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Trade unions angry about increase in controversial subsidy for low wages: ‘Money should not go to companies, but to employees’

The fact that the cabinet is increasing the controversial low-income benefit, which traps employees in the minimum wage, is causing annoyance among the trade unions and the opposition. Employees of De Bijenkorf, who are on strike for a higher salary, do not understand it either.

At the beginning of November it was announced that the low-income benefit (LIV) will be increased for 2022 (with retroactive effect) and for 2023. This is due to the increase in the statutory minimum wage.

Gift for business

The scheme was created in 2017 with the idea that more people would find work. But in practice it doesn’t seem to work that way, as the Court of Audit reported 2 years ago.

The Council of State also warned at the time that the regulation would serve as a gift to the business community because of its generic nature. Employers receive the subsidy, but do nothing extra to get people to work, was the criticism.

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LIV scheme in brief

The low-income benefit is an annual allowance for employers who employ employees with a low wage. This allowance reduces the wage costs for the employer. The idea behind the scheme is that these companies are encouraged to hire employees.

For every employee who works more than 24 hours a week with an hourly wage of less than 13.43 euros, an employer receives 960 euros per year from the tax authorities. This happens automatically. The cabinet is now increasing this amount to 1,520 euros.

‘Companies keep wages low’

And according to economist Alfred Kleinknecht, there is something else going on: “If people start earning more, the subsidy will expire. So companies keep wages low.”

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The scheme comes from a time when people were afraid of unemployment, he explains. “That is no longer the case, there is now too little staff, so wages have to go up.”

Lots of strikes

Nevertheless, the scheme, which costs the government 500 million euros a year, has now been increased by almost 200 million euros. And that causes misunderstanding among both the trade unions and opposition parties.

“Wages have to go up, which is why there are now many strikes such as at De Bijenkorf, but Prime Minister Rutte is doing exactly the opposite to achieve that increase,” says Linda Vermeulen of FNV.

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Increase tacitly introduced

In addition, the increase was tacitly introduced. “It was previously promised that the premium will be abolished in 2025, but after this increase I wonder how hard this commitment turns out,” says Vermeulen. “Fortunately, the left-wing opposition managed to limit the increase.”

Bijenkorf employee Sonia feels cheated by the government: “I am committed, I enjoy my work, but now I have the impression that they want to keep me stupid by giving my employer a subsidy for our work. I think that’s anti-social, give that money to us.”

‘Money to shareholders’

According to the cabinet, the increase in the LIV is intended to compensate for the increase in the minimum wage for companies, but economist Kleinknecht is critical of this.

“You shouldn’t compensate for it. Companies that have such low margins should collapse. That way you lose zombie companies and people can find work elsewhere. Companies that can afford it don’t need it. Then it goes to the shareholders .”

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Strike during Black Friday

Sonia and her colleagues from De Bijenkorf in Rotterdam are preparing for a major strike this Friday, where employees will stop work during Black Friday. Their wages have been standing still for a long time. “We earn between 11 and 13 euros per hour, many people work here part-time, so you earn just a little more than social assistance benefits. That is no longer possible with the current prices.”

Union leader Vermeulen supports Sonia and her colleagues and points again to the wage subsidy. “It is outrageous that this is happening, wages are too low and at the same time the cabinet is increasing this subsidy. The lower the wage, the more subsidy companies now receive. Something needs to be done about that.”

Watch the TV report.

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