely to increase the duration of the unemployment insurance benefit for all workers. Moreover, they only grudgingly came to admit that a broad interpretation of the employability criterion was the correct one from a legal point of view, before promptly pushing for its abolition. In subsequent years, the employer federations consistently lobbied for retrenchment measures to reduce the collective burden and reservation wage. That it would nevertheless take over a decade before the first serious retrenchment measures came about may to some extent be attributed to electoral considerations. Indeed, when the third Lubbers government reduced the generosity of the disability insurance program in a major way, the CDA and Labor Party promptly lost one third and one quarter of their parliamentary seats, respectively. Nevertheless, this book has questioned the popular belief that the dynamics of welfare retrenchment fundamentally differed from the politics of welfare expansion in that the former enabled governments to reap the electoral benefits of introducing popular policies while the latter required them to withstand the electoral consequences of pursuing unpopular policy measures. Just as the political debate over welfare state expansion was dominated by those who preferred actuarial and those who pushed for more inclusive welfare solutions, the debate on welfare retrenchment largely revolved around the question of whether – or to what extent – the social insurance system’s actuarial features needed to be restored to reduce its costs and limit the scope for moral hazard. The measures that necessitated this by no means necessarily worked to the disadvantage of middle-class voters, of whom a substantial section also appreciated what they viewed as economically responsible behavior aimed at reducing the collective burden. This means that retrenchment created electoral opportunities as well as risks, in particular for conservative and liberal parties that mostly rested upon support from middle-class voters. Other reasons for the absence of serious retrenchment up to the early 1990s included the strong resistance to this from the left wing of the CDA, which dominated the political landscape for most of the years following its formation in 1980, as well as the urgent need to obtain labor union support for wage moderation in this period. Just as it had taken many years before the early postwar emphasis of the main confessional parties on self-reliance and personal responsibility had given way to a societal view in which the government needed to play a crucial role by providing a shield for the weak, it would also take quite some time before the balance of power within the CDA shifted firmly towards the right. Nonetheless, this process

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was more or less completed during the early 1990s, after which the party consistently came to take a pro-retrenchment stance. Contrary to its early postwar predecessors, the CDA interpretation of subsidiarity and personal responsibility was strongly influenced by a liberal emphasis on economic incentives and the need to increase the labor force participation rate. Up to the late 1990s, the main rationale for this lay in the increasingly high level of benefit dependency. As this problem became less acute, concerns over the ongoing process of population ageing emerged as one of the most important arguments for further retrenchment. As the CDA slowly came to display a more conservative stance on welfare reform, political cleavages regarding the need and direction of this reform began to follow party lines more closely. The political right strongly tended to favor solutions based on actual retrenchment in the form of reductions in entitlement rights (which could take the form of direct benefit cuts, the reintroduction of the means-test in some areas, and the introduction of waiting days and deductibles), premium differentiation among industries and firms, as well as a redefinition and more active oversight of benefit obligations. For both electoral and ideological reasons, left-wing parties like the Labor Party were only willing to consider such options as a last resort and instead favored activation measures such as the introduction of a bonus-malus system into the disability insurance system, compulsory reintegration plans for sick workers, and investment in schooling and job counseling for unemployed workers. In addition, the left was much more insistent on the need for increased investment in schooling and facilitating the entry of women into the labor market by extending parental leave and childcare facilities. In this sense, the politics of welfare retrenchment was thus not at all different from the politics of retrenchment; on the contrary, the importance of political partisanship only increased, owing to the CDA’s shift away from a center course and gradual decline. The labor union movement continued to side with the political left on all of these issues. In addition to pushing for the extension of existing social rights to important groups such as women and part-time workers, as well as the introduction of new policy areas such as parental leave and childcare facilities, it used its sizable economic power to attempt to stave off retrenchment efforts. While these attempts were by no means always successful, there can be no doubt that the labor union movement continued to be a force to be reckoned with. This among others became clear when it managed to force the second Balkenende government to renege on its ambitious reform agenda following a union-organized demonstration that attracted as many as 300,000 people and was followed by union threats to

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take a non-accommodating stance during subsequent wage negotiations. The fact that these threats proved relatively effective at the time also related to the government’s need to obtain labor union support for wage moderation. For this reason, despite their concerns about the system’s costs and moral hazard and consequent preference for substantial retrenchment, the employer federations generally continued to adopt a moderate stance in the debate over welfare reform. Despite recent scholarly claims that the working class in Western countries has become more prone to displaying insider-outsider divisions, the labor union movement also continued to pursue a solidaristic welfare course during the age of welfare austerity.3 By pushing to ensure that all workers – including the lowest paid and those with a less favorable risk profile – would continue to obtain adequate care and protection against labor market risks, it worked as a powerful counterweight to the tendency of center-right governments to seek austerity measures that spared middle class voters and thus disproportionally affected precarious groups. A good example of this was its successful resistance to a proposal by the second Balkenende government to limit unemployment insurance benefit entitlement to workers with a work history of at least 39 out of the last 52 weeks, given that this would make it impossible for workers on half-year contracts to obtain access to an earnings-related benefit. In addition, the unions regularly pushed governments committed to welfare reform to take compensatory measures for vulnerable groups. The most recent example of this was their push to exempt professions that took a heavy physical toll on workers from the increase in the retirement age during the late 2000s. By doing so, they helped to ensure that the Dutch welfare state – while becoming somewhat less generous – largely preserved its inclusive character.

The Future of the Dutch Welfare State While recent decades have also witnessed the introduction of new social programs and the extension of existing programs to previously neglected groups like women and part-time workers, the overall trajectory of the Dutch welfare state since the early 1980s can best be described as one of 3 On these claims, see for instance Bruno Palier and Kathleen Thelen, “Institutionalizing Dualism: Complementarities and Change in France and Germany”, Politics and Society 38:1 (2010) 119-148; Johannes Lindvall and David Rueda, “The Insider-Outsider Dilemma”, British Journal of Political Science 44:2 (2014) 460-475.

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initially gradual and subsequently increasingly serious readjustment and retrenchment. As a result, the Dutch welfare state is now much leaner than it was some three decades ago. While the level of social spending in the Netherlands still far exceeds the OECD average, many of its social insurance and allied programs are no longer significantly more generous or accessible than those of other continental European countries with similar levels of economic development. This is particularly the case for programs that facilitated the mass exit of workers from the labor market in past decades, such as the public disability insurance and unemployment insurance programs. In terms of eligibility criteria, net replacement rates and maximum benefit duration, these programs are now comparable in generosity to or even relatively lean compared to their counterparts in continental and northern European countries. As the withdrawal of workers from the labor market through these programs was more serious in the Netherlands than in most of these countries, it is unsurprising that the retrenchment of these programs has also been more radical in the Netherlands. In other welfare domains such as old-age pension provision, the Dutch welfare state continues to outrank most of its European counterparts in terms of accessibility and benefit generosity. 4 At the same time – and contrary to some of the other continental European countries, – the Netherlands has largely avoided becoming a more segmented welfare state. Compared to three decades earlier, low-income groups and other precarious groups now certainly receive less generous levels of state protection against the financial consequences of major labor market risks like disability, old-age, sickness, and unemployment. The gradual reduction of the social minimum from just over 80 to under 70 percent of the average wage in manufacturing industry as a result of the frequent non-application of the wage indexation mechanism during the 1980s and 1990s is but one – albeit a very important – reason for this. Other measures that specifically targeted the poor included the replacement of minimum disability, sickness and unemployment insurance benefits with means-tested supplements, and the gradual lowering and tightening of social assistance benefits. However, at the same time the replacement rates of Dutch social insurance programs continue to be comparatively high for low-income earners.5 In addition, the Netherlands continues to have relatively generous tax-financed provision programs that mostly cater to specific precarious 4 See, for instance, OECD, OECD Employment Outlook 2009. Tackling the Jobs Crisis (Paris: OECD, 2010) 233; OECD, Pensions at a Glance 2013. OECD and G20 Indicators (Paris: OECD, 2014) 67. 5 For the state old-age pension, see OECD, Pensions at a Glance, 67.

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groups. As a result, the levels of poverty among the disabled, elderly, and unemployed continue to rank among the lowest in the world.6 The fact that the Netherlands continues to have a relatively compressed wage and income structure holds particular importance in this respect. Contrary to many other advanced economies, wage inequality has only slightly increased in the Netherlands since the 1980s, whereby most of this increase can be explained by changes in the composition of the workforce. As a result of the high collective bargaining rate and solidaristic stance of the union movement, the lower half of the wage distribution has remained particularly stable and compressed throughout this period. As a result, the lowest pay levels in most sectors (which are now generally far above the level of the statutory national minimum wage, which is now significantly lower than the average wage than was the case three decades ago) are generally sufficient to live on and the problem of poverty in employment is almost non-existent in the Netherlands.7 For obvious reasons, this has also made it much easier to continue to guarantee benefit adequacy for the lowest paid. In various other advanced economies, a significant portion of employees earn wages that are insufficient to live on, which also makes it very difficult to set minimum benefit levels that comfortably exceed relatively poverty levels there.8 In addition, the high level of collective bargaining in the Netherlands has ensured that as the duration and replacement rates of public benefits gradually fell over the years, the generosity of private supplements rose to partially compensate for this decrease. This also happened in other European countries and is considered one of the prime reasons for the emergence of new welfare dualities in such countries. The reason for this is that private benefits in these countries often only apply to a small

6 Currently only two percent of those aged 65 and over have a disposable income that is less than 50 percent of the median, compared to f ifteen percent in Belgium, sixteen percent in Denmark, thirteen percent in Germany and fifteen percent in the United Kingdom. Among the disabled, twelve percent live in poverty in the Netherlands, compared to 25 percent in Denmark, 24 percent in the United Kingdom, 21 percent in Germany, and nineteen percent in Belgium. See OECD, Pensions at a Glance, 165; OECD, Sickness, Disability and Work: Breaking the Barriers. A Synthesis of Findings Across OECD Countries (Paris: OECD, 2010) 56. 7 About two percent of Dutch employees currently have an income below the official poverty rate. See Boukje Jansen en Wim Bos, “Inkomen uit werk en toch risico op armoede”, Sociaaleconomische Trends 12:1 (2012) 24. 8 For an overview, see for instance Eric Crettaz and Giuliano Bonoli, “Worlds of Working Poverty: National Variations in Mechanisms”. In Neil Fraser, Rodolfo Gutiérrez, and Ramon Pena-Casas, Working Poverty in Europe: A Comparative Approach (London: Palgrave Macmillan, 2011).

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group of “insiders”.9 However, in the Netherlands, relatively centralized and high levels of collective bargaining have enabled the labor unions to “repair” emerging gaps in benefit entitlement for almost all workers. For instance, it was noted in Chapter 7 that following the 1993 introduction of the Act on the Reduction of Disability Arrangement Claims, the unions had managed to do so for 85 percent of all workers within the course of a year. The chapter also noted that almost all collective bargaining agreements grant supplements to the sickness benefit. Finally, around 90 percent of all Dutch workers are covered by occupational pension programs. Contrary to various other continental European countries, the collective bargaining rate in the Netherlands has remained quite stable over the years, meaning that there is no reason to assume that these numbers will decrease in the near future.10 The reason for this is that Dutch policy-makers have so far not displayed the “harmful neglect” that some of their counterparts in other countries have done. On the contrary, when non-standard forms of employment like part-time work increased during the 1990s, various consecutive governments took legal recourse to ensure equal treatment in wages, benefits, and training for this type of work. They did so in close cooperation with the social partners. Contrary to, for instance, Germany, there has been no strong employer resistance towards doing so. As a result, collective bargaining rates are roughly as high for workers on non-standard contracts as they are for regular workers: among part-time workers the rate is for instance 76 percent compared to 84 percent for workers on full-time contracts.11 Over the years, 9 Palier, A Long Goodbye to Bismarck; Jon Kvist and Ben Greve, “Has the Nordic Welfare State Been Transformed”, Social Policy & Administration 45:2 (2010) 146-160. 10 OECD, Economic Policy Reform Reports. Going for Growth Interim Report (Paris: OECD, 2014) 103. A good example of a country where collective bargaining coverage has decreased in the last two decades is Germany. For the consequences of this see for instance Dirk Antonczyk, Bernd Fitzenberger, and Katrin Sommerfeld, “Rising Wage Inequality, the Decline of Collective Bargaining, and the Gender Wage Gap”, Labour Economics 17:5 (2010): 835-847; Thelen, Varieties of Liberalization; John T. Addison, Paulino Teixeira, Jens Stephani, and Lutz Bellman, “Declining Unions and the Coverage Wage Gap: Can German Unions Still Cut It?” Journal of Labor Research 36:3 (2015) 301-317. 11 Despite having the highest rate of part-time work in the world, the Netherlands has the lowest rate of involuntary part-time work (e.g. part-time work that resulted from unwanted employer pressure). On this and the popularity of part-time work in the Netherlands see, for instance, Lans Bovenberg, Ton Wilthagen, and Sonja Bekker, “Flexicurity: Lessons and Proposals from the Netherlands”, CESifo DICE Report 6:4 (2008) 9-14; Jelle Visser, “Flexibility and Security in Post-standard Employment Relations: the Netherlands”. In Katherine Stone and Harry Arthurs, Rethinking Workplace Regulation: Beyond the Standard Contract of Employment (New York: Russel Sage, 2013) 135-151.

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governments of various ideological orientations have also adjusted the main worker insurance programs to improve their ability to cater adequately to workers on non-standard contracts. In 1987, the center-right second Lubbers government for instance extended entitlement to unemployment insurance benefits to part-time workers. More recently, the liberal-social second Rutte government extended employer responsibility to finance sickness benefits for sick workers whose contracts had already expired, which greatly improved the protection of workers on fixed-term contracts against the risk of loss of income as a result of short-term sickness. This amendment to the Sickness Act came into effect on 1 January 2013. The Dutch experience with readjustment and retrenchment thus serves to show that a greater reliance on private welfare provision does not necessarily have to result in a more segmented system of welfare provision. Whether the result of a government mandate or union attempts to repair emerging gaps in welfare entitlement, private benef it programs cover almost all employees in the Netherlands and benefit entitlement is generally guaranteed by (statutory bargaining) law. Nonetheless, this is not to say that the process of partial privatization has been without its problems; for instance, the privatization of the sickness insurance program was mainly about the de-collectivization of risks, which had serious adverse consequences particularly for smaller companies confronted with high instances of sickness. As we have seen, many of them have consequently become more reluctant to hire workers with a less favorable risk profile (e.g. older workers and those with a medical history). Moreover, while the privatization of the sickness insurance program has worked to reduce the scope for moral hazard, the privatization of the health insurance system greatly increased this problem through stimulating health care providers to increase production. In terms of access to care and benefits, the process of partial privatization of the Dutch welfare state has raised many concerns yet relatively minor problems though. In other words, despite being subjected to various decades of retrenchment, the Dutch welfare regime continues to offer quite generous levels of care and protection against labor market risks to its citizens. By doing so, it serves as a useful reminder that a generous system of welfare provision does not have to undermine national economic performance. While once considered a prime example of a “welfare-without-work” society, the Netherlands has long since developed a reputation for its ability to streamline social spending without abandoning its commitment to upholding a generous system of social care and protection. With an employment rate that consistently ranked among the highest in the OECD since the late

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1990s, the Netherlands is also well-prepared to meet the future challenge of population ageing, which is projected to peak some two decades from now.12 While it is difficult to predict the impact of future changes in the occupational structure as a result of technological change and a further intensification of international competition, there is no reason to assume that the Netherlands is less prepared to meet these challenges than countries with less generous and comprehensive systems of social protection. At the same time, these challenges should not be underestimated. The process of population ageing alone will certainly require future policy-makers to make further changes to social insurance and (long-term) care programs, and so will the changes in the employment structure that the Netherlands has experienced in the last couple of decades. In addition to the rapid increase in part-time employment, the country has also experienced a massive growth in fixed-term employment since the mid-1990s. From about twelve percent in 1996, workers on part-time contracts now represent just over twenty percent of the workforce. Moreover, in roughly the same period, the number of self-employed persons has almost doubled and now equals to about fifteen percent of the workforce. This means that non-regular work now makes up at least a third of the workforce – even if we do not take part-time work into account. Compared to other northern European countries, this number is quite high.13 While this increase in non-regular forms of employment is often presented as an automatic outcome of the transition from manufacturing to services, there can be no doubt that government policy has played a major role in this. The increase in fixed-term contracts can for instance largely be related to the Purple government’s decision to loosen restrictions on this. And while the rise of two-income households and technological change certainly played a role in increasing the popularity of self-employment, there can be no doubt that generous tax benefits facilitated this process as well.14 While both part-time and f ixed-term employment are now subject to equal treatment under collective bargaining law and are also treated relatively generously under the social insurance system, there can be no doubt that workers on non-regular types of contracts constitute a vulnerable group. This is particularly the case for those on fixed-term contracts. A clear sign of this is that they have comprised over 50 percent of new 12 R.S.C. van Eekelen and R. Olieman, “Voorbij de grenzen van de premie?” In J.B. Kuné, Leven in een ouder wordende samenleving: generatiebewust vooruitzien in de 21e eeuw (Den Haag: Sdu, 2003) 85-100. 13 For an overview see, for instance, OECD, Better Policies for Better Lives (Paris: OECD, 2015). 14 On this, see for instance CBS, Achtergronden en kenmerken van zzp’ers in Nederland (Den Haag: CBS, 2014).

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sickness benefit claimants in recent years while, as noted earlier, making up only about twenty percent of the workforce. One major reason for this is that employers have little incentive to invest in the health of temporary employees (nor, it should be noted, do they have a strong incentive to invest in their skills). The purpose of the aforementioned 2013 amendment to the Sickness Act is to change that. At the same time, the increasing popularity of fixed-term contracts and higher levels of labor turnover has complicated efforts to collectivize the risk of unemployment. For instance, and as noted in Chapter 9, in 2005 the labor union federations only barely managed to convince the second Balkenende government to devise eligibility criteria in such a way that workers with half-year contracts would continue to be entitled to a regular earnings-related benefit. In future years, there would certainly be more discussion about this. The rapid increase in the number of self-employed persons has likewise created new challenges. Whereas Dutch workers – including those on temporary contracts – continue to be entitled to relatively generous levels of protection against labor market risks, the self-employed often are not. For instance, following the 2004 abolition of the Act on Disability Insurance for the Self-Employed, only around one third of the self-employed have managed to insure themselves against the financial consequences of longterm disability. This means that risk underestimation by the self-employed, risk-selection by insurers, and high contribution levels of commercial insurance programs have been much more of an obstacle to membership of insurance schemes than the second Balkenende government predicted at the time. The majority of the self-employed are not insured against the financial consequences of short-term sickness and disability either, while only about half of them are entitled to additional old-age provision on top of the state old-age pension benefit.15 As the self-employed now number a significant portion of the workforce, their inability or unwillingness to insure themselves against these risks is quite worrisome. The rapid increase in the number of self-employed persons has consequently brought new urgency to a question that has divided parliament for 15 For this and coverage against disability, see B. van der Linden and N.E. de Vries, Arbeidsongeschiktheidsverzekeringen van ZZP’ers (Zoetermeer: Panteia, 2014); Ministerie van Sociale Zaken en Werkgelegenheid, Pensioen van zelfstandigen. Onderzoek naar de oorzaken van beperkte pensioenopbouw van zelfstandigen en mogelijke oplossingsrichtingen hiervoor (Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid, 2013). Since 2008 pregnant self-employed women are entitled to a maximum of sixteen weeks of maternity leave, with the maximum benefit set at a level that is equal to the minimum wage. To obtain this maximum benefit they have to work at least 1225 hours per year. Pregnant employees on maternity leave are entitled to full earnings replacement.

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over 70 years: to what extent can a diverse group like the self-employed – of whom the majority of members see themselves as entrepreneurs – be submitted to compulsory membership of insurance against labor market risks?16 The positions of the main political parties on this question have remained remarkably stable over the years: whereas left-wing parties like the Labor Party continue to lean towards compulsory membership of collective insurance programs, confessional and liberal parties like the CDA, D66, and VVD (who were responsible for the abolition of the Act on Disability Insurance for the Self-Employed) tend to oppose such solutions. Part of the reason for the latter’s rejection is that most of the self-employed also do so. On the other hand, the labor union movement supports compulsory membership of social insurance programs to prevent the self-employed from undercutting wages and shifting social insurance costs to the tax payer. For the latter and other reasons, some employer organizations like the Dutch General Employers’ Association (Algemene Werkgeversvereniging Nederland, or AWVN) have also come out in favor of compulsory membership of insurance programs against disability, sickness, and even unemployment.17 Nonetheless, the main employer federations continue to oppose this. Other issues that are certain to involve strong political conflict in the near future include how to assure income protection and stimulate employment for youth and other workers with reduced work capabilities due to physical and mental disabilities, how to organize social assistance for other precarious groups and how to organize long-term care programs. The reason for this is that these areas have all been subjected to strong austerity-driven reform in recent years, which (consequently) generally rested on relatively small parliamentary majorities. The lack of broad consensus on these reform initiatives makes it quite likely that future governments will be forced to make additional changes in these areas. A good example of this is the 2015 Social Support Act, which was not only resisted by various parties but also sparked so much controversy that future amendments seem inevitable. Major parts of the 2015 Participation Act – which came about with much broader political support – also came under immediate discussion following its introduction. For instance, despite resting on a social agreement with the social partners, within a year after the act’s implementation the 16 For an elaborate overview of the characteristics of this group, see CBS, Achtergrondkenmerken en ontwikkelingen van zelfstandigen in Nederland (Voorburg: CBS, 2014). 17 In the same document, the AWVN also came out in favor of a system of basic provision for workers that could be complemented with private supplements. See Lucy Kok, Barbara Baarsma, and Arjan Heyma, Nieuw Ontwerp Sociaal Beleid. Beoordeling van AWVN-voorstel voor een basisregeling voor werkenden (Amsterdam: SOE economisch onderzoek, 2014).

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Social-Economic Council called upon the government to reconsider its decision to freeze the number of workers who are employed by the social employment centers.18 The Council clearly did so in response to the rather disappointing number of jobs for persons with a reduced work capacity that had been created since then, which raised the fear that the government would proceed with the introduction of a statutory quota. As the growth in health expenditure continues to outstrip economic growth levels and is projected to reach between twenty and 30 percent of gross domestic product under unchanged policy in 2040, the question of how to organize the health care sector will likely become one of the most salient issues confronting policy-makers in future years.19 It will also surely involve much political conflict. The 2005 overhaul of the health insurance system – which was opposed by much of the left – did not manage to curtail this growth and left-wing and right-wing parties in parliament continue to be thoroughly divided on the direction of future reform. Most parties on the right continue to believe that more market competition can bring about further efficiency gains and they are inclined to introduce measures that reduce the demand for care, such as the introduction of deductibles and care package retrenchment. Parties on the left continue to emphasize that market competition may bring about efficiency gains but also stimulates care providers to increase production levels. Moreover, they emphasize that care package retrenchment primarily results in a shift from collective insurance to market spending and thus mainly works to reduce solidarity between high- and low low-income earners. To preserve this solidarity in the face of ongoing spending increases, various parties on the left have long insisted on the introduction of health insurance contribution rates that are graduated according to income levels. Under pressure from the Labor Party, the second Rutte government briefly considered doing so but subsequently retracted its commitment as it could not find sufficient support for this in the first chamber of parliament. The proposal also incited a storm of protest by middle-class voters.20 18 SER, Verkenning sociale infrastructuur kwetsbare groepen binnen de Participatiewet (Den Haag: SER, 2016). 19 For this estimate, see Albert van der Horst, Frank van Erp, and Jasper de Jong, “Trends in gezondheidszorg”, CPB Policy Brief 11 (2011) 1-16. 20 When the government came forward with this proposal shortly after coming to power in 2012, the VVD promptly lost almost half of its seats in the polls, which forced it to retract the proposal and find other – less visible ways – to take measures aimed at income leveling. For a variety of reasons, almost the entire opposition opposed the government’s proposal, including the Socialist Party, with its party leader arguing that the proposal did not go far enough.

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The latter raises the question of whether it may have become more difficult to successfully initiate redistributive welfare solutions in recent years. The question is an important one as a truly inclusive welfare system that provides adequate levels of social care and protection does not only rely on broad risk sharing; to a significant extent, it also demands direct redistribution in the form of a contributory system that benefits low-income groups at the expense of those who do possess the earnings to finance adequate social care and protection for themselves. As rightly pointed out by parties on the left side of the political spectrum, the health care sector provides no exception to this. As health care expenditure will continue to increase further in future years an even more progressive system of financing will be necessary to make sure that low-paid groups will continue to have access to adequate levels of care. Without this, major dualities in access to care among different income groups will simply be inevitable. If such dualities were to emerge in recent years, there will undoubtedly be even stronger pressure to increase the redistributive nature of the health care sector’s f inancing system. This can either take the form of health insurance contribution rates that are graduated to income levels (which is already the case for as far as employer contributions are concerned) or increased tax-financing. So has it really become more difficult to successfully initiate redistributive welfare initiatives in recent years? To some extent this may have been the case. It may be no coincidence that as the process of depillarization set in and confessional parties were no longer sheltered against electoral competition from parties specifically geared towards middle-class interests, their successor – the CDA – slowly but consistently shifted towards the right. As illustrated at length in this book, this move was largely prompted by the perceived need to tackle the problem of increasing benefit dependency. However, at the same time, it may also have partly been a response to the tendency of middle-class voters to shift their allegiance to liberal-oriented parties that have always been primarily concerned with catering to middle class voters. To protect the material interests of their constituents, these parties have always been quite hesitant to accept – and often outright opposed – redistributive welfare solutions. The gradual increase in electoral appeal of these parties in recent decades has therefore not been without its consequences for parliament’s ability to display broad social solidarity. Over the years, various scholars have brought forward other reasons why it may be more difficult to introduce and maintain redistributive welfare measures, spanning political to broad socioeconomic developments such as the ongoing processes of individualization and secularization, the rise

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of two-income households, and increase in tertiary level schooling, as well as the increasingly multicultural nature of Dutch society.21 Nonetheless, it is difficult to ascertain whether and to what extent this is indeed the case. After all, the concept of social solidarity is an elusive one and notoriously difficult to measure. There are still powerful forces in the Netherlands that work to preserve and extend social solidarity and these are by no means only limited to parliament. Of particular importance in this respect is the labor union movement, which continues to display a remarkable ability and willingness to push for welfare solutions that redistribute income and risk among different segments of society – including various groups of workers. By doing so it will continue to act as powerful counterweight to those who aim to dismantle or de-collectivize existing social programs. And perhaps even more importantly, it will continue to guard against the kind of harmful neglect that can undermine social solidarity through simple policy inaction. So far, and as we have seen, it has done so with considerable success.

21 For an elaborate and excellent discussion of this, see Peter Achterberg, Judith Raven, and Romke van der Veen, Omstreden solidariteit (Amsterdam: Amsterdam University Press, 2010). For a broader discussion that also focuses on other countries, see for instance John Logan and Glenna Spitze, “Self-Interest and Altruism in Intergenerational Relations”, Demography 32 (1995) 353-364; Ronald Inglehart, Modernization and Postmodernisation: Cultural, Economic, and Political Change in 43 Societies (Princeton: Princeton University Press, 1997); Lutz Leisering and Stephan Leibfried, Time and Poverty in the Welfare State (Cambridge: Cambridge University Press, 1999); Giuliano Bonoli, Victor George, and Peter Taylor-Gooby, European Welfare Futures: Towards a Theory of Retrenchment (Cambridge: Polity Press, 2000).

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Index Aantjes, Wim 134 Act on Adjustment Mechanism (WAM) 220 Act on Disability Insurance (WAO) 127, 147, 184-186, 301; see also disability insurance Act on Extension of the Unemployment Benefit Duration for the Elderly (WWV voor Ouderen) 146, 182, 186, 200, 212 Act on Extension of Wage Payment during Illness (WVLZ) 269 Act on Flexibility and Security (WFZ) 262 Act on Income Provisions for Older or Partially Disabled, Former Self-employed Persons (IOAZ) 231 Act on Income Provisions for Older or Partially Disabled, Unemployed Persons (IOAW) 231 Act on Long-term Care (WLZ) 290 Act on a Minimum Wage 165 Act on a Minimum Wage and Holiday Surcharge 164 Act on Premium Differentiation and Market Regulation (PEMBA) 256 Act on Reduction of Disability Arrangement Claims (TBA) 245, 247, 308 Act on Reduction of the Disability Volume (TAV) 242 Actuarial principles, actuarial approach 23-24, 28, 32, 35, 39, 43, 46, 56, 72, 76, 79, 100-102, 107, 113, 115-116, 128, 141-142, 151, 153, 169, 197, 211, 229, 282, 295, 297-300, 303 Agt, Dries van 212, 217-218 Van Agt government 215, 217, 220, 222, 228 Albeda, Wil 216 Andriessen, Frans 216 Anti-Revolutionary Party (ARP) 24, 29, 54, 80, 92, 94, 96, 110, 112, 120-121, 126, 131-132, 134, 155, 161, 164, 166, 176, 184, 198, 215-216, 297-298 Association of Dutch Employers (VNW) 93 Association of Insurers 274 Association of Social Services’ Directors (DIVOSA) 111, 145 Austerity 38, 67-68, 78, 100, 162, 168, 214-216, 218, 222, 224, 226-227, 230, 235, 239, 266, 269, 275, 290, 305, 312 Austria 55 Balkenende, Jan-Peter 263 Balkenende government 263-266, 273-275, 277, 281-283, 286, 304-305, 311 Stability and Growth Pact 266 Becker, Uwe 54 Beerman, Albert 132 Belgium 55, 259 Beveridgean system 58 Board of Government Mediators (CvR) 104-105 Boersma, Jaap 198, 215

Bretton Woods system 212 Brinkman, Elco 241 Bureau for Economic Policy Analysis (CPB) 219, 283 Buurmeijer, Flip 249-250 Buurmeijer Committee 250-251 Cals, Jo 132 Catholic People’s Party (KVP) 54-55, 74, 78, 80, 92, 94, 96, 108-109, 112, 117, 120-121, 126, 129, 131-132, 155, 161, 164, 210, 216, 220-221, 297-298 Catholic and Protestant-Christian Employers’ Unions (FCWV) 171 Catholic Workers’ Movement (KAB) 60-61, 92, 113, 116, 126, 141, 170, 299 Central Administration Office 94 Central Court of Appeal 190 Central Social Council 93 Central Social Employers’ Federation (CSWV) 118, 141, 143 CSWV Social Insurance Committee 151 Child benefits 77, 95-96, 104, 108, 127, 134, 171 Basic Childcare Provision Act (WBK) 267 General Child Benefit Act (AKW) 108, 127, 134 Christian-Democratic Appeal (CDA) 54, 63, 68, 201, 210-211, 217-220, 222, 226-227, 230, 232, 235, 238-241, 249-251, 263-264, 268, 275, 277, 279, 282-283, 303-304, 312, 314 Christian-democratic parties see confessional political parties Christian Employers’ Federation (NCW) 192-193 Christian Historical Union (CHU) 54, 71, 80, 110, 112, 121, 132, 297 Christian Union (CU) 283 Christian Union Federation (CNV) 14, 28-29, 60-61, 63, 79, 89, 92, 96, 104, 113, 116, 119, 126, 141, 161, 170-171, 176, 221, 241, 248, 299 Common Insurance Office (GAK) 96 Confessional political parties 12-14, 23-25, 27, 30, 54-60, 67-68, 78, 100-102, 112-113, 144, 297, 302-303, 312, 314 Welfare state development 12, 21-23, 26, 29-32, 35-36, 39, 41-43, 48-49, 72, 92, 188, 295, 297 Confessional union 79-80, 112-113, 119, 141, 163, 169, 297 Consultative Council for Social Organizations 120 Council for Advice 132 Council for the Judiciary 291 Council for Social Work 109, 131, 174 Council of State 244, 249 Council of Trade Union Federations (RVV) 89, 116-117, 119, 141 Coupling with Adjustment Possibility Act (WKA) 223, 280 Cradle-to-the-grave 19, 23, 44, 181

338 

Religion, Cl ass, and the Post war Development of the Dutch Welfare State

Deferred wages see social wage Dekker, Wisse 277 Dekker Committee 277 Democrats 66 (D66) 209, 217, 230, 235, 243, 249, 255, 265, 282, 312 Disability insurance 39-40, 44, 95, 127, 147-148, 150-153, 167, 182, 184-188, 191-193, 197, 200, 205, 207-208, 211, 218, 222, 227-228, 232-235, 237-240, 242-243, 245, 249-251, 256, 264, 267-269, 272-273, 301, 303-304, 306, 311-312 Act on Disability Insurance (WAO) 127 Income Insurance Program for the Fully and Permanently Disabled (IVA) 273 Return to Work Scheme for the Partially Disabled (WGA) 273 Donner, Piet Hein 283-284 Drees, Willem 78-80, 83-84, 94, 114 Duisenberg, Wim 215 Dutch Association of Trade Unions (NVV) 29, 60, 73, 78-79, 86, 92, 95, 101, 106, 115-117, 119, 128, 138, 140-141, 162, 169-171, 217, 299 Early retirement 14, 186, 195, 197, 199-200, 202, 227, 264, 281, 285 Early exit pathways 39-40, 44, 146, 183, 194, 200, 302 Early retirement pension 196 Early Retirement Schemes (VUT), 44, 182, 184, 200-201, 203-205, 212, 267, 270-271, 302 Egalitarianism 61-62, 156 Wage bargaining 62, 65, 104, 156, 176, 212, 219, 295, 299 Welfare system 19, 41-43, 45-46, 50-52, 56, 126, 153-154, 156-157, 162, 167, 181, 214, 231, 237-238, 248, 263-264, 288, 295, 314 Emergency Old Age Provision Act 79, 83 Emergency old age provision 80, 106, 114 Emergency Old Age Provision Bill 114 Employee Insurance Agency (UWV) 15, 253 Job Guarantee Act (JWG) 259 Jobseekers Employment Act (WIW) 259 Europe, European Union 19-20, 53, 55, 61, 66-67, 72, 99, 125, 207, 236, 262, 264, 290, 306-308, 310 Federation of Dutch Industries (VNO) 167, 171, 192-193, 199, 202 VNO workgroup 198 Federation of Dutch Industries-Christian Employers’ Federation (VNO-NCW) 14 Federation of Dutch Labor Unions (FNV) 14, 54, 217, 241, 256, 271, 284 Federation of Industrial Insurance Associations (FvB) 15, 95-96, 187-189 Industrial insurance associations 93-96, 107, 115, 138, 143, 148, 187-190, 193-194, 204, 228, 231-232, 241-242, 250-252 Financial crisis 264, 283, 285, 290

Flat-rate benefits 31, 58, 106, 113-114, 116-117, 123, 128, 153, 159, 219, 242, 258, 299 Fortuyn, Pim 266 Framework Act on Specific Welfare (KSW) 175 Gatekeeper Improvement Act 257 General Assistance Act (ABW) 110, 129, 134-137, 143, 145, 150, 167, 173, 181, 224, 229, 258 General Assistance Act College 229 General Court of Auditors 249-250 General Disability Act (AAW) 72, 107, 192, 212, 242, 256-257 Act on Disability Benefits for Young Disabled Persons (Wajong) 256, 287 Act on Disability Insurance for the SelfEmployed (WAZ) 256, 273, 311-312 General Dutch Employers’ Association (AWVN) 312 General Widows and Orphans Act (AWW) 123, 281 General Survivors Act (ANW) 281 Germany 99, 137-138, 308 Geus, Aart Jan de 268, 272 Graaf, Louw de 248 Green Left (Groenlinks) 243, 279 Guided wage policy 33, 35-36, 43-44, 62, 72-73, 88-89, 91, 99, 102-105, 107, 118-119, 122, 125, 129, 139-140, 153, 159, 162-163, 165, 170, 176, 297; see also incomes policies Health insurance 42, 75-77, 95, 107, 127, 136-139, 172, 208, 218, 225, 227, 264, 267, 274, 278-280, 309, 313-314 Dutch Healthcare Authority (NZa) 278 Health Insurance Act (Zvw) 127, 279-280 National Health Insurance Council 138 Housing 42, 103, 125, 156, 172, 175-177, 218, 226 Inactivity crisis 38-39, 63, 207-211, 233, 248 Income policies 72, 162, 176 Industrialization 60 Industry Pension Fund Act 105 Inspection Service for Work and Income (IWI) 254 Joekes, Dolf 94-96, 114-117, 121, 148 Jong, de government 176 Jongerius, Agnes 284 Kersbergen, Kees van 54 Klompé, Marga 130-133, 135, 143 Kok, Wim 235, 244, 247-248 Kok government 252, 254 Labor Councils 115 Labor Foundation (STAR) 74, 76, 78-79, 83-85, 90-91, 94-95, 104, 127, 141, 163, 170, 172, 239, 261-262, 270, 272, 284 Labor market policy 125, 239

Index

Labor Party (PvdA) 43, 68, 74, 78, 87, 90, 92, 95-96, 101, 106, 109-110, 116-117, 125-126, 130, 138, 155, 158, 160-162, 164, 166-167, 201, 209, 212, 215, 217-218, 220-222, 225, 230, 232-233, 235, 237-240, 243-245, 248-249, 251-253, 255-256, 259-260, 262, 264-266, 277, 279, 282-283, 285, 303-304, 312-313 Labor Union for Middle and Higher-Level Personnel (MHP) 65, 156, 241 Law on Penalties and Measures 258 Leeuwen, Hannie van 166 Leijnse, Frans 244-245 Levenbach, Marius 120 LTO Nederland 274 Lubbers, Ruud 211, 218, 240, 245 Lubbers government 218-219, 222, 224-228, 238-239, 247-249, 258-260, 275, 277, 303, 309 Means-test 77, 79-80, 106, 114, 117-118, 120, 141, 143, 145, 173, 195, 208, 228, 230-231, 269, 301, 304, 306 Melkert, Ad 260 Melkert jobs 260 Minimum wage 42, 58, 62, 136, 151, 154, 160-168, 170-172, 212, 214, 220-221, 224, 230, 244-245, 259-261, 269, 274, 300-301, 307 MKB Nederland 274 Moral hazard 39, 46, 49, 85, 142, 303, 305, 309 National Institute for Social Insurances (LISV) 252-253 Netherlands Catholic Trade Union Federation (NKV) 29, 92, 126, 170-171, 201, 202, 217 Oil crisis, first and second 20, 182, 192, 200, 212-214, 217-218, 302 Old-age pensions 22, 27, 35, 53, 78-81, 103, 108, 113-123, 127, 137, 139, 141, 148, 153, 157, 162, 165, 167, 170-172, 222, 229, 232, 264, 275-276, 280, 282-284, 299-301, 306, 311 Ageing crisis 19, 38, 44, 264, 281 Association for a State Pension 158 General Association for the Elderly 158 General Old Age Act (AOW) 81, 101-103, 112-113, 121-123, 127, 133-134, 136-137, 156-157, 159, 170, 230 Old-age insurance 72, 75, 77, 95, 101, 107 Retirement age 75, 79, 123, 201, 205, 231, 244-245, 282-285, 305 OPEC 214 Participation Act 287, 312 Pay-as-you-go financing 56, 113-116, 118, 149, 172, 204, 270, 297, 300 Pensions and Savings Funds Act 105-106 People’s Party for Freedom and Democracy (VVD) 28, 59, 68, 131-132, 145, 154, 160-162, 164-168, 176, 209, 215, 217-218, 220, 224, 226,

339 229-230, 232, 235, 239, 249, 260, 264-265, 282, 285, 312 Pillarization 25, 27-30, 33, 55-56, 65, 91, 101, 127, 295-298 Depillarization 25-26, 29-30, 56, 67, 174, 295, 297, 314 Poor Relief Act 109-110, 130 Prohibition of Discrimination by Working Hours Act (WVOA) 261 Purple government, purple coalition 44, 235-236, 254, 257-263, 271, 275, 278-282, 285-286, 310 Reformed Political Party (SGP) 121, 134 Rhijn, Aart van 71, 83, 94 Beveridge report 71 Van Rhijn Committee, Van Rhijn report and second Van Rhijn Committee 71-72, 81, 83, 93-95, 114-115, 148-149 Roman Catholic Workers’ Federation (RKWV) 79 Roolvink, Bauke 161, 163-164, 184, 189-190, 195 Rutte, Mark 285 Rutte government 287, 290, 309, 313 Scientific Council for Government Policy (WRR) 219 Self-employed, the 28, 72, 75-76, 78-79, 84, 95, 101-102, 105, 107-108, 111, 114, 116, 119-120, 137, 149-150, 157, 165, 170, 192, 195, 198, 212, 230, 256-257, 273, 278, 298, 311, 312 SER see Social-Economic Council Shield for the weak 24, 56, 155, 210, 296-297, 303 Sickness insurance 75, 147-148, 150-152, 192, 208, 217, 235, 240-242, 247, 251, 264, 281, 300, 302, 306, 309 Act on the Extension of Wage Payment during Illness (WULBZ) 255 Act on Sickness Absenteeism Reduction (TZ) 246-247 Sickness Act (ZW) 127, 137, 147, 172, 185, 255, 309, 311 Sickness Fund Act 138 Sickness Fund Decree 137 Sickness Insurance Act 242 Simons, Hans 277 Sint, Marjanne 235 Social assistance 58, 77, 103, 110, 133, 145, 153, 159, 161-162, 165-167, 173, 175, 189, 195, 221-224, 258, 281, 287, 306, 312 Social Councils (Sociale Raden) 93, 133 Social Democratic Workers’ Party (SDAP) 106 Social-Economic Council (SER) 14, 22, 34, 65, 90-91, 95, 117, 119-120, 123, 127, 138, 140, 143, 145, 148-150, 158-160, 163-164, 167, 172, 199, 219-222, 228-229, 240-244, 268, 270-271, 282-283, 313 Social Employment Act (WSW) 136 Social Insurance Council (SVR) 15, 96, 149, 187, 190-191, 194-196, 229, 244, 250, 252, 256 Central Social Insurance Council 95-96

340 

Religion, Cl ass, and the Post war Development of the Dutch Welfare State

Social Insurance Organization Act (OSV) 72, 97, 194, 251-252 New Social Insurance Organization Act (NOSV) 251 Social Insurance Supervision Committee (CTSV) 194, 252, 254 Social Support Act (WMO) 288-291, 312 Social wage 34, 37, 43, 73, 89, 211, 296, 300 Deferred wage 119, 170 Socialist Party (SP) 279 Solidarity 14, 19, 26-27, 29-30, 32, 41, 45-50, 5354, 57-60, 64-66, 68, 85-86, 112, 134, 136-137, 152, 155, 169, 212, 286, 297-299, 313-315 Stapelkamp, Antoon 91, 96, 121 State Group Scheme for Unemployed Workers (RWW) 135 State Insurance Bank 115 Statutory national minimum wage 154; see also minimum wage Bismarck, Bismarckian systems 58, 106, 153 Net-net link 154, 162, 167-169, 172, 181, 212, 220, 300 Stikker, Dirk 83 Supplementary Benefits Act (TW) 231 Suurhof, Ko 121 Sweden 20, 170, 207 Switzerland 55, 279 Temporary Act for Invalidity Beneficiaries 150 Common Medical Service (GMD) 15, 151, 187, 189-190, 192 Therborn, Göran 20, 25, 207 Unemployment, general 19, 35, 44-45, 68, 81-82, 85, 87-88, 96, 99, 125, 129, 136-137, 139-140, 144, 146-147, 153, 173, 181-182, 184, 188-189, 191, 193-195, 198, 200-202, 205, 207, 213, 217, 228, 235, 239, 258, 260, 274, 302, 306, 311-312 Unemployment rate 99, 142, 166, 195, 207, 255, 258, 266 Unemployment insurance 31, 34, 39-40, 44, 75, 77, 81-86, 88, 90, 103, 120, 127, 135-136, 139144, 146-147, 151, 167, 173, 182, 184, 195-198, 200-201, 205, 222-223, 227-228, 230-232, 258, 267-268, 271, 273, 281, 298, 300, 302-303, 305-306, 309 New Unemployment Insurance Act (NWW) 230-231

Unemployment Insurance Act (WW) 81, 103, 139, 196, 230-231 Unemployment Provision Act (WWV) 127, 136, 143-144, 146, 196-197 United Kingdom 50, 52, 71, 116, 299 British report, British war cabinet 71 British social insurance system 93 British Trades Union Congress 116 United States 50, 279 Uyl, Joop den 217 Den Uyl government 155, 175, 195, 197-198, 200, 203, 212-214 Veld, Elske ter 235 Veldkamp, Gerard 120, 126-127, 133, 135, 138, 143, 147, 150, 152, 161, 163, 184-186 Vries, Bert de 240 Wage compression 62, 104 Wage indexation mechanism 68, 220-223, 280-281, 284, 306 Wage restraint 99, 103-104, 210, 216, 222, 226; see also income policies Wage limit 76, 85-86, 128, 139, 141, 143, 151, 155, 278 Wagner, Richard 219 Wassenaar Agreement 222, 226 Welfare Act 227 Act on Collective Public Health Prevention (WCPV) 289 Act on Services for the Handicapped (WVG) 289 General Act on Exceptional Medical Expenses (AWBZ) 138, 289-290 New Welfare Act 227, 289 White-collar unions 60, 156, 169 White-collar workers 52, 64, 156 Wolfson, Dirk 244 Wöltgens, Thijs 244, 249 Work and Income According to Work Capacity Act (WIA) 272 Work and Social Assistance Act (WWB) 286-287 Working Conditions Act (Arbo-wet) 216 Works Councils Act (WOR) 216 Zijlstra, Jelle 132-133 Zwan, Arie van der 259