OECD urges Netherlands to be tougher on welfare recipients
The Netherlands should be tougher on social benefit recipients. Also, employment protection should be reduced and the retirement age could be raised, advises the OECD in its ‘Economic survey of the Netherlands 2008′, published yesterday.
The Dutch labour market is functioning well, with employment and labour participation rates above OECD averages. “Nevertheless, there are sizable pockets of under-activity, including social benefit recipients representing 17% of the working-age population”, which could be mobilised in order to address short-run labour shortages and the long-run ageing-related reductions in the labour supply.
For people on social benefit and older workers, “job search requirements should be strengthened” and the authorities “should continue making the tax-benefit system more work-friendly”, as people’s net income now sometimes declines if they accept a job. Reintegrating benefit recipients would also help to reduce spending on labour market programmes, “which is among the highest in the OECD.”
For women with low-earning capacities, “existing work disincentives should be eliminated”. And for (partially) disabled people, “it is important to envisage labour market re-integration at an early stage.” For the long-term unemployed, “policies should be further strengthened by adjusting the unemployment benefit and the employment protection systems,” as well as further improving current profiling and training measures.
Over the medium-term, the challenge of ageing looms large, but less so than in other countries. The Netherlands could opt for running large budgetary surpluses for a long period of time, but this is likely to prove politically challenging. “An alternative strategy is the adoption of incentives to increase participation in the labour market, including at older ages, so as to widen the revenue basis.”
The Netherlands has benefited from past structural reforms, “notably reforms of pension systems, health care and disability benefits.” Productivity growth, however, has remained sluggish, “which may be partly due to the relatively high weight of traditional industries in the economy and a lack of innovation activity. Labour utilisation has therefore contributed to growth more than in most other countries.”
Dutch employers are “running into increasing difficulties in hiring workers.” This is largely because the working-age population has virtually stopped growing. Large groups of baby-boomers are reaching retirement ages. “In addition, less foreign migrants are entering the country and more natives are leaving it, a rare occurrence in a high-income nation.”
Furthermore, labour utilisation is being reduced by the relatively short working week and the high incidence of part-time employment. “If unaddressed, these hurdles will impose a constraint on growth in the medium-term.”
About two-thirds of Dutch female workers opt for part-time jobs, bringing down the country’s average working time to one of the lowest levels in the OECD. “The Dutch tax burden on second earners remains high, as social benefits are conditioned on family income, which creates incentives to work part time” that should be eliminated.
In the past decade, “poor economic integration and weak labour market performance of immigrants have induced policy changes aimed at making immigration policy more selective.” A new entry scheme was enacted to facilitate entry of high-skilled workers, “but at this time it is difficult to ascertain whether this has led to an increase in the inflow of such workers.”
Source: NIS News, 1 February 2008
