In the Dutch labour market, it is difficult for companies and organisations to find sufficient staff. We call this a tight labour market. According to the most recent figures from Statistics Netherlands (CBS), for every 100 unemployed people there were 108 job openings at the end of 2024. The most pressing staff shortages are in the healthcare sector, where demand for nurses and other healthcare staff is high, and in the engineering sector, where there is a shortage of fitters, installers and electricians.
One of the key reasons is that most people in the Netherlands who are able and willing to work are already doing so. Compared to other countries in Europe, the labour participation rate in the Netherlands is high. As at the end of 2024, over 75% of all people aged 15-74 were either working or actively looking for work. Among people aged 25-65 this percentage was even higher, at 90%. This means there are relatively few people available who are not currently working and who are immediately available to fill a vacancy. In addition, population ageing plays a role. An increasing proportion of the population is reaching retirement age, while the proportion of younger people who are able to work is decreasing. As a result, the growth of potential labour supply is slowing down.
The ongoing tightness in the labour market has several implications for the economy. Companies and organisations struggle to carry out their operations, which can lead to longer waiting times (healthcare) or delays (construction, installation of heat pumps or solar panels). Labour tightness can also put a brake on economic growth by preventing companies from expanding production. Workers in a tight labour market often have stronger bargaining power, which may lead to higher wages.
We cannot easily increase the number of people employed or the hours they work, but we can try to reduce the demand for labour, for example by learning to work more efficiently, increasing productivity or ceasing to perform certain tasks. Investing in technology, innovation, and developing workers' knowledge and skills are essential in this respect. Organising work processes and using technological innovations such as artificial intelligence (AI) and robots in a smarter way can also help to perform tasks more efficiently, reducing the need for additional staff.
See our news item Tight labour market calls for broad public debate
For the technical analysis of the impact of population ageing and some ways to mitigate its negative effects, read our DNB Analysis - Tight labour market: the new normal? (in Dutch)
You can also read our news item about incentives that get people to work more or fewer hours.
We have also examined the willingness of unemployed people in the Netherlands to move to another region for a job. The results of this study can be found here: The Effect of Unemployment on Interregional Migration in the Netherlands.
Continued labour market tightness and increased inflation have led to a marked rise in wages in the past two years. Workers have stronger wage bargaining power in a tight market, especially when the cost of living increases due to inflation. This wage growth is important to support their purchasing power.
However, it is important that wage increases are controlled. If wages rise too fast and too much, companies may be forced to raise the prices of their products and services to cover the higher labour costs. This can then lead to a vicious cycle, with workers again demanding higher wages to pay for increased prices. Such a development is known as a wage-price spiral and can become a source of persistent inflation. In the Netherlands, wage growth is slowing down again after the inflation peak and we do not see a wage-price spiral developing. A balanced development of wages and prices is necessary for stable economic development.
DNB research shows a low likelihood of wage-price spiral in the Netherlands
DNB research indicates that low income and job insecurity often coincide with other vulnerabilities such as high housing costs, high energy bills, debt and a lack of financial buffers. Read more about this study and our recommendations here.
In a scholarly study, we take a detailed look at the differences between flexible and permanent contracts: The price of flexible jobs: Wage differentials between permanent and flexible jobs in The Netherlands
We address labour market developments in our semi-annual projections for the Dutch economy. Read our latest projections here: DNB Autumn Forecast 2024
High inflation, though now receding, has had a strong impact on recent wage growth. However, higher wages generally do not fully pass through to prices, which suggests that the likelihood of a wage-price spiral emerging is low. This is shown in a new Analysis by DNB.
Read more New study confirms low likelihood of wage-price spiral
The growth of the labour force in the Netherlands is set to decline sharply in the coming decades. To meet this challenge, we need to look not only at increasing labour supply, but also at ways of reducing labour demand and improving the match between supply and demand.
Read more Tight labour market calls for broad public debate
The Dutch economy will grow by 0.8% this year, which is sharply lower than last year's 4.5% growth. While inflation is set to decrease, in part due to the economy cooling down, it remains too high at 4.2%.
Read more Economic growth slows, inflation remains persistent
One in three working people in the Netherlands is prepared to work more hours if it means a higher salary. People would also be willing to work more hours if their work were more fun, if remote working were easier and if they could spend less time caring for their children.
Read more Incentives for people to work more (or fewer) hours