Van Ark suggests disabled individuals work for less than minimum wage

Edition 29 May 2018, by Lorre Luther

On April 26, 2018, the Dutch House of Representatives debated a proposal that would allow employers to pay disabled workers less than the minimum wage. Tamara Van Ark, State Secretary for Social Affairs and Employment, introduced the measure. Unemployment among handicapped workers in the Netherlands is extremely common. More than 50 percent of those with a physical or mental disability that limits workforce participation are completely shut out of the job market. Proponents of the plan suggest the changes will result in more employment opportunities for handicapped Dutch citizens.

The proposal reduces the level of government spending by substituting the current arrangement of wage subsidies for a wage dispensation system. At the moment, the Dutch government uses wage subsidies to encourage employers to hire disabled workers. Handicapped employees earn the full hourly minimum wage, and employers receive a subsidy to offset costs resulting from disabled workers’ lower productivity. Individual productivity levels are not relevant in the determination of wages. Van Ark’s plan would end wage subsidies for new disabled labor market participants and implement a wage participation model. Employers would pay employees for their actual productivity, and municipalities would supplement that income with social benefits. The plan would bring the actual income of most handicapped workers up to minimum wage. Municipalities usually prohibit workers from collecting social benefits from while employed. Wage dispensation would supersede this and permit disabled workers to collect benefits while working.

The law’s supporters assert these innovations will increase employment levels among the disabled. Van Ark contends the proposal’s cost reductions and simplified administrative procedures will make it cheaper, easier and more attractive for businesses to hire handicapped workers. This shift, she asserts, will result in the employment of more individuals with physical and mental limitations. The suggested changes would also result in substantial savings for the government. The Dutch Central Planning Office, CPB, calculates the law will save €500 million by 2050. Van Ark’s plan earmarks this money to fund programs designed to improve workforce participation among disabled individuals. One proposal is to increase the number of “sheltered workplaces,” enterprises that specifically employ handicapped workers.

Opponents argue the law has several flaws. As written, the legislation negatively impacts handicapped workers’ ability to adequately save for retirement. By lowering the amount earned by disabled individuals, the proposal would result in substantially underfunded supplementary pensions for impacted workers. It would also disadvantage disabled workers by preventing them from collecting unemployment benefits. Because workers would be subject to municipalities’ social benefit rules, some workers would be prohibited from receiving top-up social benefits from the municipality. Those with savings or a working partner would not be eligible for social benefits. This group would simply end up working for less than minimum wage. Disabled workers, human rights rights organizations and a number of municipalities all oppose the changes.

Disabled workers object to the shifting of administrative burdens from employers to vulnerable individual workers. The Netherlands Institute for Human Rights called the plan discriminatory. According to a poll conduced by Cedris, the Dutch national organization for opportunities and integration of disabled workers, a 63 percent of employers who currently employ disabled workers expressed concern with the new plan, citing issues of worker motivation. Employers also suggested the complicated interplay of having two systems of payment would make it more difficult to employ disabled workers. The CPB put to rest Van Ark’s assertion her plan would increase employment levels of handicapped workers. The agency determined the proposed legislation would have minimal impact on unemployment among disabled workers. If passed, the new law would become effective in July of 2019 and would only apply to new labor market entrants. The proposed changes would not affect those already working under the wage subsidy system. Van Ark is considering adjustments to the proposal, including policy modifications designed to reduce the plan’s impact on the retirement income of disabled individuals.