Setting and asjusting minimum wage levels

The Netherlands

The Netherlands adjusts its minimum wage twice a year (1 January and 1 July) in line with changes in the weighted average of collectively agreed wages. It is important to note that minimum wages also determine minimum social security benefits, raising concerns related to the tax burden that minimum wage increases could entail.

For this reason, in 1993 a condition for minimum wage uprates established that if the “inactives to actives ratio” exceeds a threshold of 82.6 per cent there would be no increase. Inactives are defined as those receiving benefits, including public old-age pension, while actives are those employed, including self-employed and part-time workers. In addition, the law provides for an assessment every four years. Despite these very clear criteria, in practice the minimum wage has been frozen even in situations when the inactive–active threshold ratio was not exceeded (July 2003 to January 2006).

(See: W. Salverda (2008) ‘The Netherlands: Minimum wage fall shifts focus to part-time jobs’, in Vaughan Whitehead, ibid.)