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Trade unions try another tactic

When Mao Ze Dong announced his ‘great leap forward’, he probably had in mind equal rights and duties for all the hundreds of millions of Chinese, based on solidarity.

The Cultural Revolution that followed turned out to be a disaster which cost millions of Chinese their lives and destroyed the intellectual assets of a whole generation. Fortunately things have improved in China nowadays, although there still much room for improvement.

Looking at the Dutch pension system, the trade unions have realised that their position in society has weakened during the last decade, and to maintain their position as a ‘social partner’ they are preparing their own great leap forward. For the good of the unique but vulnerable Dutch pension system it is essential that they succeed. Even employers can benefit from the unions’ success, perhaps setting an example for the rest of Europe.

The pension system in the Netherlands consists of three pillars, the so-called ‘Cappuccinomodel’.

The state pension (AOW) is the basis for all Dutch inhabitants from the age of 65. Pension payment is equal for everyone and is financed through tax (pay-as-you-go). It is the coffee in the cappuccino.

The second pillar is made up of the additional pension schemes operated by more than 800 pension funds and financed by funding, currently totalling more than €600bn. Participation is compulsory and therefore applies to almost all employees, providing them with an additional pension based on their personal careers and salaries.

The second pillar is the responsibility of social partners - the organisations of employers and employees. Second pillar pensions are based on solidarity and are executed in collective schemes, which have proved to be the most efficient and cost-effective method. It the cream in the cappuccino.

The third pillar is purely individual, and intended for those, for example, who have not save enough in the second pillar. This is the domain of the insurance companies.

Individual pension products are the cocoa on top of the cream in the cappuccino. The Dutch three pillar system is unique in Europe and the rest of the world. It depends on the specific role of social partners.

What makes it unique is the tradition of constructive negotiation between employers and employees, the so-called ‘polder model’.

The minister of social affairs is responsible for pensions but has delegated the establishment and operation of pension schemes to the social partners, provided they can prove that they represent their sector, branch or company. They can then make the participation in the scheme compulsory. It is this compulsory participation that is the backbone of the Dutch system.

Trade unions traditionally play an important role in establishing collective arrangements for workers and have been quite successful in that role. Almost all industries, sectors and bigger companies nowadays have a collective labour agreement, the so-called CAO, in which all details about the terms of employment from wages to education, are set out. All employees benefit from this agreement, whether or not they are union members.

Another achievement has been the collective second pillar pension schemes, which are on average of high quality. Most employees do not realise that these schemes are the result of negotiations between the social partners.

With the typically Dutch approach of constructive dialogue, which usually leads to a positive outcome, and without a tradition of continual conflict and repeated strikes, it is understandable that a growing number of employees do not feel they need to join a union. These so-called ‘free riders’ nevertheless benefit from collective agreements.

The growing trend of individualisation in society, a logical effect of prosperity, is also a factor. Increasingly, people feel they can look after themselves and no longer need collective strength and provisions. For younger generations in particular, the word ‘solidarity’ is associated with the past.

The young are looking for value for money and behave like demanding clients. They do not feel any obligation to strengthen the position of trade unions, any more than they expect any individual benefit from the unions. They may even suspect that the unions operate only on behalf of older generations.

This suspicion was fuelled by the social agreement 2004 which ruled that that pre-pension arrangements, which were to be repealed, were secured for people aged 55 and over. The young considered this one-sided solidarity.

For the young, unions are associated with past generations, problems, strikes and rearguard actions. Recent research found that over 50% of all employees are dissatisfied to some extent with their present jobs, although only 14% are actively search for another job.

Considering the current perception of trade unions it is unlikely that they will ask them for help as the perceived guardians of their present jobs. But this situation is about to change.

ABVAKABO FNV, the trade union representing members in civil and public service and the healthcare and welfare sector and the second largest union in the Netherlands, has realised that a drastic change in strategy is essential if it is to maintain a strong and significant position in society.

ABVAKABO FNV has more than 350,000 members, and is a member of FNV, the confederation of some 20 Dutch unions. It holds leading positions on the boards of trustees of ABP and PGGM, the two largest Dutch pension funds. More than anyone else they are aware that the unique balance of power and influence between social partners requires at least equal and strong partners.

It is essential, therefore that unions succeed in reversing the loss of membership most of them are experiencing. Current membership as a proportion of potential members is now on average, between 20% and 25%. With the current image of Dutch unions that will not be an easy task.

However, the board of ABVAKABO FNV is determined to succeed. There is much at stake. A large number of their members will retire within 10 years and with an unchanged policy they will not be replaced by younger members.

The new strategy, which is now in its final stage of construction, has a strong focus on making a renewed contact with the younger generations.

Effectively, ABVAKABO FNV has to re-introduce itself. The opportunities are within reach, but it will not be easy. There are few things more difficult than changing an image.

The FNV and some sister unions within the confederation are showing considerable interest in this development, and the need for change extends beyond ABVAKABO FNV. FNV covers all sectors and branches across society.

The first combined communication initiative has already been introduced, offering assistance to workers looking for a change. The initiative is an interactive internet programme called GoNoGo (www.gonogo.nl ), which encourages people to find out whether they are content with their present position or whether they would find another job more interesting.

By answering a battery of questions online they get an instant advice: go or no go. In every case, people are directed towards organisations that can help them to improve their position. This includes the FNV, one of the sponsors of the programme. The initiative helps FNV position itself in an area of opportunities.

These are only the first steps towards a stronger position for the FNV unions in the Netherlands. Their challenge is to convince younger workers in particular that they can find individual added value in a union. Membership of a strong union, for example, ensure that they belong to a solid pension scheme.

The new strategy forces unions to have an outside-in focus, looking through the eyes of their ‘customers’. One interesting side effect is that it stimulates cooperation between the various unions within the FNV confederation. They can learn from each others experiences and it is cost-efficient.

The first steps are promising. Other Dutch unions like CNV also face lower membership rates and difficulty to reach younger generations. They, too, are thinking about changes in strategy.

The pension world will benefit from the ‘great leap forward’ of the unions, at least if they succeed. The result will be a long-lasting foundation for the unique Dutch pension system. As long as the social partners continue to build and improve good pension schemes, either DB or collective DC, the minister of social affairs will continue to give approval for compulsory participation.

The future survival of the Dutch unions could set a good example for the rest of Europe. In that case it could become a new and promising export of that small ‘polder country’ behind the dikes.

Alfred Kool is managing partner Kool Corporate Communication

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