Short Analysis of Deeltijd WW in The Netherlands

1. Deeltijd WW in the Netherlands
1st April 20091
- 1st of July 2011

2. Deeltijd WW
The Deeltijd WW, (WW= werkeloosheidswet) hereafter DWW, took effect on the 1st of April 2009 till
the 1st
of July 2011 and was initiated by Minister Donner from the Balkenende 4 cabinet. The
measure replaced the WTV (werktijdenverkorting) that came into effect in 2008. The act was
designed to “prevent unemployment among specialized employees”.2
The measure took effect on
the the 1st
of April and lasted till July 2011 (it was extended two times3
).
The DWW can be regarded as a temporary step between the WW (the compensation employees
receive after losing their job) and full employment. During a given period, employees are going to
work less, because there is no work for a full employment anymore. Therefore the employer and
employee can agree on working 70 % of the contractually fixed amount of hours and to compensate
the loose of income, the fund of the WW can be used. In this way the employer does not loses the
specialized employees and the employees keep their employment and income.
Also the shortage on the labor market during 2009 and the expectation on a quick economic
recovery seemed to make an introduction of a DWW more legitimate. With a quick economic
recovery, companies would have been able to keep their scarce employees on board and survive the
short economic decline.4
A more detailed description of the initiative
The core of the initiative is that the employee will not be fired, but is going to work fewer hours than
he was used to. If the agreement is reached between the employer and the employee representative
(which is usually the trade unionism) the employee has to accept it. The time schedule for the DWW
is at least 13 weeks and can last till 65 weeks, where a renewal application should be made after 13
and 39 weeks. During this period the employee is using his saved WW-rights partly. The WW (1949) is
a kind of insurance for unemployment of the employee which is paid by the employer (1,7 % of the
gross income). Since 2009 the employee was freed from paying for the insurance, but in the social
agreement of 2013 was determined that employees pay an amount of € 10 monthly) again.5
In order to prevent abuse of the DWW and let the employees restore their build up WW rights (they
consume this partly during the DWW) the employer has to give the employee the original amount of
hours again when the DWW ends. If the employer does not, the employer can receive a fine. By
doing so, companies it is easier for companies to be productive again when the economical climate is
getting better, because they don’t have to look for new employees and retain the “company specific
knowledge”.
The plan by the Dutch government
The budget created for this measure can be divided into two categories. First the amount of costs
there would have been made anyway, because there would have been a group of employees have
would have used the WW fund anyway. Second there is an additional cost of eventual closing
2
CPB notitie budget deeltijd ww 12 juni 2009
3
http://www.nl.pwc.com/extweb/Bn/Taxnews.nsf/Public/PI32332
4
Kabinetsreactie evaluatie bijzondere wtv-regeling en deeltijd-WW – 11 June 2012
5
http://nos.nl/artikel/494472-vraag-en-antwoord-over-ww.html

3. businesses (so the knowledge is lost anyway) and there is will be an amount of money used for other
purposes than their initial target.
Two conflicting visions on the Deeltijd WW
In the debate about the DWW two different perspectives are used. From the micro-economical
perspective (usually advanced by labor market economists) the DWW is a measure to ensure
companies to retain company specific capital. This argument is also often used by labor unions and
employers. From this point of view the company is keeping its employees, companies do not have to
fire people and the unemployment payments are lower compared to a full WW.
From the macro- economical perspective, the DWW is rather seen as a harmful, because it keeps up
less competitive companies and therefore slows down labor mobility.6
The target of the DWW is to
prevent companies to fire employees with company specific knowledge.7
This is also where the
legitimacy of the DWW is in doubt. The employer and employee are the ones who both benefit of
their company specific knowledge so therefore support from the government is doubtful. This can
also decrease the misuse of the grants8
which is thought to be around 50%.9
The Case of VDL - Sociaal convenant voor VDL-busbedrijven10
The VDL group (Industrial and manufacturing company from Eindhoven) consist of 80 companies and
9,000 employees. Due to the sharply falling demand the group was looking for a solution for their
employees. After negotiating with the works council, labor union and UWV, the company reached an
agreement (social convenant) that applies to all 550 employees of two subsidiaries (VDL Bus Modules
en VDL Bus Valkenswaard). The agreement was supported only by the company’s works council,
while the labor union did not. A balance was found between the security of job and income and on
the other side the flexible use of the employees in order not to lose the employee’s experience and
knowledge.
The agreement (sociaal convenant)11
After the first of May 2013 all employees of both companies (see above) going to work for 60 %
(phased) of their previous amount of working hours. Income for the missing 40 % will be paid by the
WW (werkeloosheids-wet in Dutch) and the VDL group will fill the gap up to 100 %.12
According to
this agreement the employees earn the same amount of money and save the same amount in their
retirement fund. The agreement also includes that employees can be mutually exchanged easily
between other companies in the region. With the agreement VDL aims at a sustainable long term
employment.
Why the DWW should be continued
6
http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee
7
CPB notitie deeltijd WW 12 juni 2009
8
http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee
9
CPB notitie deeltijd WW 12 juni 2009
10
http://www.vdlgroep.com/?news/1368572/Sociaal+convenant+voor+VDL-busbedrijven.aspx
11
http://www.vdlgroep.com/?news/1368572/Sociaal+convenant+voor+VDL-busbedrijven.aspx
12
The interesting question here is that the company seems to use the WW-verzekering on their own behalf. Is
this possible? Can you make an agreement with the UWV and just have a DWW for your employees.

4. Bas van der Klauw from the VU University stated indicated the positive effects of the DWW. First the
money that is spend on the DWW would have been spend otherwise on the retraining of people, but
with a bad labor market, the chance that people find jobs due to those programs is still limited.
Studies showed that an training in (especially private) companies works better than a reintegration
training without employer, because the employee is part of the actual working process. Therefore
the budget of reintegration training can be used for the DWW. In short remove the money from
active labor market policies to the DWW.13
The DWW can ensure that especially low skilled people occupy the jobs of young low skilled
graduates. This seems a bad condition, but in an economic recession salaries for young low skilled
people are among the most vulnerable. This can give an incentive to them to continue studying and
enjoy higher education. Higher education brings along many advantages like: less unemployment,
healthier lifestyle and adding to the general economical growth in the long run. 14
The risk of a long term unemployment (in a long recession) is high especially among low skilled
employees working for the same employer for many years, because those people usually master
especially company specific knowledge. Therefore they are not attractive for other employer and
causing a long term unemployment (with the accumulating costs).
Why the continuing the DWW is a bad idea
In an economical recession companies are forced to increase production and lower the cost of this
production. The less competitive companies who are not able to do so, will go bankrupt. The
employees of the bankrupt companies enter the market again to look for new jobs, which they are
likely to find at competitive companies who were able to increase production and lower their
productivity costs. This means that more people work for more competitive companies and therefore
the potential is utilized better. In this case an economy will leave the economic recession better
while entering it. The introduction of the DWW goes against this principle because it keeps less
competitive alive with governmental grants.15
In practice the DWW seems to be really difficult to implement. It seemed that the requirements to
receive DWW are hard to apply on individual companies. Therefore companies use the DWW for
other things than their initial target (deliberately or not). This “deadweight loss” in which the cost of
the waste of money has to be paid by the taxpayer is around 50% for DWW16
. With a budget of 1
billion Euros this is around 500 million Euros.
The evaluation of the DWW in statistics
Only after 3 months the initial budget of 975 million Euros was used and Minister Donner had to look
for additional funds in order to continue the initiative. At the 10th
of July 2009 the Minister decided
to continue the initiative and an additional 600 million Euros were added to the budget (with
stronger requirements on the companies using the system in the future), which summed the total
amount up to almost 1 billion Euros.
13
http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp
14
http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp
15
http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp
16
http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee

5. The CPB calculated that in 2009 the DWW tempered the unemployment rate by 0,1 – 0,2 %. These
results were also confirmed by the OESO confirming that the DWW saved some 5000-6000 FTE in the
Netherlands during 2009. In total 7,836 companies used the DWW for a total of 77,430 employees
which is an equivalent of 0,99% of the working population. 70 % of the employees who used the
DWW were people in executive positions and the industrial sector (41%) made used the DWW the
most.17
Conclusion
The extraordinary economic environment around 2009 with a quick decline of demand, the
expectations of a fast recovery and the shortage on the labor market made the introduction of the
DWW an option. The effects on its initial target of tempering growing employment (which is
fundamentally different from creating jobs) were calculated between the 0,1 and 0,2 %. However the
effects of the rule are not always easy to measure. Maybe calculating the effects on the
unemployment rates are but the DWW’s side effect of “creative killing” by subsidizing bad companies
and the “restructuring” of the economy are not. However from the CPB’s analysis this disadvantage
was not big either.
17
Kabinetsreactie evaluatie bijzondere wtv-regeling en deeltijd-WW – 11 juni 2012