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The Dutch Labor Market Fudge Creates Jobs

AMSTERDAM: The Dutch like to think of themselves as leaders in social policy. But as we discovered on a recent trip to the Netherlands and Germany, it is in economic policy that today’s Europe looks to Holland for leadership. With unemployment in Germany, France and Italy around 10%, the Dutch jobless rate, at less than 3%, is the envy of Europe.

Holland is that rare example of a booming welfare state (“overheating” was the word used to describe the Dutch economy by three central bankers in Frankfurt). How did this happen? Some credit the so-called “Polder Model” of social cooperation between employers, unions and the government. They’re wrong. Social cooperation per se did not save the Dutch from the mistakes of the 60’s and 70’s. So how can it be credited for economic recovery in the mid 80’s and 90’s?

True, Dutch trade unions have moderated wage demands. But this is not what sparked Holland’s dramatic employment gains. Instead, credit structural reforms in the Dutch labor market for the jobs boom. Primary amongst these is the widespread use of part-time and temporary employees.

The move to part-time employment in Holland was intended to increase female participation in the Dutch labor force. Increasing availability of part-time and temporary jobs, however, raised the labor force participation rates of both men and women. Regular full-time employees are almost impossible to sack under Dutch law, but employers can fire part-time workers and not renew temporary contracts when they expire.