The Dutch minimum wage: a radical reduction shifts the main focus to part-time jobs

The paper is part of a broader international project undertaken by the ILO and the European Commission. It studies the Dutch minimum wage from the perspective of country differences in minimum-pay regulations within the European Union with the aim of serving as an input into a discussion whether a European approach to such regulation may be desirable and feasible or not. The European issue itself is not considered here.

In a historical perspective, going back to the establishment of the minimum wage in the 1960s, three characteristic features are presented and discussed at some length:

the very long tail of youth minimum wages staring at age 15 up to age 23 - the oldest age in international comparison at which a full minimum wage applies;
the pivotal role of the (net) minimum wage for determining (net) minimum social benefits and therewith for much of public social-security spending;
the steep decline in recent decades of the minimum wage both in terms of purchasing power and relative to the rest of the wage distribution.
A brief description is given of the mechanism of uprating over time of the wage level and the coverage of employees. The declining value since 1979 is shown and compared to the rather similar evolution of the US minimum wage.
The relations of the minimum wage to poverty, wage inequality, employment, wage bargaining and social dumping are scrutinised. It appears that the decline of the minimum wage has greatly reduced its labour-market significance. As a result the well-known long-run Dutch wage moderation has affected lower levels of pay more than higher one inciting an increase in earnings inequality.
In one of two case studies, of retail trade where youth minimum wage earners are concentrated, shows how unions and employers are gradually beginning to perceive the downside of the long tail of very low youth minimum wages for the motivation of young workers and the productive innovation of their business.