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The Europeanisation of social protection$

Jon Kvist and Juho Saari

Print publication date: 2007

Print ISBN-13: 9781847420206

Published to University Press Scholarship Online: March 2012

DOI: 10.1332/policypress/9781847420206.001.0001

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The Netherlands: social and economic normalisation in an era of European Union controversy

The Netherlands: social and economic normalisation in an era of European Union controversy

Chapter:
(p.175) Ten The Netherlands: social and economic normalisation in an era of European Union controversy
Source:
The Europeanisation of social protection
Author(s):

Anton Hemerijck

Peter Sleegers

Publisher:
Policy Press
DOI:10.1332/policypress/9781847420206.003.0010

Abstract and Keywords

In recent years, the European integration project has become increasingly controversial in the polarised political landscaped of the Netherlands. The legality of engaging in further deepening and broadening of EU integration, in terms of the further enlargement of the EU and a sensitive constitutional discourse on it, has been challenging in Dutch society, which has been formerly and traditionally been supportive of the EU. This chapter discusses the Netherlands' social and economic normalisation during the period of the EU controversy. The Dutch politicians failed to communicate European policies to their public. Therefore, a political controversy on EU socio-economic policy directions occurred in the Netherlands. While the Dutch socio-economic policy of the 1990s fed the European socio-economic discourse, to which the Kok reports and the Lisbon Strategy testify, the European socio-economic policy agenda has reinforced national reforms in the Netherlands. In recent years, three social policy reforms in the Netherlands were intensified by the EU: the reforms of disability pensions, the prevention of long-term unemployment, and the equal treatment of dossier.

Keywords:   European integration, Netherlands, EU integration, Netherlands' social normalisation, Netherlands' economic normalisation, European policies, socio-economic policy, socio-economic discourse, Lisbon Strategy

In recent years the European integration project has become increasingly controversial in the polarised political landscape of the Netherlands. The legitimacy of engaging in further deepening and broadening of European Union (EU) integration, in the further enlargement of the EU, and in a sensitive constitutional discourse on the EU has become challenged in Dutch society, which has traditionally been supportive of the EU.

Three days after the French rejected the proposal for a Treaty establishing a Constitution for the EU, Dutch voters did the same. How this message should be interpreted is still unclear. Although general support for European integration is still high (although a bit lower than a decade ago), dissatisfaction with the fast pace of enlargement and with the lack of democracy in the EU has increased strongly: in 2004 no EU citizens were more dissatisfied with European democracy than the Dutch (Aarts and van der Kolk, 2005).

The Dutch ‘Nee’ seems to differ from the French ‘Non’. Unlike the French, the Dutch debate on the Constitutional Treaty was less fuelled by a cleavage between protagonists and opponents of competing social models. The Dutch ‘Nee’ seems to express a lack of acceptance of EU policies beyond the specific content of the Treaty or of a concept such as the European social model (ESM). The Dutch ‘Nee’ results from the transformation of the EU (the deepening and broadening of EU integration, enlargement) and of changes in the relationship between Dutch citizens and the democratic political system in general.

Unlike in France, the Netherlands does not see much controversy over current EU socio-economic policies and initiatives as these are clearly not at the centre of the Dutch political debate.1 The Dutch political elite failed to communicate the European dimension of socio-economic policies.

Furthermore, the changing character of the Dutch welfare state in the 1990s, from Continental laggard in the 1980s to ‘Dutch Miracle’ (p.176) in the 1990s (Visser and Hemerijck, 1997), and to a normal European country by the beginning of the 21st century, has inspired the EU socio-economic reform agenda, which in turn reinforced the direction of the Dutch welfare state in the 1990s: this explains the current lack of controversy in the Netherlands over EU socio-economic policies.

Generally speaking, the EU influences national socio-economic policy making through four channels: the European Economic and Monetary Union (EMU) and the Stability and Growth Pact (SGP), European law, European Court of Justice (ECJ) case law, and the agenda setting and innovations of the open method of coordination (OMC). Apart from downloading from the EU to national policy-making arenas, Member States simultaneously upload to the EU agenda as well (Börzel, 2005).

The parallel and mutually reinforcing character of interactions between the EU's and the Netherlands' socio-economic policy making makes it impossible to draw conclusions about causal relations in these interactions.

The European social model versus the Dutch model

Academics have defined and analysed the ESM (and politicians have used it) as a particular set of institutions, common values, a particular way of dealing with common problems (policy paradigms and legitimating rhetoric), and in terms of outcomes (different levels of social performance) (Canoy et al, 2005). Its taken-for-granted nature and ambiguous meaning is characteristic of the use of the model. According to Jepsen and Serrano Pascual (2005), the ESM is used in three ways: as an entity, as an ideal type and as a European instrument for social cohesion. They label the ESM as a politically constructed project, a way to legitimise European social policy. Thus, the ESM is rather based on common problems and policy paradigms than on common values.

It should be stressed that debates about models tend to be ideological discussions, depicting the welfare state as a static phenomenon and suggesting high degrees of uniformity and coherence. This way, welfare state arrangements are too easily qualified as export commodities. Problems with the transportability of institutional solutions between different welfare states are ignored (Hemerijck and Berghman, 2004).

Given this background, the term ‘European socio-economic discourse’ describes the specific convergent set of policy directions on the European level better. Convergence in policy challenges and a certain similarity in policy paradigm can be deduced from the different national debates and from the European debate, although (p.177) national cultural diversities and institutional differences point out the hybridisation of welfare states. Contrary to the term ‘social model’, the term ‘European socio-economic discourse’ captures hybridisation in institutional solutions to common challenges.

In spite of the difficulties in applying a specific notion of the ESM, a specific set of characteristics can be extracted from the socio-economic discourse in the EU and from individual Member State developments. The European social discourse is a set of common challenges and an agenda of policy directions.

All European Member States are challenged by demographic ageing, by the ongoing internationalisation of the economy and by the monetary and budgetary constraints on national political economies stemming from the EMU and the SGP. As a result of a change in the configuration of households and work careers, women's participation in the labour market has increased (which has triggered a rise in demand for high-quality childcare services), and workers change jobs more often.

The European agenda sets four policy directions. First, it sees activation and labour market participation as a vehicle for social inclusion and economic growth. Second, it regards social policy as a productive factor; the European Community's latest social agenda goes further and emphasises the cost of a lack of social policy. Third, it promotes emancipation on the labour market, gender equality, anti-discrimination of minority groups, and strategies to combat social exclusion. Fourth, it promotes the consultation of social partners in the social dialogue, and, in general, strong involvement of non-governmental organisations (NGOs) in policy making.

The specific characteristics of the Dutch social model were formed in the 1980s and 1990s, in tandem with the European socio-economic discourse, and departed from the traditional belief that full employment could come about only by redistributing existing jobs. As a result, the most followed strategy was one of compulsory reduction of working hours.

Social partners played a pivotal role in Dutch social policy reform. The 1982 Wassenaar tripartite accord was a turning point. In order to fight rising unemployment, high public debts, inflation and interest rates, and to revive the economy, social partners agreed to wage moderation and reducing working hours. Wassenaar paid off: profits grew, real wages and working hours declined. Simultaneously, moderate monetarism replaced the Keynesian approach: the Wassenaar accord was accompanied by the pegging of the Dutch guilder to the Deutschmark in 1983.

(p.178) Moreover, with Wassenaar, the character of social pacts changed from hard bargaining over wages and hours towards more qualitative agreements, containing multiple choices for the needs and preferences of individual workers at the workplace level.

The activation of inactive people via participation in the labour market has been a leading goal in Dutch welfare reform since the 1990s. Since then the Dutch policy consensus favoured voluntary work-sharing through the expansion of part-time work. The Dutch economy developed into the first ‘part-time economy’, and its success is largely due to the part-time participation of women in the labour market.

Recent history has seen the rise and fall of a number of national success models. Central to the success of these models was their ability to adapt to changing conditions while continuing to provide effective social protection (Visser and Hemerijck, 1997). The Dutch model of tripartite bargaining, wage restraint and the promotion of part-time work – resulting in a substantial growth in service jobs – has attracted much attention from abroad since the mid-1990s. The socio-economic model, soon coined the Polder Model, was presented as a third way, an alternative to neoliberal deregulation and to traditional social democracy.

As a result of changes (in the past 15 years) in both methods and substance of EU socio-economic policy, European welfare states have transformed into semi-sovereign welfare states.

Further economic integration and enlargement inspired the European Council to seek new methods of European cooperation, beyond the traditional juridical route. As a result, the mechanisms by which the EU influences Member State welfare state policies have changed considerably, since the second half of the 1990s.

The leeway of national governments has been limited by the monetary and budgetary integration via EMU, the SGP and the introduction of the euro: monetary instruments and the government budget can no longer be used for safeguarding welfare state expenditure.

Next to the instruments for European monetary and budgetary integration, experimentalist governance methods functioning as new agenda-setting mechanisms have emerged, creating a new environment in which now semi-sovereign welfare states operate.

The OMC is of great importance in this new environment for socio-economic policy making. It came into being when the European Council expanded the method it used for the Broad Economic Policy Guidelines (BEPGs) (the ‘Luxembourg method’) to cover other policy areas: employment policy, pensions and social inclusion. Later it was labelled the open method of coordination. ‘Open’ reflects its desired (p.179) nature, that is (1) the emphasis on policy learning by means of peer reviews, and (2) the involvement of state and non-state actors in the preparation of national policy reports on the basis of commonly agreed objectives. ‘Coordination’ reflects its non-binding character, along with the need to develop common understandings of common problems of Member States' welfare states (Zeitlin et al, 2005).

Main principles in national reforms

Partly as a result of tightening labour supply in the 1980s, the Dutch welfare state in the early 1990s faced typical ‘Continental’ problems: high payroll taxes meant high labour costs (preventing growth in employment ratios), high levels of unemployment, high numbers of inactive people in the workforce, and low female labour market participation. As a result of economic restructuring in the 1980s and the early 1990s, many redundant workers ended up on disability pensions.

The main principles in the reforms implemented to tackle the ‘Continental’ problems consisted of increasing labour supply, ensuring fiscal austerity and involving the social partners in the process. As a result, access to disability benefits and to early retirement was restricted; part-time work was promoted by the introduction of ‘flexicurity’ (WRR, 1990, 2000); health care was privatised; and social assistance decentralised. In this process, social pacts and the ‘jobs, jobs, jobs’ reports prepared by Wim Kok proved important.

Following strong political pressure in 1993, the employers and trade unions in the Social and Economic Council signed a multi-annual agreement, ‘A New Course’, on wage moderation and further decentralisation of wage setting paired with work-time reduction (more flexible working arrangements and further expansion of part-time work). The ‘New Course’ was followed by the ‘werk, werk, werk’ approach (that is, ‘jobs, jobs, jobs’) of the 1994 government led by Wim Kok. It emphasised social inclusion by increasing labour participation, stimulating economic growth by increasing the labour force, and increasing women's labour market participation. The approach fed the EU social discourse of the 1990s, when the interaction between the Netherlands and the EU socio-economic policy agendas culminated in the preparation of the ‘European’ Kok report, in which Wim Kok repeated the message ‘jobs, jobs, jobs’, signalling a European consensus on policy direction for Continental welfare states (European Task Force Employment, 2003).

(p.180) The dissemination of the concept of flexicurity followed a pattern of uploading from the Dutch to the EU level and subsequent downloading to other Member States. The Dutch embraced flexicurity when it was included on the Dutch agenda for collective bargaining in 1996. It was an attempt to balance flexibility and security by lowering the dismissal protection of existing workers alongside enhanced employment and social security for atypical workers in temporary work agencies (Wilthagen, 1998). In 2000 the Working Hours Act normalised part-time work. The Act gave part-timers access to arrangements in social security, pensions, training and education, care provision and holiday pay. The 2003 ‘European’ Kok report embraced flexicurity and showed how Dutch and Danish flexicurity measures had inspired other Member States to implement reforms in the same direction (European Task Force Employment, 2003, pp 28–9).

Furthermore, the Kok report dealt with the problem of high and rising disability claimant figures and the gender pay gap in the Netherlands. EU pressure for reforms in these policy fields contributed to the political legitimisation of reforms, as interviews with senior civil servants show (interview, Dutch civil servant, 2005). The EU acted as an amplifier of three Dutch reforms: on disability/incapacity pensions, on equal treatment and on a policy (Sluitende Aanpak) directed at the prevention of long-term unemployment by means of activation (Ministry of Social Affairs and Employment, 2004).

Traditional pledges for fiscal austerity in Dutch politics were reinforced by the SGP, while the government changed the direction of its macroeconomic policies from anti-cyclical to pro-cyclical. The introduction of the EMU and the SGP in the 1990s ‘increased mutual dependency’ among the Member States (interview, Dutch civil servant, 2005). The criteria laid down in the SGP (Dutch Finance Minister Zalm was an architect of the SGP) reinforced the fiscal austerity tradition in the Netherlands. In order to legitimise welfare state retrenchment efforts, Dutch politicians no longer needed to refer to a national tradition of fiscal austerity that pre-dated EMU and the SGP, but could use EMU and SGP criteria as a scapegoat instead. The emphasis of the government on fiscal austerity contrasts with its pro-cyclical macroeconomic policies, which contributed to an overheated economy in the late 1990s. Higher inflation rates, the result of these pro-cyclical policies, were perceived by the Dutch public as a consequence of the EMU and the introduction of the euro, feeding existing eurosceptic trends in Dutch society.

The Balkenende Centre-Right government's defensive reform efforts, emphasising fiscal austerity and traditional retrenchment, contrasted (p.181) sharply with the offensive approach of the Kok governments in the 1990s (which combined retrenchment efforts with new innovative policies, reflecting the emphasis on flexicurity). The 2003 government implemented a reduction in collective ‘first-pillar’ provisions (analogous to the three-pillar configuration of pensions systems), the introduction and expansion of semi-collective second-pillar provisions, and the introduction of third-pillar individual private insurance. This three-pillar philosophy was extended to include old-age pensions, disability pensions, unemployment insurance, social assistance, health insurance, life course arrangements and the curtailment of poverty traps.

Reforms in pension policy were confined to the rise of contribution rates and changes in indexation rules. A reserve fund was built to ensure the continuation of the basic public pension system, under conditions of demographic ageing. Part of the November 2004 Social Pact restricted possibilities for early retirement. Fiscal incentives for early retirement were abolished, with a ‘life course’ arrangement enabling workers to save up to 12% of their annual income, to spend during their lifetime for parental care or sabbatical leave. This programme claimed that it enabled people to shape their own life course: to take time off for raising children or for investing in one's own education. However, focused as it was on the mid- or late-career group with a higher income, this programme had little to offer the young. Ironically, for elderly workers, the life course arrangement enabled early retirement (age 62) at a 70% income rate. In the drawing up of the life course arrangement, the interests of the baby-boom members (the vast majority of union members) were well represented, so much so that it sparked fierce union debates and the creation of a new union, the AVV (Alternative for Union). The AVV represents the interests of young workers, flexi-workers and other ‘vulnerable’ groups.

At the beginning of the 1990s, about 900,000 people were disability pension claimants – more than 10% of the labour force. The reform in disability pensions resulted from a primarily national political process (interview, Dutch civil servant, 2005). However, EU recommendations for limiting disability pensions helped legitimise the reform, leading to the adoption of the Employment and Income According to Capacity to Work Act (WIA) (interview, Dutch civil servant, 2005). The Kok report explicitly dealt with the problem of disability pensions in the Netherlands:

The disincentives for inactive people to take up a relatively low-paid job are also serious issues in several Member States, usually due to the loss of income-dependent social assistance (p.182) benefits combined with other obstacles to participation. Inactivity traps for beneficiaries of disability/sickness benefits are particularly serious in some Member States such as the UK with 2.7 million recipients, the Netherlands with 985,000 people and, to a lesser extent, Sweden with 320,000 people on long-term sick leave, and Luxembourg. (European Task Force Employment, 2003, p 34)

Although in the 1990s it was extremely difficult to reform the disability law (WAO) the adoption of the WIA (the reform of WAO) by Parliament in 2005 did not entail the political opposition that earlier attempts at WAO reform had triggered. This lack of opposition is remarkable, as the effects of the law are far-reaching. First, instead of passive compensation for disability risks, the law emphasises the capacity of disabled people to work. Second, the WIA represents a classic form of retrenchment, tightening eligibility criteria and lowering the number of claimants. A probable explanation for the relatively easy adoption of this law is that it came into being during a weaker economy, a condition that makes legitimising reforms easier.

A reform of social assistance in January 2004 shifted responsibility to local government. Municipalities received strong incentives, full financial responsibility and more room to manoeuvre, in reintegrating people on social assistance into the labour market. Apart from the reform of social assistance, the new Social Support Act (Wet Maatschappelijke Ondersteuning, WMO), which took effect in January 2007, is a second sign of further decentralisation of social policies. The Act put an end to scattered laws and regulations directed at support for elderly people and people with disabilities.2

In 2006 a controversial Health Care Act was passed, eliminating the difference between public and private health care insurance. Essentially, the reform resulted in a private health care system, constrained by public guarantees and compensation systems. People who used to benefit from relatively low-cost public insurance now have access to tax benefits that enable them to pay the higher insurance bills. Health insurance companies are now at the centre of the health care system, competing on a basic health care insurance package. Since the insured populations of health insurance companies differ, companies with insured populations characterised by higher-than-average health risks get compensation from a fund. The insurance company Azivo has filed a complaint at the ECJ, arguing that the compensation system is not adequate and in fact functions as illegal state aid to health insurance (p.183) companies with healthier insured populations (NRC Handelsblad, 23 May 2006, p 1).

Via the rules of the internal market, competition, non-discrimination and EU citizenship, the ECJ interferes in the working of national welfare state arrangements (van de Brink, 2005). Given the historical role of the ECJ in European integration, ECJ case law could accelerate integration in socio-economic fields. National welfare state arrangements are increasingly subject to EU law and EU decision making.

National responses to the EU initiatives

Most EU initiatives on socio-economic policies do not differ substantially from the Dutch socio-economic policy consensus. Given more commonalities than differences, the EU–Dutch link is politically not much of an issue. This section briefly summarises the main recent EU documents and initiatives and indicates the Dutch national political and policy-making responses.

Lisbon Strategy and Social Policy Agenda

The initial Lisbon Strategy of 2000, after the Kok report of 2004, was transformed in the renewed Lisbon Strategy for growth and employment. The Kok report was directed at evaluating the relevance of the Lisbon Strategy, to determine ways of using EU potential and improving the Strategy's execution and implementation. In the report of the European Employment Task Force of November 2003, Wim Kok repeated the policy diagnosis and policy directions that formed the basis for his governments in the 1990s arguing for reform, activation and flexicurity. ‘Werk, werk, werk’ was translated into ‘Jobs, jobs, jobs’. This development indicates both the changing socio-economic discourse in the Netherlands in the 1990s and the emerging policy consensus in the EU at the end of the 1990s and beginning of the 21st century.

Key to the Lisbon Strategy is that it considers the welfare state as a ‘productive factor’. This idea was put forward by the Dutch presidency of the EU in 1997, when the EU launched its common employment policy (Hemerijck, 1998). Increasing economic growth was necessary for guaranteeing a prosperous, social and sustainable society.

Because the Lisbon Strategy and the Dutch socio-economic discourse developed hand in hand, it is no surprise that the Dutch government supported the new approach in the renewed Lisbon Strategy, arguing that sustainable economic growth and employment was central to it. Clearly establishing the responsibility of actors on the EU and Member (p.184) State levels was key to the success of the new strategy. In it, Member States prepare (every third year) a National Reform Programme, setting out the policy measures taken in the framework of the Lisbon Strategy. Apart from the Reform reports, the Member States send a yearly implementation report to the Commission, reporting on actual implementation. These reports are combined with the Lisbon Strategy setting out the EU measures. The Commission annually evaluates the execution of the Lisbon policies and examines the progress of the Strategy. The European Council decides on the adjustment of guidelines and advises both the Member States and the EU on how to achieve the Lisbon goals (Ministry of Economic Affairs, 2005a).

In a letter to the Dutch Parliament, the Dutch government embraced the Kok report and its recommendations. In short, the government underlined the need to reform the Lisbon Strategy: to decrease the number of goals in the OMCs, to do more naming and shaming, to improve the governance of the Lisbon Strategy (the OMC), streamline the OMCs, and introduce one integral (streamlined) National Action Plan. Special attention should go to the ‘knowledge economy’, the completion of the internal market, the stimulation of entrepreneurship, the better functioning of labour markets and environmental issues (Ministry of Foreign Affairs, 2004).

The new Social Policy Agenda is framed within the Lisbon Strategy. It emphasises the positive interplay between economic, social and employment policies; the promotion of quality (of employment and social policy and industrial relations) to improve human and social capital; and the need to modernise social protection systems, on the basis of solidarity and by strengthening their role as a productive factor. The Dutch Parliament, after receiving the government's reaction, has not debated the Social Policy Agenda in detail. The Dutch government has argued that most of its wishes have been absorbed in the new agenda, linking it directly to the Dutch 2004 EU presidency ambitions, but added that more attention should go to the positive effects of labour market participation on the social integration of immigrants. The fears among many European Parliament delegations were that the economic competitiveness objectives of the Lisbon Agenda would overshadow the social goals it envisioned. In its new Social Policy Agenda, the EU goes beyond social policy as a productive factor by paying attention to the cost of the lack of social policy. The strategy is twofold.

First, the confidence of citizens needs strengthening. It is important to take an intergenerational approach (chances for young people, intergenerational partnership, contribution to the European Initiative for Youth), to establish partnerships for change (role of social partners) (p.185) and to seize opportunities offered by globalisation (social dimension of globalisation): ‘Decent work for all should be a world objective at all levels’ (European Commission, 2005a, p 5).

Second, the Agenda promotes measures on employment and equal opportunities and inclusion. Combining the prosperity and the solidarity objective is of key importance.

The Agenda hints at two forces that make change necessary in the ESM: first, increased competition in a global context and, second, technological development and population ageing. It argues that challenges remain: low rate of employment, unemployment, poverty, inequality and discrimination. The Commission reports that the link between the European Social Fund (ESF) and the Social Policy Agenda would be strengthened. Further, an integrated approach was envisioned (building on the proposed Constitutional Treaty) in the impact assessment tool. All EU policies should take social and employment dimensions into account. The Social Policy Agenda thus has four instruments at its disposal: legislation, the social dialogue, financial instruments like the ESF, and the OMC.

Open method of coordination

The Dutch government has supported recent initiatives in the framework of the streamlining of the different OMCs. It welcomes the new streamlined OMC procedures, and argues that the current involvement of the Council reflects a more politicised OMC. Nevertheless, the Netherlands has in recent years promoted simplified OMC procedures, with fewer goals and more coherence. Thus it would have welcomed the inclusion of the social OMCs as sub-goals in the EES (European Employment Strategy). However, the current streamlining and parallel reporting procedures are a significant improvement, compared to the old OMC procedures that reflected a more bureaucratic approach to EU coordination. The Dutch generally believe that the comparison of best practice in the European arena contributes to reform efforts in welfare state arrangements. Although there are prospects for policy learning via the OMC, two observations stand out: first, the presentation of Dutch best practice to others receives a lot of attention in Dutch ministries, while best practice from other Member States might also be very relevant to Dutch welfare state issues (interview, Dutch civil servant, 2006). Second, participants in the OMC from the EU15 think the OMC is more beneficial to the EU10 than to the EU15, while participants from the EU10 generally do not have high expectations on policy learning via best practice (Sleegers, 2005).

(p.186) The Dutch approach to reforms in the OMC has traditionally centred around four recommendations. First, the reporting process in the OMC (including social inclusion, pensions and health care) could be revised further, with fewer reports and page limits. Second, the OMC on social inclusion should focus on a concise set of five concrete topics relevant to most EU countries. The renewed focus in the Lisbon Strategy should also clarify how social inclusion could contribute to growth and employment. Third, the peer review process for social inclusion and pensions should be revised, as the current peer reviews are not possible with 25 Member States. Fourth, pension reform should be included in the National Reform Programmes, as they will be greatly important in the Lisbon process. The integrated guidelines on growth and employment allow for this inclusion in the National Reform Programme (interview, Dutch delegation to Social Protection Committee, 2005).

Proposal on the Services Directive

The European Parliament in 2001 and 2003 adopted resolutions giving the completion of the internal market top priority. In 2004, the European Commission brought a Services Directive proposal before the European Parliament. Largely the codification of existing EU legislation, this Directive would make freedom of services (already formally established in the Treaty of Rome) a reality.

In December 2004, the Dutch government asked the Social and Economic Council for advice on the Services Directive. In its official reaction to the advice, the Dutch government supported the idea of a genuine single market in services, as a necessary step to completing the internal market, and as a part of the Lisbon Strategy, promoting a more dynamic EU economy (Ministry of Economic Affairs, 2005b).

The Dutch consensus is that a genuine single market in services would enhance the EU economy and lead to economic growth and welfare gains, since more than 70% of all production is located in the services sector. The unions and Dutch government alike are committed to the recommendation of the Social and Economic Council (2005).

The Dutch government has reported that, although it wanted more, it supports the EU consensus around the renewed proposal for the Services Directive. The government favours a more liberal approach to the Directive, for example, for services of general interest (SGI) like health care.

(p.187) Demographic change

The European Commission's Green Paper Confronting demographic change: A new solidarity between the generations covers three characteristics of demographic ageing: increase in life expectancy, low birth rates and the baby-boom generation (European Commission, 2005c). The increase in life expectancy reflects a well-developed welfare state with high living standards, a population in relatively good health, and developed professional health care systems. The Green Paper argued for new forms of solidarity between generations and the development of human capital among both the young and the old. The Dutch Cabinet underlined the need for action and placed the challenges of demographic ageing in the framework of the Lisbon Strategy (Ministry of Social Affairs and Employment, 2005, pp 1–3).

To prevent future generations from having to bear the costs of demographic ageing, the Dutch Cabinet sought to: (1) increase the legitimacy of collective services; (2) adjust collective arrangements; and (3) lower the national debt. Old people in the Netherlands are richer than their predecessors, as a result of generous first-pillar pensions, well-developed second-pillar pensions and a very friendly tax system. Furthermore, most old people in the Netherlands have built up large capital reserves (for example, mortgage-free houses). Dutch women have fewer children than desired; the 1.7 fertility rate is low but, compared to other Continental welfare states, not dramatically low.

The Dutch position on policies for demographic ageing was to handle such problems via BEPGs and the EE S and to use existing institutional structures such as the Economic Policy Committee (EPC) and the Social Protection Committee (SPC) instead of developing new specific policies. In the Netherlands, the baby-boom generation is expected to bear more of the rising costs associated with demographic ageing. One way they could contribute is by participating in the labour market. The Dutch government therefore underlined its ambition to increase the participation rate of elderly workers (55–64 years) to 50% by 2010. The Dutch government saw an important EU role in monitoring life expectancy rates and the desired number of children (Ministry of Social Affairs and Employment, 2005, pp 1–3). Furthermore, from this monitoring, the EU could indicate causes of life expectancy changes, and changes in the desired number of children (the Dutch experience shows that this number follows the economic cycle) and publish a comparison of Member State policy results. Thus, according to the government, the Commission should take an integrated approach to problems of demographic ageing and facilitate the comparison of best (p.188) practice. The EU should integrate the monitoring procedures and comparison of best practice into the processes of the already existing BEPGs and employment guidelines, guaranteeing involvement of both the Employment Committee and the SPC. Developing new institutional structures for activities on this policy field was not necessary (Ministry of Social Affairs and Employment, 2005).

In recent reforms, the Dutch Cabinet has introduced life course arrangements, which should make it easier to combine care for children with participation in the labour market. As argued earlier, such life course arrangements are not attractive for young parents; they are directed only at enabling early retirement. Childcare facilities have been improved recently in the Netherlands (although further reform, in terms of both quality and costs, is still necessary) (Esping-Andersen, 2005). Nevertheless, of all women active in the labour market before having a child, 90% return to the labour market after the birth of their child(ren).

To combat age discrimination in the labour market, the EU should use its legal anti-discrimination framework. In the Netherlands, an effort to mainstream anti-discrimination policy on labour market issues is under way. Furthermore, the government supports initiatives for comparing best practice for the integration of young people into the labour market, more specifically, for dual trajectories of combining work and study. The Dutch government does not consider immigration as contributing to solving problems associated with demographic ageing.

Services of general interest

In its 2003 Green Paper on SGI, the Commission covered issues connected to the development of SGI: ‘Given their weight in the economy and their importance for the production of other goods and services, the efficiency and quality of these services is a factor for competitiveness and greater cohesion, in particular in terms of attracting investment in less-favoured regions’ (European Commission, 2003f, p 4). The Dutch government welcomed the Green Paper and set out the Dutch position in an official government reply (Ministry of Economic Affairs, 2004). Although the Green Paper built on European traditions for social services, it connected the right to non-discriminatory and efficient access to SGI to the concept of EU citizenship. The Commission's Green Paper underlined the importance of SGI to the functioning of the internal market: the increase in employment and downward pressure on costs, as a result of the privatisation of network (p.189) industries, were relevant for social goals. The increase in employment and downward pressure on costs should benefit not only society as a whole, but low-income citizens in particular.

For social services, education and health care, the Commission emphasised that it respected the national varieties of organisational and institutional make-up. The Green Paper covered issues connected to subsidiarity in these fields. It argued that the function of welfare and social protection had a recognised role in promoting cooperation and coordination in these areas. The Commission stressed that a particular concern was the promotion of Member States' cooperation in the modernisation of social protection systems. The Commission had legal powers insofar as they were linked to anti-discrimination and to the freedom of workers in the EU.

The Dutch government position on the scope of the competences of the EU and the Member States is clear: the current system functions well with regard to subsidiarity as laid down in Article 86 of the Treaty. Changes in the Treaty were not necessary, according to the Dutch government, although the concept of economic activity could be defined more precisely. As to the desirability of an EU regulator, the Dutch government is sceptical, proposing a case-by-case approach. The necessity and added value of a network of regulators or an EU regulator should be evaluated by sector and market. An EU regulator per se was not desirable.

For various reasons, the Dutch government strongly opposes a horizontal approach to SGI. First, the Dutch approach is to evaluate and define SGI by sector. Second, Member States have very different definitions of SGI. Third, the proposed framework directive would have to be general, given the diversity between sectors and Member States. Framework directives of such a general nature can hardly be effective. Moreover, the current framework in the Treaty would be so altered by the framework directive that the authority for defining SGI would go to the EU. While the Netherlands would oppose such a development, it would welcome a benchmarking approach to SGI, by comparing best practice in the EU.

European Economic and Monetary Union

The budget of the Dutch Ministry of Finance clearly and explicitly states that the EMU, the SGP and the Lisbon Strategy determine the framework for Dutch socio-economic and budgetary policies (Ministry of Finance, 2005). This is peculiar, since the Dutch emphasis on fiscal austerity pre-dated the EMU and SGP. The Netherlands has (p.190) a tradition of budgetary and fiscal austerity, and has always promoted the importance of EU budgetary restraint on the road to the EMU. The Dutch government has been a forerunner of fiscal austerity in the EU (notably Finance Minister Zalm, one of the architects of the SGP), leading to political clashes with other Member States. The Dutch hard line in the EU was accompanied by an even more austere national budgetary policy. Not only did the Dutch want to comply with the EMU and SGP criteria, but they also surpassed them (that is, the budget deficit in 2005, after an economic downturn, is only 0.3%). This attitude has had great consequences for the development of the Dutch welfare state. Since joining the EMU, and especially after joining the SGP (even though the Dutch emphasis on fiscal austerity pre-dated the SGP), the Dutch government has used SGP criteria for political purposes. The Centre-Right Balkenende government could now legitimise far-reaching welfare retrenchment efforts by referring to strict EU austerity criteria. This position represents a classic form of blame avoidance and of using the EU as a scapegoat for legitimising national reforms. As such, it is a specific manner of downloading EU policy into the national political domain.

Enlargement and the free movement of workers

The High Level Group (2004a) on enlargement wrote a report on the future of social policy in an enlarged EU. The High Level Group argued that seeking a renewed balance between economic integration (always on the forefront of EU integration) and the social dimension was important. The EU should therefore deal with three major challenges in the next decade: enlargement, population ageing and globalisation. Five major policy orientations needed defining, for a new intergenerational pact.3 The High Level Group identified a gap between the broad and integrated approach to social policies in the Lisbon Strategy and the narrowly defined understanding of social policies in the accession process. New Member States had only to implement the acquis communautaire, which does not yet reflect the ambitions of the Lisbon Strategy, leaving some catching up to do.

One very important difference between the older Member States and new Member States is their level of social dialogue. Unions and employer organisations in the new Member States are less well organised and play a less important role in fostering change in their social protection systems. Furthermore, the neoliberal approach in the new Member States during the transition period led some of them to neglect social policies. In some cases this neglect resulted in their (p.191) vulnerable position on the capital market and the involvement of the World Bank in promoting and coaching change in social protection systems (Sleegers, 2005).

The High Level Group findings indicate yet again that the populations of many new Member States have strong egalitarian expectations that contrast sharply with socio-economic realities. The findings also reveal an insufficiently transposed and implemented social acquis in the new Member States, mainly in health and safety at work and equal treatment.

The Accession Treaty regulates the free movement of workers. Regulation 1612/68 on the free movement of workers will apply in all Member States seven years after the enlargement and perhaps in most Member States after two or five years. Only workers can be restricted from free movement; other citizens are free to move from day one. In January 2004, the Netherlands reversed its original 2001 policy (under the Kok II government). The change was a result (mainly) of fears of a deterioration of the Dutch labour market. The Dutch also justified their move by referring to other Member States that had changed their restriction on labour since December 2002 (Kvist, 2004). Thus, the Netherlands has continued its practice of requiring work permits for nationals from the eight Central and Eastern European countries, and imposed a quota of 22,000 employees until May 2006. After pressure from the opposition, the government agreed to review the Dutch labour market sector by sector and allow migrant workers only in sectors in need of labour (Kvist, 2004). In 2005, 30,000 work permits were issued (80% to Polish migrant workers).

Recently, the Secretary of Social Affairs and Employment pledged to open the Dutch labour market for migrant workers from the new Member States. However, Parliament insisted on further research into the expected number of migrant workers, and postponed the decision about opening the labour market to the autumn of 2006, and made it conditional on efforts to fight illegal labour. Until at least January 2007, migrant workers from the new Member States had to apply for a work permit before they could enter the Dutch labour market. Opening the labour market for migrant workers from the new Member States will be evaluated by sector in dialogue with social partners.

Conclusions

In terms of its macro- and socio-economic policies and performance, the Netherlands transformed from a laggard Continental welfare state in the 1980s to a European forerunner in the 1990s. After the ‘Dutch (p.192) Miracle’ of the 1990s, the Netherlands became a normal EU Member State at the beginning of the 21st century. During this development, the Netherlands was transformed from a Continental welfare state into a hybrid, containing occupational welfare and pensions, a relatively generous universal first pillar in pensions, decentralised social assistance and a privatised health care system.

This chapter has shown that interaction between Member States and the EU takes place through four channels: the EMU and the SGP, EU law, ECJ case law, and agenda-setting mechanisms such as the OMC. Interaction takes place in two directions: downloading and uploading. The Dutch social model and the policy directions promoted by the European socio-economic discourse are similar, as a result of parallel development and the sometimes mutually reinforcing interactions of the Netherlands' and EU's socio-economic policy agendas in the 1990s.

Dutch politicians fail to communicate European policies to their public. Consequently, little political controversy on EU socio-economic policy occurs in the Netherlands. While the Dutch socio-economic policy directions of the 1990s have fed the European socio-economic discourse, to which the Kok reports and the Lisbon Strategy testify, the European socio-economic policy agenda has reinforced national reforms in the Netherlands. In recent years, three social policy reforms in the Netherlands were amplified by the EU: the reform of disability pensions, the equal treatment dossier and the prevention of long-term unemployment.

The Dutch welfare state reform efforts of the 1990s and the beginning of the 21st century have, in line with the EU socio-economic discourse, emphasised decreasing the number of inactive people in society by promoting and stimulating activation and participation in the labour market, and decentralising socio-economic policies. In contrast to the traditional Continental solution of decreasing labour supply, reforms in unemployment schemes, disability pensions and social assistance have all been directed at activation and participation in the labour market – to increase labour supply. The involvement of municipalities in the execution of social policies has intensified, through the decentralisation of social assistance and the adoption of the new Social Support Act.

The strict interpretation by Dutch politicians of the concept of fiscal austerity, reinforced by the SGP, forms an important influence on Dutch socio-economic policy making, and has led to serious retrenchment in recent years. Dutch public expenditure on social policy has thus decreased drastically, whereas eligibility criteria for disability pensions and unemployment benefits have tightened. Community law, apart (p.193) from labour conditions and equal treatment, has not influenced Dutch socio-economic policy making to a great extent. However, discussions about the Services Directive and the free movement of migrant workers have been highly topical.

Strategic behaviour in the EU, combined with political opposition, led to change in the initial Dutch position on opening the borders for migrant workers from the new Member States. ECJ case law could, in the near future, accelerate integration in socio-economic fields.

The Dutch government has embraced the Lisbon Strategy and (on the basis of the second Kok report) the renewed Lisbon Strategy. The government has also supported the streamlining of the EES and the social OMCs. It has promoted simplified OMC procedures, fewer goals and guidelines, and more coherence between economic and social goals. Furthermore, the government thinks that the comparison of best practice and other benchmarking systems in the socio-economic policy fields is a good instrument for further coordinating social policies.

As to demographic ageing, the Dutch government welcomes European Community-led monitoring of life expectancy and the desired number of children, and comparison of national policy results in the EU. However, the Dutch government believes that the EU should not strive to develop a new specific policy on demographic changes but use existing institutional structures instead. For SGI, the government sees no need to change the Treaty. The single most important EU influence on welfare state policy making in the Netherlands is the result of the narrow interpretation by Dutch politicians of the EMU and SGP criteria. This interpretation has led to serious, far-reaching retrenchment in the Dutch welfare state in recent years.

Multi-level Europe depends on democratic legitimacy derived from and mediated through national legislatures, which remain the primary focal point of political identity in Europe and the cornerstone for further policy integration. Less binding and legal-pluralist modes of governance such as social dialogue and the OMC should therefore be viewed not as alternatives to the Community method but as necessary or indispensable complements. It is a sign of good health that 50 years of European integration have developed such a wide range of modes of governance for European cooperation (Best, 2003).

The Dutch government has retained a one-dimensional, defensive position towards proportionality and subsidiarity issues, whereas a more constructive attitude – taking into account the recent enlargement of the EU – would be more appropriate.

(p.194) Notes

(1) Since 2001, the European dimension of social policies has been visible in yearly reports of the Ministry of Social Affairs and Employment in The Hague. While politicians fail to communicate European policies, three annual reports have mentioned, on the sideline, the European dimension of social policies, signalling increasing attention to the European dimension of social policies in Dutch policy makers' circles as witnessed by the annual Social Report of the Ministry of Social Affairs and Employment.

(2) The WMO encompasses the Services for the Disabled Act (WVG), the Social Welfare Act and parts of the Exceptional Medical Expenses Act (AWBZ).

(3) The five policy orientations were: (1) focusing the EES on three objectives: to extend working life, by increasing the employment rate of both the old and the young, to implement lifelong learning and to address economic restructuring; (2) reforming the social protection systems; (3) fostering social inclusion and investing in children and young people; (4) allowing European couples to have the number of children they desire (increased emphasis on family policies); (5) developing a European immigration policy, in order to arrive at more selective and better integrated immigration.

Notes:

(1) Since 2001, the European dimension of social policies has been visible in yearly reports of the Ministry of Social Affairs and Employment in The Hague. While politicians fail to communicate European policies, three annual reports have mentioned, on the sideline, the European dimension of social policies, signalling increasing attention to the European dimension of social policies in Dutch policy makers' circles as witnessed by the annual Social Report of the Ministry of Social Affairs and Employment.

(2) The WMO encompasses the Services for the Disabled Act (WVG), the Social Welfare Act and parts of the Exceptional Medical Expenses Act (AWBZ).

(3) The five policy orientations were: (1) focusing the EES on three objectives: to extend working life, by increasing the employment rate of both the old and the young, to implement lifelong learning and to address economic restructuring; (2) reforming the social protection systems; (3) fostering social inclusion and investing in children and young people; (4) allowing European couples to have the number of children they desire (increased emphasis on family policies); (5) developing a European immigration policy, in order to arrive at more selective and better integrated immigration.