More immigration does not help. Reward work.

Apart from the business lobby, a few politicians and a lost economist, there is agreement in the country: the Netherlands should not make a light grip on labor migration. The current and future staff shortages must largely be resolved in the Netherlands itself.

How is it possible? By working more, by reducing the administrative and administrative burden and by being a better employer. And by increasing labor productivity. We should not be afraid of robots.

Problem number one

Fewer trains run due to lack of conductors. At Schiphol, travelers stand in line for hours because the airport does not have enough luggage staff. The waiting lists are returning to health care because hospitals are unable to keep their nurses on track.

There does not seem to be a restaurant in Amsterdam that has enough employees. There are ‘staff wanted’ signs everywhere. The celebration of Ajax could not take place this year due to lack of security guards. Ministers Hugo de Jonge and Rob Jetten should be concerned: There are not enough installers to supply homes in the Netherlands with heat pumps – as they would like – and to fill half of the North Sea with wind turbines.

Staff shortages are so acute that Dutch entrepreneurs see it as their biggest problem. In other European countries, high energy and commodity prices come first.

More immigration does not help

VNO-NCW employers’ association has proposed to pick up workers from abroad. Minister Karien van Gennip (CDA) for Social Affairs and Employment does not see much in that. Labor migration from countries outside the EU should be ‘really the cornerstone of this discussion’, she said on Sunday in Buitenhof

Oddly enough, Van Gennip sees potential in importing the unemployed from banlieues van Parijs – breeding ground for drug trafficking and terrorism – to staff the greenhouses and catering industry in the Netherlands. However, most economists and the government agree that labor migration from outside Europe – with the exception of ‘knowledge migrants’, who are already allowed to come – does not offer a solution.

More immigration is even counterproductive

The disadvantages of low-skilled labor migration are passed on to society: unfair wage competition (Eastern European and Turkish truck drivers are three times cheaper), tightness in the housing market, a relatively high dependence on social rent and social security on even second and third generation immigrants.

In addition, the easy access to foreign staff (often low-skilled from other EU countries, usually better qualified from abroad) has resulted in employers investing less in innovation and not improving their working conditions. This is not the opinion of JA21 or PVV, but Rits de Boer, Inspector General of the Danish Working Environment Authority.

Pierre Koning, professor of the labor market at VU University Amsterdam and Leiden University, agrees with De Boer: ‘Employers have long been accustomed to a sufficient supply of new labor supply. It is now gradually changing due to the aging population, but on top of that, employers really need to think a little more creatively and recruit people off the beaten track, such as the long-term unemployed and the elderly. ‘

The Netherlands will have to do it itself

The Netherlands will therefore, to a significant extent, have to resolve its shortcomings in the labor market itself. This can be done in a number of ways, starting with drawing on one’s own ‘untapped work potential’. There are over a million people. But how do you make it work?

At the end of March, there were 451,000 vacancies, 59,000 more than in the previous quarter. There are now 133 jobs for every 100 job seekers. In addition to the 338,000 officially unemployed, the Netherlands has about 350,000 ‘half-unemployed’ (able to work but do not look) and 560,000 part-time workers who want to work more hours.

To earn more hours

The Dutch work on average only 32 hours a week. The EU average is 36 hours. There is also an untapped potential there. Particularly in the catering and care sector – precisely sectors that lack staff – part-time employees want to work more, but either they do not get the opportunity from their boss, or it is not worth it.

The reason is the poverty trap I wrote about in May: employees who go from a small to an almost average salary often end up worse off. They pay more tax and receive less benefits. This risk applies primarily to working parents, one of whom works part-time. ‘The government will have to look more seriously at the part-time trap that encourages women in particular to stay in part-time jobs,’ says Koning.

Work must pay

Social assistance recipients and the million disabled Dutch people, who are not even considered part of the ‘work potential’, have the same problem. Six out of ten would suffer financial loss if they work beyond their benefits.

The government is considering increasing the employee’s tax deduction next year. It would make it more attractive for low- to middle-income workers to earn more. In the longer term, there is a need for a simplification of the indexing system.

However, there is one drawback: when more parents start working full-time, the demand for childcare increases, and it is one of the sectors that lacks staff.

Permanent jobs weigh on (small) entrepreneurs

Hiring employees on a permanent basis is risky, especially for small entrepreneurs. Since 2004, they have had to continue paying 70 percent wages to sick employees for not one but two years. Since 2009, employers have also borne the full cost of the Sickness Benefit Act. The prizes were then shared with the employees.

Dismissing one from permanent employment takes a lot of time and sometimes a lot of money. Entrepreneurs who quit must pay their staff a transitional payment of up to 84,000 euros per employee or one gross annual salary.

The government hinders the self-employed

While the shortage of (permanent) workers is increasing, the number of self-employed is also increasing. There are 1.1 million self-employed. In addition, freelancer more than 300,000 employees in parallel with a permanent job. That is a total of 1.4 million, which is a record.

Employees place special emphasis on the flexibility they gain as self-employed.

It is no coincidence that so many ‘advisers’ and ‘consultants’ work, especially in the (semi) public sector. Officials and nurses in permanent employment sometimes get confused over the bureaucracy.

Rules, rules, rules …

The government could ease the rules for permanent employment. Instead, it devises more rules for the self-employed. The Balanced Labor Market Act, introduced under the Third Rutte Cabinet, tightened the rules for shift workers.

ABN-Amro has calculated that 77,000 jobs, mainly in the restaurant industry, childcare and home care, have been lost as a result of the law. Young people and women who worked a small number of hours next to their studies or family became too expensive for employers.

The current cabinet will completely ban guard contracts. Temporary contracts for one employer may not last longer than three years. Self-deduction is reduced. The only guideline for employers is that they get a discount on the unemployment insurance premium when they hire flex workers on a fixed basis. By the way, flexible will be more expensive, but certainly not cheaper.

Employers demand flexibility, but are not themselves

Employers can also take a look at themselves. The flexibility that employees demand, often to be able to combine a permanent job with childcare or a sick parent, is not dependent on rules. The companies themselves can do that.

Precisely in the healthcare sector, employers hardly bend with their staff, which means that every tenth nurse leaves permanent employment every year. Some come back as self-employed. Then schedules and tasks can suddenly be adjusted. But some are leaving the sector forever, while the demand for care is rising.

Corona support strengthens staff shortages

Bankruptcy is always tragic for an entrepreneur, but it is a ‘normal dynamic’ for companies to go bankrupt, which frees workers for companies that are growing, explains Olaf van Vliet, professor of economics at Leiden University. ‘Because of the support measures, this happened less, which made it harder to fill vacancies.’

During the corona, the state kept businesses afloat. Edwin van Scherrenburg from VNO-NCW points out that it has prevented large groups from becoming long-term unemployed. Healthy companies in the culture and events sector and the catering industry have also been rescued. Without support ‘the misery would have been many times greater’, he believes.

In the first quarter of the year, nearly 23,000 employers with 420,000 employees received corona support, about half in the restaurant industry. Some of them have to close their doors during the year.

All in all, ABN-Amro economists estimate that between 80,000 and 120,000 workers will be released this year as a result of bankruptcies. Part of this would have already taken place without corona support. That way, the staff shortage will be fixed a bit – as long as the cabinet does not save the companies again.

Labor productivity lags behind

Despite the ‘untapped labor potential’, never before have so many Dutch people been employed. Of the working population – Dutch people between the ages of 15 and 75 – 71 percent work. This places the Netherlands on the European average.

But: according to Van Scherrenburg, growth in labor productivity has lagged behind. Calculations from the British Productivity Institute and our own CBS show that he is right. While labor productivity before the turn of the century still increased by about 2 percent annually, in recent years it must be measured in tenths of a percent. The trend is no different in America and other European countries.

Economists do not have a clear explanation. Some believe that productivity growth in the twentieth century was extraordinary and will not return. Others point to growth in service sectors that are difficult to become more productive, such as healthcare. In line with this, growth in the public sector also plays a role. Public services have less incentive to increase their productivity. They have no competition.

Automation can help

What employers and scientists agree on is that automation and robotics can increase labor productivity. This makes it possible to perform more work and make manual work superfluous.

Van Vliet explains the theory: when labor becomes more expensive compared to capital (in this case machinery), companies will tend to automate (parts of) the work. ‘In that sense, the tight labor market is also an opportunity to improve the quality of work. Now is the time to replace heavy work that few people want to do with machines and computers. ‘ Think about lugging luggage at Schiphol.

Koning cites e-commerce as an example. It became more popular under the corona, which means there is less need for vendors. However, there is greater demand for warehouse staff and deliveries. In order to attract staff, companies may have to increase wages and thus costs for consumers.

Or they should invest in automation, which costs more in the short term but saves money in the long term. In most factories, robots, not humans, perform all the heavy lifting. Amazon is experimenting in America with drones to deliver packages.

Robots by the bed

The next step is robotics in ‘soft’ professions, such as healthcare. Robots for washing the elderly, but also computers that can make a diagnosis and order the medicine directly from the pharmacy. Even with existing technology, a large part of the staff shortage in the care sector could already be eliminated.

Further innovation is inevitable in the light of the aging population. Otherwise, according to the Scientific Council for Government Policy, one in three Dutch people will have to work in health care by 2060. That will not leave much for the rest of the economy.

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