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The following is the Executive summary of the OECD assessment and recommendations, taken from the Economic survey of the Netherlands, published on 31 January 2008.
After a long stagnation during the first half of the decade, the Dutch economy has made a successful comeback. Growth has strengthened, unemployment has fallen back and the fiscal position has been brought into balance. Though the current recovery is partly cyclical, it is also built on a robust medium-term performance, which has helped to maintain living standards among the highest in the OECD.
Increases in labour utilisation have been the main source of growth, but the economy is now facing labour shortages, related to the greying of the population and the continued weak labour market-participation of several groups. In addition, part-time work remains widespread and net migration flows have turned negative in recent years. If the policy setting remains unchanged, medium-term growth is likely to be impaired by insufficient labour resources and demographic ageing will be a burden for the public finances. While the previous Economic Survey focused on raising productivity growth, the present one focuses on the following challenges:
The ageing of population and its effects on fiscal sustainability. Public spending on health care and pensions is projected to increase sharply in the next four decades, despite second pillar pension funds being well funded. These trends should improve thereafter, but not by enough to avoid a spiral of debt accumulation. Policy solutions to restore sustainability should focus on containing ageing-related costs, including a reform of the state pension scheme and later retirement. Additional measures should include an expansion of the funding base through increased labour participation and a certain degree of prefunding.
The need to increase labour-market participation further and lengthen working time. Dutch participation rates are high, but there are a number of groups who remain less active on the labour market, notably lone parents, low-skilled women, partially disabled persons and inactive migrants. For those people, reforms in the tax-and-benefit system are needed and activation strategies should be enhanced. Their job-search activities would also be facilitated by an easing of employment protection legislation, which currently reduces the fluidity of the labour market. For parents with young children, the provision of pre school child care continues to be lacking despite recent progress, contributing to a high incidence of part-time work. Recent reforms requiring primary schools to offer before- and after school care go in the right direction, but more could be done to facilitate full time careers for mothers.
The scope for opening borders more widely to labour flows and to enhance the integration of immigrants into the labour market. The Netherlands has tightened rules for non-work migration, partially reflecting the unsuccessful integration of non-OECD migrants into the labour market and their dependence on social benefits. As well, the entry of non-European workers is subject to a strict labour market test that hampers cross-border labour flows. To ease labour market shortages, it could be envisaged to open new entry routes, such as a skill-based visa system. In order to improve the prospects for a successful integration of the migrant population, the likely adverse impact of early streaming on the educational attainment of immigrants’ children should be evaluated.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of the Netherlands 2008 is available from:
For further information please contact the Netherlands Desk at the OECD Economics Department at email@example.com. The OECD Secretariat's report was prepared by Jens Hoj, Ekkehard Ernst and Jasper Kieft under the supervision of Patrick Lenain. Research assistance was provided by Laure Meuro.
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