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Personeel gezocht

Labour market

The Netherlands has a strong labour market. Many people are employed and our labour productivity is high. Unemployment has fallen and there is even a shortage of people in a number of sectors. On other words, we have a tight labour market. Read here why this situation is likely to continue for the time being and about other work-related developments.

Our productivity is high

At the beginning of 2023, nearly 10 million Dutch people have paid work. Compared to other countries, we work part-time more often. But because we retire at a relatively old age, we proportionally work more hours than in many countries around us. Three quarters of the Dutch population aged between 15 and 75 are working or looking for work. This is an all-time high for our country, and within Europe this percentage is higher only in some of the Scandinavian countries.

Short-term expectations

The Dutch labour market is not only strong, but also tight. This means many companies are looking for workers and the number of unemployed people is low. There is a huge shortage of staff in various sectors such as ICT, construction, healthcare and education. By the end of 2022 there were 442,000 vacancies, well above the average of 181,000 since records began in 1997. One of the consequences of labour market tightness is that people switch jobs more easily, for example because of favourable working conditions such as higher pay. At some companies, employees who bring in new colleagues are given a recruitment bonus.

There is so much demand for products and services that there are not enough workers to meet this demand with current production techniques. It would be beneficial for economic growth if we all worked more hours than we already do. But people are not always willing or able to do so, for example because they have caring responsibilities or because they are studying. The population is ageing, and this reduces the number of people working. We therefore expect the labour market to remain tight in the coming years. On top of that, an ageing population means that more care needs to be provided, which means we also need more workers.

Wages

Inflation is high and the labour market is tight. This means wages are likely to rise more sharply, because inflation reduces the purchasing power of working people. Higher wages can help to support their purchasing power. In addition to the steep increase in prices, labour productivity (production output per hour worked) has increased and there are many vacancies. We are therefore of the opinion that wages can – and should – go up more. This is especially true for companies that can easily pass on the higher costs to their customers. The government has taken an important step for the lowest income earners, by increasing the minimum wage by 10.15% with effect from 1 January 2023. 

Wage-price spiral

Wages must be raised in a controlled manner, however. Because when wages rise, companies have to increase the prices of their products and services to pay for these higher wages. That, in turn, makes workers want higher wages to afford the more expensive products and services. This could lead to a situation in which higher wages themselves become a major source of inflation. Then wage increases would add fuel to the flame of inflation. When that happens, we speak of a wage-price spiral. It is important to avoid this. At present, there is no such situation and we see enough room for wages to rise. There are several parties in society that can help prevent a wage-price spiral. For example, we, as the central bank, can influence inflation.

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Working conditions are more than wages

Besides wages, other employment conditions include the type of labour contract: permanent, flexible or self-employed. The labour market has become increasingly more flexible in the past few decades. As a result, there are fewer people working in permanent employment and more people working on temporary or on-call contracts or on a self-employed basis. At the end of 2022, the Netherlands had 2.7 million workers in flexible employment and 1.2 million self-employed. To put things in perspective, employees on a permanent contract numbered 5.3 million.

What kind of work do people have?

Gap between workers on permanent and flexible contracts

We believe the gap between flexible and permanent contracts should be reduced. Flexible work has its advantages. For example, employers can hire people temporarily during peak times or replace staff during illness and maternity or paternity leave. But workers on flexible contracts also have less security. It is more difficult for them to get a mortgage, for example. We want the gap between permanent and flexible employment to narrow and for flexible contracts to be used only when they are really necessary, and not just because they are cheaper for employers. This requires not only better regulation of flexible contracts, but also changes to permanent contracts regulations.

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