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&RQWHQWV Introduction 3 page &KDSWHU *HQHUDO6HFWLRQ 1.1 The economic situation 4 1.2 The labour market development 5 1.3 Policy objectives and employment targets 7 1.4 Policy-mix 8 1.5 Regional dimension 9 1.6 National strategy Life Long Learning 10 1.7 Strategic action in partnership with social partners 11 &KDSWHU 7KHPDWLF6HFWLRQ 2.1. Implementation employment guidelines 2001 12 2.2. Country-specific recommendations 29 3.1. Recommendation to upgrade monitoring system comprehensive approach 29 3.2. Recommendation to increase incentives in benefitsystems 30 &KDSWHU $VVHVVPHQWFRQWULEXWLRQ(XURSHDQ)XQGV Appendix 1: Monitoring 33 Appendix 2: Overview labour market policy instruments 37 Appendix 3: Employment guidelines 2001 38 AVT01/SZ62583 2

,QWURGXFWLRQ The European Employment Strategy plays a key role in the European co-ordination of the employment and labour market policies of the Member States. Experience over the past few years has shown that the annual exercise of establishing commonly agreed targets in the form of guidelines and the subsequent evaluation of their implementation in each EU Member State (the Luxembourg process) gives a significant boost to the reform of the labour market and to efforts to combat long-term unemployment in Europe. Recently the European Council in Stockholm underlined in follow-up to the European Council in Lisbon (March 2000) the importance of the European Employment strategy. In the coming years the implementation has to be further strengthened, with priority given to increasing labour participation and policy measures for active ageing. These ambitions has been underpinned with quantitative targets: the employment rate in the EU should be raised from an average of 61% today to as close as possible to 70% by 2010, and the percentage of women in employment should be increased from 51% now, to more than 60% by 2010. In Stockholm the EU political leaders agreed upon intermediate targets (67% total and 57% for women) and a employment rate target for elderly: to increase the participation of older women and men (55-64 year) to 50% in 2010. Enlarging the labour force and combating long-term unemployment will improve the prospects for economic growth and reinforce the sustainability of social protection systems. The National Action Plan for Employment (NAP) 2001 outlines the progress made by the Netherlands in implementing the targets in the guidelines for 2001. Dutch efforts in the fields of employment, the labour market and education are reviewed in the NAP. Central government as well as the social partners, local authorities, social security benefits agencies and the education sector are making these efforts. The NAP describes the joint efforts of all these actors and indicates how ESF funds are used to help implement the guidelines. The Netherlands has based the structure of the NAP on what was agreed in the Employment Committee (EMCO). The National Action Plan for social inclusion 2001 describes policy measures to increase social inclusion. The NAP for Employment is the full responsibility of the government. The social partners were closely involved in drawing up the NAP. The partners have had the opportunity to comment on draftversions. In a (tripartite) consultation in a Steering Group on 21th of March 2001 the policy targets and measures in the NAP have been discussed. The final draft-version was submitted for comments to the social partners united in the Labour Foundation (STAR) before the Council of Ministers agreed upon the final text of the National Action Plan for Employment. AVT01/SZ62583 3

&KDSWHU*HQHUDOVHFWLRQ (FRQRPLFGHYHORSPHQW In the year 2000 economic growth in the Netherlands was 4%, which means that for the fifth consecutive year growth has exceeded 3%. Due to the slowdown in the US economy the expected growth rate for 2001 has been trimmed to 3¼ percent. Despite this, growth remains at a relatively high level. In comparison with the United States and the European Union, the same trend is even more visible in the growth in employment in the Netherlands. 7DEOH *URZWKDQGHPSOR\PHQW (average percentual changes each year) 1991-1995 1996-2000 2001 *'3YROXPH the Netherlands 2,1 3,8 3¼ European Union 1,4 2,5 2,5 United States 2,1 4,3 1,8 (PSOR\PHQW (persons) the Netherlands 1,0 2,9 1,8 European Union -0,8 1,1 1,3 United States 1,1 1,6 0,3 Source: The Dutch growth potential on medium term, Central Planning Office (CPB) Document 1, March 2001 The substantial growth in employment has led to a decrease in the benefit dependency ratio, from 78.1 in 1995 to 65.7 in 2000 1. Over the same period the volume of unemployment and social assistance benefit paid out fell from 907,000 tot 593,000 benefit years. However, the favourable economic climate has also created tensions in the Dutch labour market. Since 1997, wages and prices have clearly risen at a faster pace in this country than elsewhere in the eurozone, while productivity growth is lagging behind. The improvement in the competitive position of the Netherlands that has been evident since the early 1980s as a result of the controlled trend in wages and wage costs has thus been cancelled out to some extent. On the basis of unit labour costs in industry, the Netherlands Bureau for Economic Policy Analysis (CPB) estimates that Dutch competitiveness has deteriorated by 7 percentage points over the period 1998-2001 compared with competitors in the eurozone. The rise in prices in 2001 (expected to be 4 percent) is partly due to the knock-on effect of the higher value of the dollar and energy prices and partly due to the increase in the standard rate of VAT from 17.5 to 19 percent on 1 January 2001 and the simultaneous increase in the regulatory energy tax. 2 Both effects will evaporate next year. The CPB expects the inflation rate to be 2% in 2002. This development raises the question of whether and to what extent the relatively high growth of the past few years can be expected to continue in the future. The CPB has examined the Dutch growth potential in the medium term by means of an analysis of both labour supply and labour productivity 3. For the period 2002-2006 the CPB assumes an annual growth in labour supply of between 0.9 and 1.2 percent. 4 1 For an international comparison, see M. Arents, M.M. Cluitmans and M.A. van der Ende, %HQHILWGHSHQGHQF\UDWLRV$Q DQDO\VLVRIQLQH(XURSHDQFRXQWULHV-DSDQDQGWKH86, Elsevier, 2000. 2 This increase in indirect taxation is one aspect of the 2001 tax review aimed at substantially cutting salaries and income tax in order to make working financially more attractive and promote higher labour force participation, especially at the lower end of the labour market. Besides shifting the burden of taxation from labour to consumption and the environment, on balance the burden on the taxpayer has been reduced by EUR 3 billion. 3 The Dutch growth potential in medium term, CPB Document 1, March 2001. 4 The margin of uncertainty is linked with the question of how the sharp rise in the labour participation rate of 1.7 percent per annum between 1996 and 2001 should be interpreted: has the rise (in line with the trend) in the rate of participation among AVT01/SZ62583 4

The CPB also allows for a margin of uncertainty in relation to labour productivity. The crucial question here is whether the Netherlands can expect a development, similar to the US. The ICTintensive service industries, which have reported a considerable rise in labour productivity since 1996, demonstrate that accelerated growth in labour productivity is possible in the Netherlands as well. 7DEOH *URZWKODERXUSURGXFWLYLW\86HQWKH1HWKHUODQGV 1990-1995 1996-2001 2002-2006 US Netherlands US Netherlands Netherlands Variant A Variant B ICT-sector 9 4,3 8½ 5½ 4 8 Remainder marketsector 1 1,2 2 1 1¾ 2 Total marketsector 1,6 1,4 2,9 1½ 2 2½ Total economy 1,3 1,4 2¾ 1 1½ 2 Source: The Dutch growth potential on medium term, Central Planning Office (CPB) Document 1, March 2001 On the basis of these two analyses the CPB calculated the potential growth for 2002-2006 to be 2.75 percent per annum. Due to the uncertainty surrounding the labour supply and the growth in labour productivity the potential growth could be 0.4 percentage points higher or lower. Three percent growth, which the Commission considers to be necessary to achieve the Lisbon objectives, may still be within reach but does present a significant challenge, particularly when it comes to bringing about the requisite accelerated increase in labour productivity. Such an increase could also help counteract the recent decline in the competitive position of the Netherlands. /DERXUPDUNHWWUHQGV Employment growth in 2000 is reflected in a favourable labour market performance (see Table 1.2.1). Unemployment again fell sharply in 2000, and at less then 3 percent is now at its lowest level since the late 1970s. The growth in employment has led to a substantial increase in the labour force participation rate, from 54 percent in 1990 to 67 percent in 2000 5. There is a real prospect of continued growth, since there is also a large unexploited supply of labour in benefit schemes. The number of invalidity benefit claimants also continued to rise in 2000. Participation unevenly spread Labour force participation is not evenly spread: the rate of participation among partially disabled people and ethnic minorities, in particular, is below average. The rate of participation among older people increased sharply in 2000, but is still lower than the average rate. The proportion of women in employment has risen considerably in the past ten years, from a net 39 percent in 1990 to a net 52 percent in 2000 (jobs of 12 hours or more a week). Despite this, the rate of participation among this group is still low: on average almost 25 percentage points lower than the average level of employment among men. 7DEOH(PSOR\PHQWDQGXQHPSOR\PHQWDFFRUGLQJWR'XWFKDQG(XURSHDQVWDWLVWLFV Employment growth (persons, changes each year) Stat. Nld Stat.EU Stat. Nld Stat. EU Stat Nld Stat EU Stat Nld Stat EU 1990 1995 1999 2000 3,0 2,4 2,4 1,7 3,0 2,5 2,3 women, in particular, been accelerated thanks to the favourable labour market over this period, or is the underlying trend stronger than was previously thought? In the first case the growth in the supply of labour could revert to the old trend in the next few years. In the second case the rapid growth of recent years could continue, though the CPB does expect a certain shift in age-specific trends as natural upper limits are approached. 5 Employment figures expressed in numbers of individuals are based on national statistics, which do not include people with jobs of 12 hours or less: see Table 1.2.1 for the relationship between national and European statistics. AVT01/SZ62583 5

Employment rate total population (% working age population): 54 62 58 64 64 71 67 men 71 77 72 74 76 80 77 women 39 47 44 53 51 61 53 older (55-64) 26 29 26 29 31 35 34 FTE Employment rate (% working age population): 51 52 59 59 2 Unemployment rate (% working age population) 7 6 8 7 4 4 4 Source: CBS; Eurostat, EC (Employment in Europe); Labour Force Survey, diverse jaren 1 In contrast to the Europan (OECD) statistics in the Dutch statistcs jobs between 1 and 12 hours are not included. That means that on the base of the Dutch statistics the employment rate is a lower than the employemnt rate based on the EUstatistics. 2 provisional figure. 3 The Extraordinary European Council in Lisbon declared that the overall aim of the measures agreed upon, should be to raise the employment rate from an average of 61% today to as close as possible to 70% by 2010 and to increase the number of women in employment from an average of 51% to more than 60% for the same period. For less educated people as a group (those with no higher than pre-vocational qualifications) the labour force participation rate in 1999 was 46 percent on average, compared with 64 percent for the working age population (15-64 years old) as a whole. The rate of participation among the least educated (with only primary education) is substantially lower: 36 percent in 1999, against 88 percent for the most highly qualified group. The rate of labour force participation among the most highly qualified people is therefore about 2.5 times higher than for the least educated section of the population. Part-time jobs A large number of people works part-time. Almost one-third of the active working age population now has a job of 12-34 hours. Part-time work is a particularly popular choice among women, as it allows them to combine work and family responsibilities. In 1999 about two-thirds of all working women had a job of 12-34 hours, compared with 11 percent of men (see Table 1.5). The upward trend has, however, levelled off as a result of labour shortages. In 1999 and 2000 the volume of labour expressed in full-time equivalents rose more sharply than employment expressed in numbers of people. 7DEOH :RUNLQJSRSXODWLRQDJHGE\ZHHNO\ZRUNLQJKRXUV,Q,Q,Q 12-19 hours 362 7% 387 7% 559 10% men 69 2% 65 2% 99 2% women 292 16% 321 15% 460 17% 20-34 hours 892 16% 1182 20% 1534 23% men 270 8% 287 8% 370 9% women 622 34% 895 41% 1164 43% 35 uur ore longer 4124 77% 4351 73% 4712 67% men 3225 90% 3396 90% 3653 89% women 899 50% 956 44% 1060 40% Total 5378 5920 6805 Source: based upon CBS, labour force survey 1999 The average length of a woman s working week is expected to increase still further in the next few years. This does not alter the fact that the growing number of women in the labour market will tend to lower the average working week of all working people, given that women are more likely to work part-time. Moreover, given the regulations that exist, only 8 percent of part-time work in the Netherlands is not voluntary (Table 1.2.3). In all other EU Member States the percentage of non- AVT01/SZ62583 6

voluntary part-time work is much higher. On balance, therefore, it is not clear whether the average length of the working week will continue to rise in the next few years. 7DEOH 3UHIHUHQFHVIRUZRUNLQJIXOOWLPHSDUWWLPH Total (men/women) Part-time workers who wants to work full time NL 8 16 Belgium 27 17 Germany 15 7 Denmark 14 13 France 41 17 Italy 43 26 United Kingdom 29 5 Source: OESO, Employment Outlook, 1999 Full-time workers who wants to work parttime. Matching supply and demand There is a real prospect of a further increase in the labour force participation rate. The Netherlands not only has a low unemployment rate, it also has a large and as yet untapped supply of labour. A relatively large proportion of the working age population depends on benefits. The total available labour supply in 1999 was 806,000 people. At the same time there is a large number of vacancies (almost 170,000), a significant proportion of which cannot be filled. Approximately 3 percent employment growth could be achieved by simply filling these vacancies. 7DEOH 0LVPDWFKRIDYDLODEOHUHVHUYHDQGYDFDQFLHV(x 1000) EDVLV PDYR YER KDYR PER KER ZR 7RWDO YZR 1.Unemployed labourforce 51 30 50 26 81 36 17 292 2.Non-searching labour reserve 62 36 45 23 60 26 6 258 3. Available for work in the short term; (3 = 2 + 1) 4. Available for work in the longer term 5. Total number of people available and willing to work; (5 = 4+3) 113 66 95 49 141 62 23 550 49 28 40 23 67 35 10 254 162 94 135 72 208 98 34 805 6. Job vacancies 10 5 38 4 64 30 7 157 7. Supply surplus (7 = 5 -/- 6) 152 89 97 68 144 68 27 648 The non-searching reserve consists of people, who have indicated to be available on short notice for work (12 hrs. or more per week) but who did not look for work in the previous 4 weeks Roughly ten-thousand vacancies with unknown required education level have not been included 6RXUFH&%6(QTXrWH%HURHSVEHYRONLQJHQ9DFDWXUHHQTXHWH Table 1.2.3 shows that matching problems occur at almost all levels of education. The minimum labour supply educated up to pre-vocational level presently stands at 274,000 people. There are 53,000 vacancies available for this group, i.e. a ratio of 5:1. Among the most highly qualified group the ratio between the minimum labour supply (23,000) and the number of vacancies (7000) is 3:1. 3ROLF\FKDOOHQJHVDQGREMHFWLYHV Given this socio-economic situation the government is faced with the following policy challenges: to structurally reduce benefit dependency; AVT01/SZ62583 7

to promote labour force participation among older people, women, ethnic minorities and less educated people; to structurally increase the quality of the labour supply; to support the modernisation of working patterns. To meet these challenges the government has set specific objectives in accordance with European agreements. The following objectives have been agreed: *HQHUDO The Netherlands wants to increase labour force participation still further to take it into the leading group within the EU. 6 :RPHQ Increase labour force participation rate to 65% by 2010 %HQHILWFODLPDQWV Fully implement comprehensive approach by 2002 (WKQLFPLQRULWLHV Halve unemployment differential by 2002 2OGHUSHRSOH 4XDOLILFDWLRQVRIODERXU IRUFH 3ROLF\PL[ Increase labour force participation rate by ¾% per annum Increase the percentage of employees aged between 25 and 64 who are taking part in some form of adult or other education, whether this be related to their occupation or job or otherwise, in order to approximate the performance of the top two Member States. To achieve these objectives the government is pursuing a combination of policies which fully reflect the different pillars of the employment strategy. The key aspects of the policy mix are (1.) investment in the economy, (2.) promotion of labour force participation and (3.) development of a new social agenda for the future. This combination should prepare the Netherlands for the challenges of the knowledge-based economy (Information and Communications Technology), and for wider developments such as the ageing of the population, issues on which the Lisbon and Stockholm European Councils have focused.,,qyhvwphqwlqwkhhfrqrp\ Promoting employment growth is an important prerequisite for reducing inactivity. This means guaranteeing the sustainability of public finances and investing in the structure of the economy in order to promote the growth of employment and productivity. Specific measures in this context include: Making the tax system more employment-friendly: a new tax plan came into effect on 1 January 2001. It includes measures to make working more financially attractive (see Guideline 12). Policy measures aimed at structural reforms, including extra investment in education and knowledge, measures to strengthen the structure of the economy through market forces and innovation (see also Guidelines 10/11 regarding the MDW project) and measures designed to increase the accessibility of the Randstad conurbation in order to promote mobility.,,3urprwlrqrioderxuirufhsduwlflsdwlrq Gainful employment enables people to provide for themselves and, from a macro-economic point of view, is also needed to provide a financial base for collective provisions. The following measures are crucial: Social activation policy: various government measures are aimed at mobilising the as yet untapped supply of labour. Measures vary from providing incentives in tax and benefit systems (tackling the poverty trap) to extending the scope of the comprehensive approach to include the current pool of long-term unemployed (see Guidelines 1/2). Promotion of labour force participation among specific groups. In March 2000 the government adopted a package of measures to make it financially more attractive for older workers to continue 6 Parliament,.HQQLVHFRQRPLHLQ]LFKW, 2000-2001 session AVT01/SZ62583 8

working for longer (Guideline 3). The government will continue to invest in policy to increase the rate of participation among women, for example by making it easier to combine work and family responsibilities (Guideline 18). The government is also making efforts to reduce unemployment among ethnic minorities (Guideline 7). One area that is a constant focus of attention is the labour market position of less educated people, and the government is endeavouring to promote labour force participation among this group through a series of specific measures (Guidelines 1/2/5/7 and 13). Promotion of long-term labour force participation: the government also wants to prevent premature departure from the labour market by stimulating the changeover from early retirement to prepension schemes and by preventing and reducing the number of workers having to claim benefit by focusing attention on how financial incentives work (e.g. the Invalidity Insurance (Differentiation in Contributions and Market Forces) Act and the Sickness Benefits Act), improving prevention measures and establishing a more effective access procedure (Guidelines 2, 3 and 7). Improvement in the functioning of the reintegration market. In developing the Work and Income Implementation Structure (SUWI) plan the government is seeking to implement reintegration policy more efficiently (see Guidelines 6 and 10/11).,,,1HZ6RFLDO$JHQGD During the coming year the government intends to work with the social partners to draw up a new social agenda for the future. The emphasis will be on quality, flexibility and tailor-made solutions. The following topics were discussed with the social partners in the autumn of 2000: Investment in training and vocational education: The government is working with the social partners on a strategy aimed at investing in the quality of labour, including training and a good personnel and recruitment policy (see also 1.6); Modernisation of remuneration policy: the social partners and the government have made joint recommendations to place more emphasis on collective performance-related forms of remuneration that reflect the economic situation (see 1.7). Government policy will also aim to modernise labour relations, by seeking to achieve more diversity in combinations of work, learning, family responsibilities and leisure time. The interests of employers (working hours) can thus be better tailored to those of employees (work and family) (see Guidelines 15/16 and 18). 5HJLRQDOHPSOR\PHQWWUHQGV As in other countries there are regional differences in unemployment in the Netherlands. The difference between the highest and the lowest provincial unemployment rate was about 4 percentage points in 1999 (Groningen 7 percent and Utrecht and North Brabant 3 percent). Table 1.5 shows these differences. In an international context, however, these regional unemployment differences in the Netherlands are modest. Nevertheless, they are partly the cause for the unfilled vacancies and the large untapped supply of labour. This mismatch also has a regional dimension to some extent, which for some potential employees is linked with distance. For low-skilled workers, in particular, distance is an important factor when it comes to the allocation of low-skilled jobs. By investing more in the accessibility of the Randstad (the provinces of North Holland, South Holland and Utrecht), the government is trying to promote mobility within the Netherlands. 7DEOH 3URYLQFH 8QHPSOR\PHQWUDWHVE\JHQGHUSHUSURYLQFH 3URYLQFH 0HQ :RPHQ 7RWDO 0HQ :RPHQ 7RWDO Groningen 6 10 7 Utrecht 2 4 3 Friesland 4 8 5 N-Holland 3 5 4 Drenthe 5 11 7 Z-Holland 3 5 4 AVT01/SZ62583 9

Overijssel 2 7 4 Zeeland.. 4 Flevoland.. 4 N-Brabant 2 5 3 Gelderland 2 6 4 Limburg 3 7 5 Source: CBS, Labour Force Survey $QDWLRQDOVWUDWHJ\IRU³/LIHORQJ/HDUQLQJ The national Lifelong Learning strategy covers a time-scale up to the year 2010. The aim is to increase the proportion of the population (between 25 and 64 years of age) which is taking part in some form of adult or other education by the year 2010, whether this be related to their occupation, job or otherwise, in order to approximate the performance of the top two Member States. It may be assumed that the number of people participating in training in these top two countries will increase further in the next few years. By 2010 vocational education, comprising pre-vocational secondary education, secondary vocational education and higher professional education (the vocational option), will have to be organised in such a way as to prepare participants sufficiently for lifelong learning. By mid-2001 the government, the social partners and representatives from the vocational education sector will reach agreement on how to achieve the objectives. A 9RFDWLRQDO(GXFDWLRQDQG7UDLQLQJ6WHHULQJ*URXS has been formed for this purpose, made up of representatives from the government, the social partners and educational establishments. A two-pronged approach will be used to achieve the objectives (see also Guidelines 4 and 5): A. Improvement of vocational education Improvement of vocational education (pre-vocational secondary education, secondary vocational education and higher professional education) by: Improving the quality of the learning process: e.g. restructuring the qualification structure on the basis of skills. Encouraging collaboration with industry and offering tailor-made programmes to an increasingly diverse target population. Improving the mobility of students within the vocational sector. Enhancing the learning environment, for instance by improving educational premises and using better teaching aids (ICT-based) and equipment. Preventing young people dropping out of the school system early. Improving the upper grades of secondary school. B. Improvement of the post-initial training component Measures aimed at improving the post-initial training component include: The training incentive, which focuses on stimulating training for people in employment to take them beyond the level of basic qualifications. With effect from 1 January 2001 the existing training tax allowance has been extended to training for basic qualifications and Dutch as a second language. An experiment is now under way involving individual learning accounts. Since 1 January 2001 there has been a national EVC knowledge centre (EVC refers to the system for validating vocational skills). A quality award ( Investors in People ) for companies that invest in the employability of their employees and use career advisers. 7 According to Eurostat figures, the top two countries in 1999 were Denmark with 19.8% and Sweden with 24.1%. In 1999 the rate of participation in the Netherlands was 13.6%. This is based on a different indicator from last year, namely the potential labour force between the ages of 25 and 64 instead of the number of people in employment aged between 25 and 54, resulting in a lower percentage. If the previous indicator were used, the Dutch figure would have risen from 14.9% to 16.4% in 1999. The Eurostat data must be interpreted with caution, however. The questions were phrased differently in the various Member States, which makes it difficult to compare the figures. AVT01/SZ62583 10

The Steering Group is developing a plan for unemployed people who enter the labour market with no basic qualifications to give them a chance to gain a basic qualification through a combination of working and learning. The plan will also devote some attention to the framework of prerequisites within which this training incentive can have maximum effect. A separate plan is being devised for women wishing to return to work who already have basic qualifications but have difficulty finding a permanent job due to the fact that their training is outdated.,qyroyhphqwriwkhvrfldosduwqhuv In their customary spring and autumn rounds of talks, the government and the social partners discuss their views on the socio-economic situation and the coordination of their socio-economic policies. Each topic is discussed from the point of view of each side s role and responsibilities. During the last autumn round of talks the government and the social partners reached a number of procedural agreements concerning the coordination of European activities. All parties will continue to work together to develop and implement the European Employment Strategy. In addition, the government discussed its input to the European Council in the spring (Stockholm) with the Labour Foundation. In the past year the government has urged that the favourable economic climate be exploited by introducing boldly moving forward with measures in response to the need for investment in more fringe benefits, such as training and child-care facilities. In its letters to the government of 28 April and 8 June 2000 the Labour Foundation argued in favour of structural improvements to vocational education. The government and the social partners attach great importance to vocational education and training for both job-seekers and people in employment. They therefore set up the 9RFDWLRQDO(GXFDWLRQDQG7UDLQLQJ6WHHULQJ*URXS on 4 December 2000 during the autumn round of talks. The steering group will report on its findings at the spring round of talks and will also present an agenda for implementation (see 1.6). On 22 December 2000 the Labour Foundation presented a set of recommendations. Its key recommendations are consistent with the general outline discussed during the autumn round of talks. The document points to the risks of excessive pay rises and discusses various options for investing in quality. Given the strong emphasis on quality, the recommendations also provide something specific to work towards in the longer term. Within the context of a sensible pay restraint policy the Labour Foundation is calling on the parties involved in negotiating collective agreement parties to invest in the employability of workers, as elaborated in the policy document Employability for all (March 2001), in the work-life balance and in the modernisation of pay policy. In this way the Labour Foundation hopes to preserve a sound social and economic basis for individual businesses and sectors in the medium term. The government will continue to discuss these issues with the social partners in order to arrive at good complementary policies in these crucial areas. AVT01/SZ62583 11

&KDSWHU7KHPDWLFVHFWLRQ 7KHLPSOHPHQWDWLRQRIWKH(PSOR\PHQW*XLGHOLQHV 3LOODU,PSURYLQJHPSOR\DELOLW\ 7DFNOLQJ\RXWKXQHPSOR\PHQWDQGSUHYHQWLQJORQJWHUPXQHPSOR\PHQW*XLGHOLQH The main thrust of the policy to prevent long-term unemployment is the comprehensive approach for unemployed young people and adults: As described in the NAP 2000 the comprehensive approach for young people has been fully implemented since 1998. Since 1998 the Job-seekers Employment Act (WIW) and the Unemployment Benefits Act (WW) have stipulated that an individual action plan should be drawn up for all unemployed young people up to the age of 23 as soon as they register as job-seekers, with the aim of finding work for them. Any young person who has not found employment within a year is offered a subsidised job, unless other measures will increase perspectives for a job (see also guideline 7). The subsidised job is temporary, and intended to lead to a regular job. The comprehensive approach for adults will be further intensified in 2001. For new measures additional funding of 45 million Euro is available for the benefit agencies. With these additional means the comprehensive approach can be (almost) fully implemented in 2001, a year earlier then originally planned: 3HRSOHRQVRFLDODVVLVWDQFH Municipalities are responsible for the reintegration of people on social assistance. As described in the NAP 2000 all towns and cities will receive additional means (in 2000 only the 86 largest towns and cities). Agreements have been made that all municipalities will implement the comprehensive approach before the end of 2001. Some larger cities (Amsterdam, Rotterdam) already comply fully. 3HRSOHRQXQHPSOR\PHQWEHQHILW The social security agencies are primarily responsible for the re-integration of people on unemployment benefit. The available means will be sufficient for implementing the comprehensive approach in 2001. DLVDEOHGXQHPSOR\HG The Disability (Reintegration) Act aims to reintegrate all disabled job-seekers into the labour market by means of a targeted programme 2000 an evaluation programme of the effectiveness of the reintegration Act is finished (see appendix 1). 8QHPSOR\HGQRWUHFHLYLQJDQ\EHQHILW The Employment Service has received a budget, earmarked for a preventive approach to this group of unemployed. The Employment Service will be able to offer everyone in this group a programme in 2001. Participation is voluntary. As explained in Appendix 1, the comprehensive approach made less progress in 2000 than might have been expected given the additional funds allocated. This is partly due to the reorganisation of the social security system, which caused a situation in which the Employment Service did not fully meet its targets as regards the number of programmes created. A qualitative evaluation of the first year of the comprehensive approach (1999) was completed in May 2000. It was noted that the implementing bodies build in control mechanisms to determine the degree of continuity. During the research period covered it was found that, in practice, not all job-seekers were made an offer within 12 months of becoming unemployed. The reason for this was that the changes to the working procedures, such as the introduction of control mechanisms, had not yet been completed by all the implementing bodies in 1999. The qualitative evaluation will be repeated at the end of 2001. Comprehensive approach for the stock of unemployed To supplement the comprehensive approach for the newly unemployed, the Netherlands is also striving to introduce a comprehensive approach for the stock of long-term unemployed. In AVT01/SZ62583 12

September 2000 the Minister of Social Affairs and Employment informed parliament about his plans in this area. The present group of registered long-term unemployed is to be examined in order to determine whether a supplementary programme is required to reintegrate the individuals in question. Discussions are currently under way with the implementing bodies on how the comprehensive approach for the current stock of unemployed can be achieved, under what conditions, and on what time-scale. Many long-term unemployed people have such poor job prospects that finding regular work is out of the question for the moment. Social activation is an important tool for these job-seekers, while subsidised job programmes offer the possibility of employment (see Guideline 7). $FWLYDWLRQSROLF\*XLGHOLQH The government s starting point for increasing labour force participation is a social and labour market policy based more on activation. Modern social security systems providing an acceptable level of protection should offer sufficient incentives to prompt people to take up work. Various measures and/or programmes supplementing the existing labour market policy were introduced in 2000 with the aim of increasing its activating effect: A long term action plan to tackle the poverty trap: In September 2000 the government announced a long-term plan to tackle the poverty trap. The marginal pressure at the lower end of the wage structure, upon transition from the guaranteed minimum income to a job paying the minimum wage, is slowly but surely approaching 100%, and occasionally exceeds it (see Figure 1). This results in a poverty trap when someone moves from a benefit situation into employment, or when promotion or increased working hours leads to little or no increase in income. The aim is to substantially reduce the poverty trap, without adverse effects on purchasing power. The plan comprises the following elements: The introduction of a work incentive in the form of a labour tax credit under the 2001 Income Tax Act, which came into force on 1 January 2001. This lowers the marginal tax rate right across the board. The labour tax credit, which was increased again in August 2000 (as a result of higher than expected tax revenue amounting to EUR 204.2 million) from a maximum of EUR 880 to EUR 920 at the 100% minimum wage level, makes working financially more attractive and encourages people who earn less than the minimum wage to work more (see also Guideline 13). The introduction of a uniform tax-free bonus of EUR 1815, paid by the local authorities, for long-term unemployed people leaving the benefit system. The government is having discussions with various local authorities to establish clear criteria for income policy. The poverty trap issue is included in these discussions, which should lead to a covenant in the spring. Work will also continue on exploring (through fiscal surveys) how the marginal pressure of income-related schemes on the poverty trap can be reduced still further in the next few years so that accepting a job can be made financially more attractive. In September 2000 a study entitled )XWXUHRIODERXUPDUNHWSROLF\got under way as part of an annual Inter-ministerial Policy Review programme. The aim of the study is to evaluate the impact of the present labour market policy and determine what changes need to be made to reintegration policy to help people who are or should be looking for work to get back into permanent employment, and to prevent long-term inactivity as much as possible. Appendix 2 gives a summary of the employment instruments to be studied. The report, together with a document stating the government s position, will be presented to the Parliament in the autumn of 2001. )LJXUH1HWLQFUHDVHLQLQFRPHDVVRFLDWHGZLWKXVHRILQFRPHUHODWHGVFKHPHVLQWKHHYHQWRIWUDQVLWLRQIURPWKH JXDUDQWHHGPLQLPXPLQFRPHWRRURIWKHVWDWXWRU\PLQLPXPZDJHVLQJOHSHUVRQZLWKFKLOGUHQ AVT01/SZ62583 13

14000 12000 10000 8000 6000 4000 2000 0 100% WML 130% WML Nett income Incl. housesubsidy Incl. tax remits Incl. local subsidy Source: Ministry of Social Affairs and Employment, own calculations, March 2001 As a result of the present labour market situation more emphasis has been placed on getting people off benefit and out of subsidised jobs into regular, non-subsidised work (see also Guideline 7 for subsidised labour market programmes). Following consultations between the Minister of Social Affairs and Employment and local authorities, a number of measures were instigated in 2000 to increase the number of people coming off benefit and more incentives have been built into the current schemes available. To encourage even more people to come off benefits, from 1 January 2001 a tax-free bonus can be paid to people who stop claiming social assistance or who switch from a job subsidised under the Job-seekers Employment Scheme to an non-subsidised job. From January 1 st, 2001 employees in special entry level or step-up jobs who move permanently into non-subsidised jobs are also eligible for the tax-free bonus of EUR 1812, which has been introduced to combat the poverty trap. As of January 1 st, 2001 the results of efforts to get people out of these schemes will be included in the assessment of whether local authorities have achieved their annual targets with regard to these special jobs. A deterrent to leaving the benefit system has thus been eliminated. The creation of the Work and Income Fund has provided further financial incentives in the Social Assistance Act budget, thus giving local authorities a bigger inducement to reduce the number of benefit claimants. Over the next few years this course can be continued, with the aim of increasing the local authority share in the funding and using a completely objective allocation model (both in consultation with the local authorities). Appendix 1 gives an overview of the percentage of long-term unemployed being offered a social activation programme. 3ROLF\IRUDFWLYHDJHLQJ*XLGHOLQH On account of the bottlenecks in the labour market and the need to ensure an adequate financial base for the social security system, the government is seeking a higher labour force participation rate among older people. Although the participation rate among this group is rising, it is still relatively low. )LJXUH1HWWHPSOR\PHQWUDWHHOGHUO\\HDU 60 40 20 0 1994 1997 2000 t total male female AVT01/SZ62583 14

In May 2000 the Parliament approved the objective and basic principles of the government s proposals to promote labour force participation among older people. The implications of this are as follows: A bill to abolish the favourable tax treatment accorded to voluntary early retirement schemes is currently being drafted. The basic principles of this bill are: As of 1 July 2002 new voluntary early retirement schemes will no longer receive favourable tax treatment. As of 1 July 2009 all voluntary early retirement schemes must have been converted into pre-pension schemes. It will still be possible to make use of transitional schemes. As of 1 July 2022 the favourable tax treatment accorded to transitional schemes will end. Criteria are to be drawn up to assess whether schemes are financially viable (in terms of contributions and liabilities). Thanks to the continuing economic upturn the percentage of older people claiming unemployment benefits has steadily dropped since 1994. Despite this, almost forty percent (38.3%) of insured employees aged 57½ and over are on unemployment benefits. The government is considering introducing measures to reduce the number of older people who start claiming unemployment benefits and increase the number leaving the scheme: The government is working on a bill to promote labour force participation among older people by limiting the number who start claiming unemployment benefits. To this end, an employer s contribution to unemployment costs will have to be paid when a worker aged 57½ or over has to start claiming unemployment benefits. This measure will mean that it will cost more for employees aged 57½ to go on unemployment benefits than for younger employees. The government aims to bring this bill before parliament before the summer recess. It could then become law on 1 January 2002. The government is considering reintroducing the obligation for people over the age of 57½ to apply for jobs. A decision is expected in the first quarter of 2002, as soon as the results of a study on prospects for older people in the labour market have been published. The earliest date the obligation could be reintroduced is 1 July 2002. The scope of the tax reduction scheme for taking on long-term unemployed people (VLW) was adjusted with effect from 1 January 2001. The age of entitlement has been lowered from 55 to 50 and the maximum income has been raised from 130% to 150% of the statutory minimum wage (see Guideline 12). A special statutory provision designed to prevent people who take a step backwards in their career from losing accrued pension rights, will be included in the new Pensions Bill that should be drafted by the end of this year. It has also been decided to set up an Older Workers Task Force, to be funded by the government. The Task Force will have the following responsibilities: To encourage employers and employees to change their attitude. To collect and publicise information about good practice. To act as an information and advisory centre for employers and employees, and in particular small and medium-sized enterprises. Finally, labour force participation among older people will be the frequent focus of attention in the decentralised collective agreement talks. Voluntary early retirement schemes are increasingly being converted into flexible pension schemes, and the age at which employees can retire raised. In their recommendations of 22 December 2000 for the 2001 talks on conditions of employment, the social partners recommended the use of instruments such as part-time retirement and modified working hours in order to promote labour force participation among older people. (GXFDWLRQDQGVNLOOV*XLGHOLQH Internationalisation, information technology and the increasingly dynamic world economy mean that knowledge is growing in importance as a production factor. In work processes and reintegration programmes retraining and further training lifelong learning will therefore receive more attention. The government has discussed with the social partners the possibility of working out a national AVT01/SZ62583 15

strategy for Lifelong Learning (see 1.6), with the specific objective of increasing the proportion of the population between 25 and 64 years of age that is taking part in some form of adult or other education, whether this be related to their occupation or job or otherwise, in order to approximate the performance of the top two Member States. In addition to the measures discussed in 1.6 the following measures are also being taken: Measures to prevent young people dropping out of the school system early: The Regional Registration and Co-ordination Act (RMC), designed to ensure a better system of registering early school-leavers, has been adopted by the Parliament. Under this Act schools are also required to register school-leavers who have reached school leaving age. The number of early school-leavers reported to the system increased in 2000 as a result of better registration. The net drop-out rate has fallen owing to the increased rate of re-entry into the education system (see Table 2.1). Additional funds earmarked by the government, amounting to EUR 28 million in 2000 and EUR 32 millionin 2001 and subsequent years, have been made available to the RMC centres and local authorities. The measures are designed to help achieve the Lisbon objective, which is to halve the number of early school-leavers by 2010. ESF funds will be channelled into this initiative as well. 7DEOH 1XPEHURIHDUO\VFKRROOHDYHUVUHJLVWHUHGDW50&FHQWUHV 1998 1999 2000 Number of reported early school leavers (x 1.000) 41,2 39,4 39,9 Number of early school leavers reallocated (x 1.000) 14,6 16,2 18,1 Nett early school leavers (x 1.000) 26,6 23,2 21,8 Source: RMC-reports 1998, 1999 en 2000, Sardes analysis 2000, Deelnemerstellingen OCenW Measures to improve the quality of education: The number of students transferring from pre-vocational secondary education to secondary vocational education and from secondary vocational education to higher professional education must be increased by making it possible for schools to offer tailor-made courses and giving them more freedom to teach the core curriculum as they wish. The policy of using ESF funds to place students with a practical education in the labour market will be continued. Measures aimed at promoting dual courses combining training and employment: The framework agreement entitled Working and learning creates opportunities was concluded in 2000. It has been agreed that over the next few years emphasis will be placed on improving the way the Regional Training Centres supervise students receiving practical training in the workplace. ESF funds will be used to improve the block or day-release schemes (formerly the apprenticeship system). In addition, programmes combining training and employment (dual system of vocational education) will be implemented in pre-vocational secondary education under the Secondary Education Act. Reciprocal validation of vocational skills acquired elsewhere (known as EVC in Dutch). Since 1 January 2001 a temporary EVC knowledge centre has been in operation with the primary task of promoting the broad implementation of EVC. The activities of this body may also contribute to the introduction of a European standard for EVC. An experiment involving individual learning accounts was launched in 2000. The aim is to develop systems for the possible introduction of individual learning accounts. At the same time 1100 learning accounts are being opened on an experimental basis. A campaign will be launched in 2001 with the aim of making the public aware of the opportunities for further training. The target group is adults with poor reading and writing skills. The campaign has been announced in the Parliament and, if at all possible, will coincide with Learning Week (September 2001). (OHDUQLQJIRUDOODQGWKHWUDQVLWLRQWRDQ,&7VRFLHW\*XLGHOLQH ICT will increasingly pervade every aspect of our society. Therefore it is important for everyone to have the skills necessary to live and work in the information society. Disadvantaged groups in AVT01/SZ62583 16

particular (less educated people, benefit claimants and older workers) run the risk of being left behind when it comes to learning these skills. Mid-2001 the Minister of Social Affairs and Employment will issue a policy document on the consequences of ICT for employment and social inclusion. Specific measures already implemented include: Various partners in industry and education have set up a Task Force (the Risseeuw Commission) and have initiated projects with the aim of training groups that are presently underrepresented in the labour market (and particularly in the ICT sector) in ICT skills. These projects have received funds totalling EURO 32 million from the Ministry of Economic Affairs. Prevention of digital disadvantage:ict makes it possible to increase the training available and the range of new teaching aids specially tailored to target groups such as less educated people, ethnic minorities and women who want to return to work. Various measures have been initiated, partly using public funds, to improve the digital skills of disadvantaged groups and thereby put into practice the HEurope action plan 2002. Here are some examples: Digital playgrounds": In public locations in disadvantaged areas in large and mediumsized cities local residents have the opportunity to acquire ICT skills under supervision. The Minister for Urban Policy and Integration of Ethnic Minorities earmarked EURO 9 million for this project in 2000. Benefit claimants can receive ICT training as part of activation and reintegration policy. The implementing bodies (local authorities, benefits agencies and the Employment Service) are responsible for deciding what form the training should take. The Digital Vocational School pilot project: the aim of this project is to retrain less educated job-seekers and provide them with ICT qualifications. %RWWOHQHFNVLQWKHODERXUPDUNHW*XLGHOLQH The labour market in the Netherlands is also characterised by a relatively large number of vacancies combined with a large untapped supply of labour (see 1.2). This situation has prompted the government to take supplementary measures in several areas: In 2000 a policy memorandum was sent to the Parliament concerning the bottlenecks in the labour market (see NAP 2000: government memorandum On the right track to employment ). The analysis of bottlenecks was followed by an action plan containing specific measures. During the autumn round of talks (December 2000) this package was discussed with the social partners and updated. Most of the measures are on schedule. In the course of the discussions the parties expressed their intention to arrive at a national strategy for Lifelong Learning (see 1.6). Finally, a vital link in the government s policy aimed at improving the match between labour supply and demand is the organisation of the implementation of social security policy (SUWI). Work and Income Implementing Structure (SUWI) After the Parliament in March 2000 approved the cabinet-opinion on the Work and Income Implementing Body, the SUWI-bill was submitted to parliament in January 2001. The goal of SUWI is an effective and efficient implementation of Work and Income policy to improve the reintegration of benefit-recipients. SUWI has the following features: In 2000 an organisation was created under the responsibility of the Minister of Social Affairs and Employment to prepare the change-over to SUWI, while current regulations in the field of Work and Income continued to be implemented. A rough design of the new structure (Grof Ontwerp) was discussed with the Parliament, as well as an integrated ICT-strategy for the Centres for Work and Income (CWI) and the Employee Insurance Schemes Implementing Body (UWV). The Grof Ontwerp will be the basis for the further development of the CWI and the UWV. A part of the development of an ICT-strategy for CWI s will also be that customers (both employees and unemployed) can access the system, using ICT, to receive information concerning AVT01/SZ62583 17