The 'Dutch Miracle': Employment Growth in a Retrenched but Still Generous Welfare System

Abstract

The Netherlands, until the mid-1980s a country with high unemployment, has seen rising employment for some years. Currently its unemployment rate is below five per cent. Employment growth is mostly due to the expansion of part-time jobs, particularly for women. Because there are many people in disability and early retirement schemes, unemployment is, however, still high. A special feature is that the Dutch have managed to bring down unemployment in a context of a welfare system which is still relatively generous. There have been cuts, but the Dutch poverty rate is still one of the lowest in the world. The most frequently advanced explanation for this ‘miracle’ is the wage restraint the unions accepted for more than a decade within the framework of the Dutch corporatist institutions. Looking at other low unemployment/high employment countries, however, one can doubt that this explanation is valid. The causes of the Dutch development are probably more complex, and perhaps include sharply rising house prices and the right of tax reduction through mortgage payments, an opportunity the Dutch people have used very extensively in recent years. By doing this they have raised purchasing power more than it was reduced by wage restraint.