Highest wage increase ever: 5% more for construction

First the wages, then the rest. For example, the trade unions and employers in the construction industry sat around the table for the new collective labor agreement. Where those negotiations normally take months, it was now settled in a few weeks.

And how: in 2023 there will be a structural wage increase of no less than 5 percent for all 110,000 employees covered by the collective labor agreement for Construction and Infrastructure. Never before has such a high wage increase been agreed in a construction collective agreement.

According to the trade union CNV Vakmensen, the fact that there is now such an increase has everything to do with the current time. Due to the sharp rise in inflation (8.8 percent in May compared to a year earlier), many construction workers are finding it more difficult to pay their bills. “It is a significant increase, but one that we were able to explain well,” said CNV director Gijs Lokhorst.

Construction workers will receive an additional 2.5 percent from 1 January next year. The next 2.5 percent pay increase will follow from 1 July.

The focus on wages (and therefore speed in negotiations) is due to the high demand for security. To start with, for employees, says Lokhorst. “Normally you first have to go through months of technical negotiations about the entire collective labor agreement. Now employees know for sure: money will be added as of 1 January.”

Clarity also played an important role for employers and clients, says Erik Tierolf of employers’ organization Bouwend Nederland. “There is already so much uncertainty about the price of bitumen or brick, now we at least know where we stand in 2023 for wages.”

Then there is the level of the wage increase. For employers and clients, the 5% wage increase means that construction costs will increase further. Due to sharply rising prices of building materials and fuels, these were already high.

There is already so much uncertainty about the price of bitumen or brick, now at least we know where we stand for wages.

Important signal

Yet employers in the construction industry dared the wage increase of five percent. Employers’ organization Bouwend Nederland speaks of an ‘important signal’; after all, there is plenty of work to be done in construction, and the demand for labor is beginning to slow down construction companies’ production. According to the Economic Institute for Construction (EIB), about 81,000 new workers will be needed over the next five years to meet the housing contract of 100,000 homes. Construction “is and remains” an attractive sector to work in, according to Bouwend Nederland.

The high wage increase is unusual in itself, but it falls within a pattern compared to other collective labor agreements. While the average wage increase per twelve months last year was 1.93 percent, wages in newly concluded collective labor agreements are rising rapidly. In January the wage increase in collective labor agreements was 2.6 percent, in May already 3.7 percent. Those are averages; where there are low wage increases at some financial institutions, KLM employees received an increase of twice 2.5 percent, just like in the construction industry.

Economists warn of a self-reinforcing wage-price spiral, in which high inflation causes wage increases, fueling consumption and thus further inflation. An important nuance in the construction collective labor agreement is that it concerns a single agreement, and the lower wage increases for collective labor agreements in other sectors are pulling the 5 percent ‘down’ again.