Sector economist Albert Jan Swart of ABN Amro calls the increase “historically” high. ‘Employees want much higher wages because inflation is so high.’ The bank expects wages to rise another 5.3% this year, following a 3.2% increase last year. Due to the higher minimum wage, wage costs are expected to rise by 6.1%.
Under pressure
‘Due to the slowdown in economic growth, volumes in a number of sectors will come under pressure this year. Then it will also become more difficult for entrepreneurs to pass on cost increases correctly,’ says Swart. The bank’s calculations show that wages in industry will rise by 7%, as will wages in transport, logistics and trade.
Despite wage increases, private consumption is increasingly under pressure. Consumers are tightening their purse strings and this will slow economic growth, thinks Swart. ‘Last year, workers lost a lot of purchasing power because wage increases failed to keep pace with inflation. And also this year, with an increase of 5-6 per cent, it will not be recovered».
“Workers want a lot more wages because inflation is so high.” ‘
Chairman Klaas Knot of De Nederlandsche Bank recently warned against too high wage increases. This could trigger a wage-price spiral. “This is what central banks want to keep tabs on at the moment. Interest rates are rising to curb economic growth. Eventually, this also slows down the demand for labor and therefore wage growth,’ says Swart.
Job market
Data from Statistics Netherlands show that the labor market is still very tight and that little has changed compared to the fourth quarter of last year. According to Swart, this is a sign that ‘economic growth is slowing down’. An impending fear scenario is therefore a wave of failures. “We actually expected that earlier, from the fourth quarter of last year,” Swart says. The bank expects an increase, even though the number of bankruptcies is still relatively low. And even lower than four years ago.
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Artificial intelligence
It is now particularly important for entrepreneurs to invest in better processes and innovation to increase labor productivity. “Don’t work harder, but work smarter”, for example through automation and artificial intelligence. “US studies show that customer service productivity can increase by 40% when using artificial intelligence”
It’s just that not all companies can afford it. “It’s difficult. Higher interest rates show that business investment is under pressure.’ Swart acknowledges that this type of spending is unattractive in the short term. But in the long run, an entrepreneur should really be able to reap the rewards, he thinks. “If the economy recovers, it will be interesting to invest in it again in view of the tight job market.”