A relief for companies, a setback for the lowest incomes. The additional 1.2 percent increase in social assistance, minimum wage and state pension, which was to take effect from July, has been canceled.
The political feasibility of this plan, an initiative of the 'old' House of Representatives, was uncertain from the start. It became clear on Tuesday that there is no majority for this in the Senate, which will debate it next week. The largest group, BBB, will vote against, Senator Eugène Heijnen announced. His fellow party members already did this in the House of Representatives.
The increases had already been included in all purchasing power estimates for this year. The setback is greatest for single people on social assistance level (more than 1,200 euros per month). The Ministry of Social Affairs already estimated a decline in purchasing power of 0.4 percent for them this year. That will now be a minus of 0.7 percent.
Other groups also continue to improve in the revised estimates, albeit slightly less. For example, Social Affairs will adjust the purchasing power plus for single parents with minimum wage from 6.3 to 5.9 percent.
The extra increase was an initiative of GroenLinks-PvdA, D66 and ChristenUnie, which they took shortly after Budget Day and two months before the House of Representatives elections. The outgoing cabinet already had plans to help the lowest incomes with an increase in housing allowance and the child budget. The House of Representatives wanted more.
Resistance
There was a lot of resistance to the plans in the business community. The minimum wage has risen so sharply in the past year and a half, business clubs VNO-NCW and MKB-Nederland said last month, that it is “almost unbearable for many companies, especially smaller companies.”
Since the introduction of the minimum wage in 1969, it has only risen in line with collective labor agreement wages, and has occasionally been frozen. An additional increase of 8.05 percent was implemented for the first time in January 2023. And since January of this year, the minimum wage has been a minimum amount per hour, instead of per month. As a result, large groups of employees improved by up to 10 percent.
The usual six-monthly increases are also high, now that employers and unions have been agreeing to collective labor agreements with large wage increases for about a year. As of July 1, the minimum wage and the associated social assistance and state pension benefits will increase by 3.1 percent.
For BBB, this accumulation of employer charges is an important reason to vote against, says Senator Eugène Heijnen. But the party also believes that this expensive measure does not reach enough of the right people.
More than half of the costs of the increase, 517 million of the 857 million euros, will be spent on AOW benefits. And unlike the minimum wage and social assistance, rich and wealthy Dutch people also receive this. About 80 percent of state pensioners also receive a supplementary pension. Heijnen: “We think that you can then do something in a more targeted manner, at lower costs, for the people for whom this is really intended.”
The Council of State had the same criticism of the bill. Most of the money, the government advisor wrote, goes to the age group with the lowest risk of poverty. This leaves less money for “more targeted financial support for people in poverty.” Moreover, it sets the “shelf life of
public finances” under pressure.
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Taboo
Until recently, it seemed a political taboo to increase the minimum wage and social assistance without increasing the state pension. Rutte IV wanted to do this in 2023, with the additional increase of 8.05 percent. The government believed that this increase should only apply to minimum wage earners. But the entire opposition forced pensioners to also benefit.
Last month, when discussing this bill, members of the House of Representatives openly wondered whether the link to the AOW should always remain sacrosanct. Anne-Marijke Podt (D66) referred to the independent Social Minimum Commission. He found that people on social assistance and the minimum wage in particular lack money, while AOW pensioners do have money left over. “Then it is unfortunate,” said Podt, “that in the end it is mainly the AOW” that is so expensive.
If this link must always be maintained, it will be very expensive to help the very lowest incomes, said Member of Parliament Don Ceder (Christian Union). “Then you will never close the gap.”
BBB senator Heijnen believes that the link to the AOW should remain sacred. “If you disconnect it once, we are afraid that that is a first step towards more.”
The outgoing cabinet had already set aside money for the costs of the higher minimum wage. The House of Representatives and the Senate had already agreed to, among other things, increase bank taxes and tax the purchase of own shares by companies. This was met with fierce criticism from the business community and the outgoing cabinet, who believe that this is deteriorating the Dutch business climate.
These measures are not automatically abolished now that the minimum wage increase is not going ahead. It is therefore still unclear what happens with this reserved money.
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