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Labor-Management-Government Cooperation of <br>the Netherlands

Willem Wim Kok, President of the Club of Madrid and former Prime Minister of the Netherlands, was the guest speaker of the KF Forum held on September 3, 2010. He spoke about the Dutch efforts to overcome an economic crisis through a three-way agreement in the Netherlands, which could serve as a possible model for Korea.



Former Dutch Prime Minister Wim Kok, who is known for his numerous achievements, started his career as a labor union leader and later became Prime Minister of the Netherlands. A notable contribution of his leadership led to a revival of the Dutch economy based on a unique labor-management-government agreement. The Korea Foundation organized a session of its Forum series to learn about this successful Dutch experience from its former Prime Minister.

Efficiency and Cooperation
Former Prime Minister Wim Kok noted that the essence of the Dutch model can be found in its simultaneous adoption of economic efficiency and social cooperation, based on an inclusive approach. Although the value of social cooperation and solidarity is recognized by everyone, this alone will not be sustainable without an adequate level of market competitiveness. Therefore, he emphasized that economic efficiency needs to be pursued at the same time. And in fact, it can be difficult to realize the coexistence of these two factors. From a broader perspective, the simultaneous promotion of these two values is a particular characteristic of Northern Europe.
According to Wim Kok, the ability to attain efficiency and inclusive cooperation depends on the realization of four factors: 1) a knowledge-based economy, 2) dynamic and flexible labor market based on an enhancement of human capital, 3) a pension system that achieves a balance between social consensus and individual responsibility, and 4) environmental sustainability and energy efficiency. He also explained the historical background of the struggle to achieve compromise and harmony in the Netherlands, which faced a critical situation due to economic difficulties in the early 1980s that forced labor, management, and government to come up with an acceptable solution.
The attainment of efficiency and social inclusiveness is especially difficult to realize. He specifically described the daunting challenge of persuading the labor unions to accept pay concessions, in an effort to reinforce the country’s industrial competitiveness in the early 1980s. In return for the labor unions’ concessions, the management side agreed to invest in worker training programs, offer more jobs to youth, reduce working hours, and implement job-sharing. Wim Kok emphasized that the trust which developed between the two sides during the negotiation process made the compromise agreement possible. Of particular note, he pointed out that this effort had been initiated by the labor and management parties, rather than the government.

Develop a Suitable Model
Former Prime Minister Wim Kok also emphasized the concept of “flexicurity” (flexibility/security) during his presentation. The Danish model provides less protection for employees, which makes it easier to lay off workers, while there is stronger protection for the unemployed under the Dutch system. This indicates that there is no single correct answer for labor-management-government cooperation, as each country should search for its own model based on local conditions.
The current level of employee protection in Korea is slightly above the OECD average. This suggests that Korea should reduce its employee protection and increase labor market flexibility and unemployment benefits. The current resistance to flexibility is related to a lack of protection for jobless individuals. It is thus undesirable to improve flexibility without also offering added protection. In fact, 80 percent of Korean workers are already participating in a flexible labor market.
The most necessary aspect for a policy that seeks to protect the unemployed and temporary workers is to increase the rate of temporary worker participation in basic social insurance programs. Since many workers are not covered by these insurance programs because of the costs, the government should provide subsidy assistance to boost participation in the insurance programs. By promising to increase the rate of temporary worker participation in the social insurance programs, the government can avoid criticism of being a “government for the rich” and lay a foundation for the private sector-led creation of long-term employment.
Of greater importance is the fact there can be significant differences in the competitiveness and capability to adopt innovation among the businesses within a country, with a high level of employee protection and a low level of unemployment protection. If company-specific skill formation is not undertaken and few training programs are available, a positive fusion of technical and skilled workers will not be realized, while a learning-based work system will fail to take root, thereby causing the business sector to fall into a downward spiral. The Korean economy finds itself in such a situation today. Small and medium-sized companies are losing their ability to provide new jobs, causing an increase in unemployment and temporary workers. Under these circumstances, we should not simply seek to introduce the superficial characteristics of the labor market and protection system of Europe, without considering the underlying system of skill formation and worker training programs.

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