## 1. Labor Market Indicators

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---

### Market overview and cyclical drivers
- Summary finding: The Dutch labor market is exceptionally tight, driven by both cyclical and structural factors; policymakers should pursue a comprehensive approach to increase market flexibility, activate the unemployed, incentivize longer working hours of part-time employees, promote longer working lives, restore the balance between different types of employment, secure adequate social protection of all groups, ensure a smooth transition from one job to another, and encourage innovation and technology adoption.
- Participation and employment:
  - Labor force participation rate: 68.7 percent as of 2023Q3 (among people aged 15 years and older).
  - Female participation: 64.1 percent in 2023Q3 (up from about 54 percent in 2000).
  - Employment rate: 82.6 percent (among people aged 15–64 years) by 2023Q3.
  - Female employment rate (15–64): 79 percent as of 2023Q3, about 7 percentage points below men.
- Unemployment and vacancies:
  - Unemployment rate: 3.6 percent as of 2023Q4 (harmonized, seasonally adjusted).
  - Job vacancy rate: 4.5 percent as of 2023Q3 (industry, construction, and services), the second highest in the EA after Belgium (4.7 percent), above the EA average of 2.9 percent.
  - Vacancies relative to unemployed: about 113 vacant jobs per 100 unemployed (2023Q3), only exceeded by Germany in the EA.
- Cyclical context:
  - Labor force growth picked up notably in 2022 following post-COVID-19 recovery, with contributions from men and women across broad age cohorts.
  - Unemployment rose from 3.3 percent in late 2019 to 4.9 percent in 2021Q1 (population aged 15–64 years) before falling to current lows.
  - About 30 thousand Ukrainian refugees had found work in the Netherlands by early 2023.
  - Firms engaged in labor hoarding, contributing to vacancies and unemployment changing only marginally during the 2023 slowdown.
- Beveridge curve and efficiency:
  - The Dutch Beveridge curve shows a faster increase in vacancies than decline in unemployment, indicating that more vacancies are needed for a slight decline in unemployment (some steepening or shift since the pandemic).
  - Relative to the EA average, the Dutch curve is positioned leftward.

### Job vacancies and sectoral patterns
- Finding: Labor shortages are widespread across regions, sectors, and pay scales after COVID-19.
- Job vacancy rates by sector (2023Q2): the Netherlands had among the highest sector-level vacancy rates in the EA in mid-2023 across many sectors (total refers to industry, construction, and services except activities of households as employers and extra-territorial organizations and bodies).
- Wages and vacancies: No apparent strong correlation between average hourly wage and job vacancy rate by sector (average hourly wages in Euros as of 2021 used in comparisons).

### Structural factors — part-time employment
- Prevalence and distribution:
  - Part-time employment share: about 42 percent of all employed worked part-time in the Netherlands in 2023Q3 (seasonally adjusted), the highest in the EA (EA average 20.5 percent).
  - Gender split: nearly 63 percent of employed women work part-time, compared to about 23 percent of men (2023Q3).
  - Part-time observed across most sectors (figure shows distribution by industry and working time, 2022 employment levels).
- Working hours and hours per capita:
  - Average weekly hours worked by employed in the Netherlands are the lowest in the EA (reflecting a large share of part-time workers).
  - Hours worked per capita in the Netherlands are above the EA and EU averages due to high participation rates.
- Social norms, incentives, and disincentives:
  - The Netherlands has the lowest share of involuntary part-time employment in the EA (2022).
  - Non-financial reasons (child and elderly care, work-leisure preferences, housework, training, health, social norms) play a significant role in the choice to work part-time.
  - Complexity of the tax-benefit system may contribute, as some individuals abstain from working more hours amid concerns about loss of benefits tied to income.
- Earnings and career impacts:
  - Mothers’ earnings experience a significant penalty: about 46 percent below the pre-birth trajectory (study cited: Rabate et al., 2021); fathers’ earnings tend to be unaffected by the birth of a child.
  - Gender imbalances contribute to gaps in earnings, wealth accumulation, pensions, and slower progression into management positions (some evidence that when part-time work is accounted for, women attain management roles nearly as frequently as men excluding top management).
- Tax and benefit reforms affecting part-time work:
  - Reforms that reduced average effective tax rates on dual-earner couples include increases in the earned income tax credit (EITC) for working taxpayers, the EITC for working taxpayers with children, introduction of tax rebates for childcare, and removal of transferability of the general tax credit.
  - Cnossen et al. (2022) conclude that tax incentives for secondary earners are already generous and there may be no need for further tax incentives for secondary earners’ labor supply.
- Remaining disincentives and margins for policy:
  - Gonne (2023a) identifies two main disincentives: (1) strong disincentives at the intensive margin (hours of work) for middle-income couples with children, contributing to high part-time shares; (2) disincentives at the extensive margin (participation) for single parents dependent on childcare services.
  - The current tax system provides preferential treatment for dual-earner households and incentivizes a “one-and-a-half” worker model (one full-time, one part-time).
- Elasticities and likely effects of further tax incentives:
  - Female labor supply elasticities (particularly for women in couples) are higher than for men in couples but have declined substantially in recent decades.
  - Empirical evidence indicates labor supply elasticities for married women are higher in relative terms but small in absolute terms; the extensive margin (participation) generates most responsiveness.
  - Two conclusions drawn: (1) further tax cuts aimed at the intensive margin (longer working hours) would likely have limited effect on labor supply; (2) with the extensive margin already at an all-time high, remaining potential to stimulate greater participation via tax-benefit reforms is limited.

### Policy implications highlighted in the text
- A comprehensive approach is needed to address labor shortages and support economic growth, including:
  - Increase market flexibility.
  - Activate the unemployed.
  - Incentivize longer working hours of part-time employees.
  - Promote longer working lives.
  - Restore balance between different types of employment.
  - Secure adequate social protection for all groups.
  - Ensure smooth transitions between jobs.
  - Encourage innovation and technology adoption.

*Source — 1. Labor Market Indicators (Kingdom of the Netherlands—The Netherlands), March 20, 2024, INTERNATIONAL MONETARY FUND.*

### Labor supply responses
- Labor market reforms have already reduced the effective average and marginal tax burden on the second earner.
- Further reductions in marginal tax rates for secondary earners will likely have little effect on hours worked.
- The literature suggests policies targeting single parents and working mothers with young children (such as increases in-work tax credits for secondary earners and childcare subsidies) would likely generate a more significant labor supply response (de Boer et al., 2022).
- Policy implication: focus instruments on groups more sensitive to tax incentives (Caminada et al., 2022).

### Temporary work and self-employment (SE)
- Temporary work:
  - Temporary contracts have increased over the last couple of decades in the Netherlands.
  - Temporary workers have less job security, were more hit by the recession during the global financial crisis (International Labour Organization, 2016), and face fewer incentives for training.
- Self-employment (SE):
  - Significant growth in freelance self-employed (SE) over the last two decades has increased fragmentation of the Dutch labor market.
  - SE often enjoy more freedom but have less social protection: no unemployment and disability benefits, no coverage against risk of accidents at work, no occupational pension — contributing to labor market duality between employed and SE persons.
  - Concerns about pension adequacy for SE; evidence that SE workers with lower earnings may not have sufficient funds in retirement (OECD, 2019).
  - About 6 percent of SEs have a higher risk of poverty.
  - The share of freelance self-employment in the Netherlands increased over the last two decades and remains elevated relative to many other EA countries.
  - Drivers of SE growth:
    - Tax incentives: self-employed allowance and the SME profit exemptions are important (Bovenberg et al., 2022).
    - Relative compliance cost with employment protection regulation encourages alternative contractual arrangements (OECD, 2019).
  - Cost and productivity differences:
    - Employees are more expensive than the self-employed up to 44 percent at the minimum income level, 73 percent at the average income level, and 58 percent at twice the average income level (Bovenberg et al., 2022).
    - Empirical studies show SE are less productive than employees even after correcting for self-selection.

### Skill mismatches
- Skill mismatches create bottlenecks and exacerbate labor shortages in sectors relevant to digitalization and the low-carbon transition.
- Shortages are pronounced in engineering and Information and Communication Technology (ICT) sectors and for green skills.
- In October 2022, some 48 thousand vacancies for jobs related to energy transition remained unfilled, including roles for designers, architects, IT systems analysts, electricians, solar panel installation technicians, electric car charging station installers, accountants, administrators, and project leaders for construction and installation businesses (NL Times, 2022).
- Study highlighted by Gonne (2023b): reducing greenhouse gas emissions by 55 percent by 2030 could create about 28 thousand new technical jobs, in addition to the already existing 26 thousand full-time equivalent jobs employed in the Dutch energy sector.

### Key challenges ahead
- Constraints where the Dutch economy may reach limits: electricity grid capacity at peak times, land shortages and nitrogen emissions limits impeding housing supply, and labor shortages across most sectors.
- Labor shortages could lead to higher wages and inflation, potentially eroding competitiveness.
- Aggregate numbers suggest some remaining labor supply slack, albeit lower than the EA average; much of the remaining labor reserve is not easily activated due to a large share of the population working part-time voluntarily (as of 2023Q3).
- Population aging and projections:
  - Old-age dependency ratio projected to increase from 31 to 50 percent between 2021 and 2060.
  - Using Dutch Statistics Office projections, the old-age dependency ratio (persons aged 65+ to those aged 20–64) is projected to increase from 34.1 in 2022 to 46.2 in 2060.
- Productivity trends:
  - Labor input growth has been the main contributor to real GDP growth; productivity has lagged peers.
  - Dutch productivity per hour worked increased by 4.7 percent but below the EA average of 6.7 percent and well below the OECD average of 10.8 percent.
- Policy implication: maintaining or raising living standards will likely require faster productivity growth, higher labor force participation rates and longer working hours, and immigration, particularly of young workers.

### Dutch labor market policies (current and proposed)
- Already introduced:
  - Phase-out of the SE person's tax deduction accelerated to complete by 2027 to level playing field between employees and freelance SEs.
  - Paid parental leave and allowance increased from 50 percent to 70 percent of the maximum daily average.
  - Pilots in healthcare, education, and childcare to increase hours worked by women.
  - Free online tax-benefit calculator to improve navigation of the tax-benefit system.
- Reforms under discussion:
  - Mandatory disability insurance for SE.
  - Tackling false employment, defining conditions for employment and SE, and reducing work uncertainty by restricting zero-hour contracts.
  - Allowing greater employer flexibility in times of stress (e.g., enabling firms more flexibility in reducing hours in tail-risk events).
  - Greater access to childcare considered essential for participation decisions, but implementation faces challenges due to labor shortages.
  - Measures to improve labor market opportunities for women with a migration background and to streamline the tax-benefits system.
  - Addressing ICT staff shortages among SMEs via regional tracking, improving STEM enrollment including among women, and discussing the use of Artificial Intelligence (AI) with social partners.

### Measures that aim to enhance the use of existing resources and retain labor broadly
- Nature of measures and targeted shortages:
  - Skills forecasting to adapt vocational and ongoing training systems to identify future labor shortages.
  - Integration of broader government development strategies with training and job creation.
  - Improving the match between the education system and labor market needs, including involvement of social partners.
  - Enhancing delivery of transferable skills (digital and soft skills) through education and training.
  - Preventing early exit from the labor market to minimize burnout.
- Labor shortages in health, long-term care, and challenging sectors:
  - COVID-19 contributed to shortages of health and long-term care workers in many countries.
  - Population aging will amplify shortages in health and long-term care and may spread shortages to other sectors via treatment delays.
  - Policy focus: pay and working conditions improvements, often accompanied by measures to enhance working and living conditions.
  - Country examples include training and qualifications, attracting skilled workers from abroad, recognition of foreign qualifications, vocational training, and support covering costs of living during training.
- Selected measures summarized:
  - Attract labor: enhance vocational training appeal; improve pay and working conditions; awareness raising of sectors.
  - Enhance attractiveness of living and working conditions: attract high-level professionals and assist integration; migration policy projects (points-based systems, shortage occupation catalogues, easing salary criteria/quotas, agreements with specific countries); seasonal worker support; integrated language+vocational training for migrants; encourage return migration.
  - Improve recruitment at company level and activate underutilized resources: support mobility and childcare; services to overcome non-skills barriers for vulnerable groups; rehabilitation services; skills forecasting; lifelong learning; active labor market policies; in-work training; workplace-tailored training; employee sharing; active age management; pension reform measures to retain older workers.

### Shortages in advanced-skill sectors and gender composition issues
- ICT sector:
  - Insufficient matching of skills supply and demand and foresight deficiency drive shortages.
  - Low share of women in ICT contributes to shortages; part-time work in ICT is uncommon in the Netherlands, inhibiting female representation because a large share of Dutch women prefer to work part-time.
  - Wages in ICT tend to be higher than the national average and can pull employees from other occupations.
  - Vacancy statistics: about 6 percent of European enterprises had hard-to-fill vacancies for jobs requiring ICT specialist skills in 2022, up from 3.4 percent in 2014.
  - In 2022, the share of enterprises with hard-to-fill vacancies for ICT specialist skills was the highest (more than 10 percent) in Malta, Denmark, the Netherlands, and Belgium.
  - Policy responses: raising awareness, providing female role models, and delivering training targeted to women (Eurofound, 2023).

### Policy recommendations (explicit)
- Overall objective: comprehensive approach to address labor shortages, promote a more inclusive, flexible, and efficient labor market, and support economic growth.
- Key recommendations:
  - Continue efforts to establish a more level playing field between different types of employment, including employees and the self-employed (SE):
    - Establish mandatory disability insurance for the SE to enhance social protection.
    - Review pension arrangements for non-traditional types of employment to ensure adequacy after retirement.
    - Tackle false employment, provide definitions and conditions for employment (and SE), reduce work uncertainty by restricting zero-hour contracts.
    - Allow greater employer flexibility in times of stress (e.g., enable firms more flexibility in lowering hours in tail risk events).
  - Incentivize part-time workers to increase hours worked:
    - With labor force participation among the highest in the EA, focus on the intensive margin (hours per employed worker).
    - Improve access to child and elderly care in a fiscally sustainable manner to relieve the maternity penalty and reduce gender norms restricting labor supply.
    - Over the medium term, streamline the tax-benefit system to reduce complexity.
  - Promote training and labor mobility towards priority sectors (green transition, digitalization, health):
    - Reorient active labor market policies toward skill shortages in priority sectors.
    - Enhance and target lifelong learning programs to support acquisition of new skills and improve productivity.
    - For older workers, lifelong learning to support longer working lives and improve mobility and employability (OECD, 2018).
  - Improve education quality to prepare the future workforce:
    - Target skill development, vocational training, and STEM education by stimulating interest at a young age and encouraging female interest and participation.
    - Investment in education to enhance learning and sustain supply of human capital and skills.
  - Optimize migration:
    - Better integrate migrants into the market through language training, job search support, and streamlining and accelerating recognition and validation of qualifications acquired abroad for skills in shortage.
  - Undertake broader policies to support productivity:
    - Support research and development and encourage labor-saving innovation and productivity-enhancing investment to revive business investment.
  - Consider measures to adopt technology, including robotics, automation, and AI to reduce labor shortages and stimulate productivity.

### Digitalization, AI, and productivity potential
- Netherlands context:
  - Well-positioned to leverage digitalization due to strong digital infrastructure and high rankings in internet access and digitalization.
  - Pre-pandemic shortage of IT professionals, particularly among SMEs, indicates need for accelerated digital technology adoption in SMEs.
- AI and robotics:
  - Robots assist with complex tasks (surgery, supply transport, drug dispensing) in healthcare.
  - Cazzaniga et al. (2024): AI promises to boost productivity and growth; impact varies by country; advanced economies more susceptible to and better positioned to benefit from AI.
  - PricewaterhouseCoopers (2023) findings:
    - Over 44 percent of jobs in the Netherlands are highly (or very highly) exposed to generative artificial intelligence.
    - In sectors like information and communication, finance, education, specialized business services, and public administration, over 75 percent of jobs are highly exposed.
    - Technology reshapes jobs rather than necessarily eliminating them; AI automates repetitive and administrative tasks, freeing workers for creativity and knowledge tasks.

### Additional contextual constraints and risks
- Resource and capacity constraints:
  - Rapid population aging and ambitious climate agenda call for more efficient resource use and productivity growth.
  - Prevalence of land shortages, nitrogen emission limits, electricity grid limitations at peak times, and labor shortages suggest parts of the economy may already reach capacity.
  - Electricity grid peak constraints could be addressed by investment to expand capacity; land and emissions limits are hard constraints.
- Risks:
  - Over time, labor shortages—exacerbated by population aging—may lead to higher wages and inflation, potentially reducing competitiveness of Dutch enterprises.
  - Personnel shortages may hinder the government’s climate agenda; lack of healthcare workers will worsen as the population ages.
- Strategic priorities:
  - Make best use of remaining labor potential, foster development in priority sectors, and increase productivity growth (productivity has lagged some peers during the last decade).

*Source: KINGDOM OF THE NETHERLANDS—THE NETHERLANDS, INTERNATIONAL MONETARY FUND, Chapter 32.*

### 1. Labor Market Indicators ________________________________________________________________ 3

### 1. Labor Market Indicators

### Market overview and cyclical drivers
- Summary finding: The Dutch labor market is exceptionally tight, driven by both cyclical and structural factors; policymakers should pursue a comprehensive approach to increase market flexibility, activate the unemployed, incentivize longer working hours of part-time employees, promote longer working lives, restore the balance between different types of employment, secure adequate social protection of all groups, ensure a smooth transition from one job to another, and encourage innovation and technology adoption.  
- Participation and employment:
  - Labor force participation rate: 68.7 percent as of 2023Q3 (among people aged 15 years and older).
  - Female participation: 64.1 percent in 2023Q3 (up from about 54 percent in 2000).
  - Employment rate: 82.6 percent (among people aged 15–64 years) by 2023Q3.
  - Female employment rate (15–64): 79 percent as of 2023Q3, about 7 percentage points below men.
- Unemployment and vacancies:
  - Unemployment rate: 3.6 percent as of 2023Q4 (harmonized, seasonally adjusted).
  - Job vacancy rate: 4.5 percent as of 2023Q3 (industry, construction, and services), the second highest in the EA after Belgium (4.7 percent), above the EA average of 2.9 percent.
  - Vacancies relative to unemployed: about 113 vacant jobs per 100 unemployed (2023Q3), only exceeded by Germany in the EA.
- Cyclical context:
  - Labor force growth picked up notably in 2022 following post-COVID-19 recovery, with contributions from men and women across broad age cohorts.
  - The post-pandemic recovery further exacerbated existing labor shortages; unemployment rose from 3.3 percent in late 2019 to 4.9 percent in 2021Q1 (population aged 15–64 years) before falling to current lows.
  - About 30 thousand Ukrainian refugees had found work in the Netherlands by early 2023.
  - Firms engaged in labor hoarding, contributing to vacancies and unemployment changing only marginally during the 2023 slowdown.
- Beveridge curve and efficiency:
  - The Dutch Beveridge curve shows a faster increase in vacancies than decline in unemployment, indicating that more vacancies are needed for a slight decline in unemployment (some steepening or shift since the pandemic).
  - Relative to the EA average, the Dutch curve is positioned leftward.

### Job vacancies and sectoral patterns
- Finding: Labor shortages are widespread across regions, sectors, and pay scales after COVID-19.
- Job vacancy rates by sector (2023Q2): the Netherlands had among the highest sector-level vacancy rates in the EA in mid-2023 across many sectors (text chart; total refers to industry, construction, and services except activities of households as employers and extra-territorial organizations and bodies).
- Wages and vacancies: No apparent strong correlation between average hourly wage and job vacancy rate by sector (average hourly wages in Euros as of 2021 used in comparisons).

### Structural factors — part-time employment
- Prevalence and distribution:
  - Part-time employment share: about 42 percent of all employed worked part-time in the Netherlands in 2023Q3 (seasonally adjusted), the highest in the EA (EA average 20.5 percent).
  - Gender split: nearly 63 percent of employed women work part-time, compared to about 23 percent of men (2023Q3).
  - Part-time observed across most sectors (figure shows distribution by industry and working time, 2022 employment levels).
- Working hours and hours per capita:
  - Average weekly hours worked by employed in the Netherlands are the lowest in the EA (reflecting a large share of part-time workers).
  - Hours worked per capita in the Netherlands are above the EA and EU averages due to high participation rates.
- Social norms, incentives, and disincentives:
  - The Netherlands has the lowest share of involuntary part-time employment in the EA (2022).
  - Non-financial reasons (child and elderly care, work-leisure preferences, housework, training, health, social norms) play a significant role in the choice to work part-time.
  - Complexity of the tax-benefit system may contribute, as some individuals abstain from working more hours amid concerns about loss of benefits tied to income.
- Earnings and career impacts:
  - Mothers’ earnings experience a significant penalty: about 46 percent below the pre-birth trajectory (study cited: Rabate et al., 2021); fathers’ earnings tend to be unaffected by the birth of a child.
  - Gender imbalances contribute to gaps in earnings, wealth accumulation, pensions, and slower progression into management positions (some evidence that when part-time work is accounted for, women attain management roles nearly as frequently as men excluding top management).
- Tax and benefit reforms affecting part-time work:
  - Reforms that reduced average effective tax rates on dual-earner couples include increases in the earned income tax credit (EITC) for working taxpayers, the EITC for working taxpayers with children, introduction of tax rebates for childcare, and removal of transferability of the general tax credit.
  - Cnossen et al. (2022) conclude that tax incentives for secondary earners are already generous and there may be no need for further tax incentives for secondary earners’ labor supply.
- Remaining disincentives and margins for policy:
  - Gonne (2023a) identifies two main disincentives: (1) strong disincentives at the intensive margin (hours of work) for middle-income couples with children, contributing to high part-time shares; (2) disincentives at the extensive margin (participation) for single parents dependent on childcare services.
  - The current tax system provides preferential treatment for dual-earner households and incentivizes a “one-and-a-half” worker model (one full-time, one part-time).
- Elasticities and likely effects of further tax incentives:
  - Female labor supply elasticities (particularly for women in couples) are higher than for men in couples but have declined substantially in recent decades.
  - Empirical evidence indicates labor supply elasticities for married women are higher in relative terms but small in absolute terms; the extensive margin (participation) generates most responsiveness.
  - Two conclusions drawn: (1) further tax cuts aimed at the intensive margin (longer working hours) would likely have limited effect on labor supply; (2) with the extensive margin already at an all-time high, remaining potential to stimulate greater participation via tax-benefit reforms is limited.

### Policy implications highlighted in the text
- A comprehensive approach is needed to address labor shortages and support economic growth, including:
  - Increase market flexibility.
  - Activate the unemployed.
  - Incentivize longer working hours of part-time employees.
  - Promote longer working lives.
  - Restore balance between different types of employment.
  - Secure adequate social protection for all groups.
  - Ensure smooth transitions between jobs.
  - Encourage innovation and technology adoption.

*Italic: Source — 1. Labor Market Indicators (Kingdom of the Netherlands—The Netherlands), March 20, 2024, INTERNATIONAL MONETARY FUND.*

### 15.      However, single parents and working mothers with young children would likely have

### However, single parents and working mothers with young children would likely have greater response of labor supply to tax incentives.

### Labor supply responses
- Labor market reforms have already reduced the effective average and marginal tax burden on the second earner.
- Further reductions in marginal tax rates for secondary earners will likely have little effect on hours worked.
- The literature suggests policies targeting single parents and working mothers with young children (such as increases in-work tax credits for secondary earners and childcare subsidies) would likely generate a more significant labor supply response (de Boer et al., 2022).
- Policy implication: focus instruments on groups more sensitive to tax incentives (Caminada et al., 2022).

### Temporary work
- Temporary contracts have increased over the last couple of decades in the Netherlands.
- Temporary workers have less job security, were more hit by the recession during the global financial crisis (International Labour Organization, 2016), and face fewer incentives for training.

### Self-employment (SE)
- Significant growth in freelance self-employed (SE) over the last two decades has increased fragmentation of the Dutch labor market.
- SE often enjoy more freedom but have less social protection: no unemployment and disability benefits, no coverage against risk of accidents at work, no occupational pension — contributing to labor market duality between employed and SE persons.
- Concerns about pension adequacy for SE; evidence that SE workers with lower earnings may not have sufficient funds in retirement (OECD, 2019).
- About 6 percent of SEs have a higher risk of poverty.
- The share of freelance self-employment in the Netherlands increased over the last two decades and remains elevated relative to many other EA countries.
- Drivers of SE growth:
  - Tax incentives: self-employed allowance and the SME profit exemptions are important (Bovenberg et al., 2022).
  - Relative compliance cost with employment protection regulation encourages alternative contractual arrangements (OECD, 2019).
- Cost and productivity differences:
  - Employees are more expensive than the self-employed up to 44 percent at the minimum income level, 73 percent at the average income level, and 58 percent at twice the average income level (Bovenberg et al., 2022).
  - Empirical studies show SE are less productive than employees even after correcting for self-selection.

### Skill mismatches
- Skill mismatches create bottlenecks and exacerbate labor shortages in sectors relevant to digitalization and the low-carbon transition.
- Shortages are pronounced in engineering and Information and Communication Technology (ICT) sectors and for green skills.
- In October 2022, some 48 thousand vacancies for jobs related to energy transition remained unfilled, including roles for designers, architects, IT systems analysts, electricians, solar panel installation technicians, electric car charging station installers, accountants, administrators, and project leaders for construction and installation businesses (NL Times, 2022).
- Study highlighted by Gonne (2023b): reducing greenhouse gas emissions by 55 percent by 2030 could create about 28 thousand new technical jobs, in addition to the already existing 26 thousand full-time equivalent jobs employed in the Dutch energy sector.

### Key challenges ahead
- Constraints where the Dutch economy may reach limits: electricity grid capacity at peak times, land shortages and nitrogen emissions limits impeding housing supply, and labor shortages across most sectors.
- Labor shortages could lead to higher wages and inflation, potentially eroding competitiveness.
- Aggregate numbers suggest some remaining labor supply slack, albeit lower than the EA average; much of the remaining labor reserve is not easily activated due to a large share of the population working part-time voluntarily (as of 2023Q3).
- Population aging and projections:
  - Old-age dependency ratio projected to increase from 31 to 50 percent between 2021 and 2060.
  - Using Dutch Statistics Office projections, the old-age dependency ratio (persons aged 65+ to those aged 20–64) is projected to increase from 34.1 in 2022 to 46.2 in 2060.
- Productivity trends:
  - Labor input growth has been the main contributor to real GDP growth; productivity has lagged peers.
  - Dutch productivity per hour worked increased by 4.7 percent but below the EA average of 6.7 percent and well below the OECD average of 10.8 percent.
- Policy implication: maintaining or raising living standards will likely require faster productivity growth, higher labor force participation rates and longer working hours, and immigration, particularly of young workers.

### Dutch labor market policies (current and proposed)
- Already introduced:
  - Phase-out of the SE person's tax deduction accelerated to complete by 2027 to level playing field between employees and freelance SEs.
  - Paid parental leave and allowance increased from 50 percent to 70 percent of the maximum daily average.
  - Pilots in healthcare, education, and childcare to increase hours worked by women.
  - Free online tax-benefit calculator to improve navigation of the tax-benefit system.
- Reforms under discussion:
  - Mandatory disability insurance for SE.
  - Tackling false employment, defining conditions for employment and SE, and reducing work uncertainty by restricting zero-hour contracts.
  - Allowing greater employer flexibility in times of stress (e.g., enabling firms more flexibility in reducing hours in tail-risk events).
  - Greater access to childcare considered essential for participation decisions, but implementation faces challenges due to labor shortages.
  - Measures to improve labor market opportunities for women with a migration background and to streamline the tax-benefits system.
  - Addressing ICT staff shortages among SMEs via regional tracking, improving STEM enrollment including among women, and discussing the use of Artificial Intelligence (AI) with social partners.

### Other countries' policies: examples
- EU member states use varied measures to address labor shortages, classified into three categories: i) attracting labor; ii) activation of underutilized resources and retaining labor; iii) enhancing the use of existing labor and retaining labor (Eurofound, 2021, 2023).
- Measures to attract labor include:
  - Enhancing appeal of specific sectors (pay, working conditions, training, image campaigns).
  - Enhancing appeal of living and working conditions in a region to attract high-level professionals and support family integration.
  - Active migration policies: encouraging return migration, managed migration, exemptions from labor market tests, quotas, points-based systems, reduced minimum income thresholds, easing access for students, more favorable family reunification, and integrating refugees and asylum seekers into the labor market.

*Source: IMF staff analysis and cited studies as presented in the content unit.*

### 32.      Measures that aim to enhance the use of existing resources and retain labor broadly

### 32.      Measures that aim to enhance the use of existing resources and retain labor broadly

### Nature of measures and targeted shortages
- Aim: address qualitative shortages by improving matching between demand and supply and retaining labor broadly.
- Common approaches:
  - Skills forecasting to adapt vocational and ongoing training systems to identify future labor shortages.
  - Integration of broader government development strategies with training and job creation.
  - Improving the match between the education system and labor market needs, including involvement of social partners.
  - Enhancing delivery of transferable skills (digital and soft skills) through education and training.
  - Preventing early exit from the labor market to minimize burnout.

### Labor shortages in health, long-term care, and challenging sectors
- Drivers and consequences:
  - COVID-19 contributed to shortages of health and long-term care workers in many countries.
  - Population aging will amplify shortages in health and long-term care and may spread shortages to other sectors via treatment delays.
- Policy focus:
  - Pay and working conditions improvements, often accompanied by measures to enhance working and living conditions.
  - Examples of comprehensive policy mixes:
    - Germany: training and ongoing qualifications, working conditions and remuneration, care planning, attracting skilled workers from abroad, recognition of foreign qualifications, vocational training.
    - Austria: supports training in shortage occupations, covering the cost of living during training.
    - Spain: aims to prevent early market exit and burnout by delivering medical and social support and legal services.

### Selected measures to address labor shortages (summarized)
- Attract labor:
  - Enhance attractiveness of vocational training for specific sectors/occupations (Austria, Germany, Hungary, Luxembourg, Romania).
  - Improve pay and working conditions in specific sectors, including regular review of minimum wage (Belgium, Bulgaria, Croatia, Estonia, Finland, Germany, Hungary, Lithuania, Luxembourg, the Netherlands, Slovakia, Slovenia, Sweden).
  - Awareness raising of sectors (Austria, Belgium, Finland, Estonia, Malta, the Netherlands, Portugal, Sweden).
- Enhance attractiveness of living and working conditions:
  - Attract high-level professionals and assist integration (Austria, Finland, Germany, Latvia).
  - Migration policy projects (points-based systems, shortage occupation catalogues, easing salary criteria/quotas, agreements with specific countries) (Austria, Belgium, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Hungary, Ireland, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Slovenia, Spain).
  - Seasonal worker support schemes (Croatia); vocational training with integrated language training for migrants (Sweden); encouraging return migration of diaspora (Lithuania, Portugal, Slovenia).
- Improve recruitment at company level (Austria, Malta, Poland).
- Activate underutilized resources and retain labor:
  - Support for mobility and childcare, services to overcome non-skills barriers for vulnerable groups, rehabilitation services, skills forecasting, lifelong learning, active labor market policies, in-work training, workplace-tailored training, ongoing vocational assessments, employee sharing, active age management, pension reform measures to retain older workers.
  - Examples of countries using these approaches are listed in the source (Eurofound, 2021).

### Shortages in advanced-skill sectors and gender composition issues
- ICT sector:
  - Insufficient matching of skills supply and demand and foresight deficiency drive shortages.
  - Low share of women in ICT contributes to shortages; part-time work in ICT is uncommon in the Netherlands, inhibiting female representation because a large share of Dutch women prefer to work part-time.
  - Wages in ICT tend to be higher than the national average and can pull employees from other occupations.
- Vacancy statistics:
  - About 6 percent of European enterprises had hard-to-fill vacancies for jobs requiring ICT specialist skills in 2022, up from 3.4 percent in 2014.
  - In 2022, the share of enterprises with hard-to-fill vacancies for ICT specialist skills was the highest (more than 10 percent) in Malta, Denmark, the Netherlands, and Belgium.
- Policy responses: raising awareness, providing female role models, and delivering training targeted to women (Eurofound, 2023).

### Policy recommendations (explicit)
- Overall objective: comprehensive approach to address labor shortages, promote a more inclusive, flexible, and efficient labor market, and support economic growth.
- Key recommendations:
  - Continue efforts to establish a more level playing field between different types of employment, including employees and the self-employed (SE):
    - Establish mandatory disability insurance for the SE to enhance social protection.
    - Review pension arrangements for non-traditional types of employment to ensure adequacy after retirement.
    - Tackle false employment, provide definitions and conditions for employment (and SE), reduce work uncertainty by restricting zero-hour contracts.
    - Allow greater employer flexibility in times of stress (e.g., enable firms more flexibility in lowering hours in tail risk events).
  - Incentivize part-time workers to increase hours worked:
    - With labor force participation among the highest in the EA, focus on the intensive margin (hours per employed worker).
    - Improve access to child and elderly care in a fiscally sustainable manner to relieve the maternity penalty and reduce gender norms restricting labor supply.
    - Over the medium term, streamline the tax-benefit system to reduce complexity.
  - Promote training and labor mobility towards priority sectors (green transition, digitalization, health):
    - Reorient active labor market policies toward skill shortages in priority sectors.
    - Enhance and target lifelong learning programs to support acquisition of new skills and improve productivity.
    - For older workers, lifelong learning to support longer working lives and improve mobility and employability (OECD, 2018).
  - Improve education quality to prepare the future workforce:
    - Target skill development, vocational training, and STEM education by stimulating interest at a young age and encouraging female interest and participation.
    - Investment in education to enhance learning and sustain supply of human capital and skills.
  - Optimize migration:
    - Better integrate migrants into the market through language training, job search support, and streamlining and accelerating recognition and validation of qualifications acquired abroad for skills in shortage.
  - Undertake broader policies to support productivity:
    - Support research and development and encourage labor-saving innovation and productivity-enhancing investment to revive business investment.
  - Consider measures to adopt technology, including robotics, automation, and AI to reduce labor shortages and stimulate productivity.

### Digitalization, AI, and productivity potential
- Netherlands context:
  - Well-positioned to leverage digitalization due to strong digital infrastructure and high rankings in internet access and digitalization.
  - Pre-pandemic shortage of IT professionals, particularly among SMEs, indicates need for accelerated digital technology adoption in SMEs.
- AI and robotics:
  - Robots assist with complex tasks (surgery, supply transport, drug dispensing) in healthcare.
  - Cazzaniga et al. (2024): AI promises to boost productivity and growth; impact varies by country; advanced economies more susceptible to and better positioned to benefit from AI.
  - PricewaterhouseCoopers (2023) findings:
    - Over 44 percent of jobs in the Netherlands are highly (or very highly) exposed to generative artificial intelligence.
    - In sectors like information and communication, finance, education, specialized business services, and public administration, over 75 percent of jobs are highly exposed.
    - Technology reshapes jobs rather than necessarily eliminating them; AI automates repetitive and administrative tasks, freeing workers for creativity and knowledge tasks.

### Additional contextual constraints and implications
- Resource and capacity constraints:
  - Rapid population aging and ambitious climate agenda call for more efficient resource use and productivity growth.
  - Prevalence of land shortages, nitrogen emission limits, electricity grid limitations at peak times, and labor shortages suggest parts of the economy may already reach capacity.
  - Electricity grid peak constraints could be addressed by investment to expand capacity; land and emissions limits are hard constraints.
- Risks:
  - Over time, labor shortages—exacerbated by population aging—may lead to higher wages and inflation, potentially reducing competitiveness of Dutch enterprises.
  - Personnel shortages may hinder the government’s climate agenda; lack of healthcare workers will worsen as the population ages.
- Strategic priorities:
  - Make best use of remaining labor potential, foster development in priority sectors, and increase productivity growth (productivity has lagged some peers during the last decade).

*Source: KINGDOM OF THE NETHERLANDS—THE NETHERLANDS, INTERNATIONAL MONETARY FUND, Chapter 32.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1nldea2024002.pdf_