Is flexibilization really increasing in the Dutch labor market?

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Charles Kalshoven, macro economist at APG, on the question of whether the Netherlands really does have an increasing number of flex workers.

Since the end of the Covid crisis, the Dutch labor market has been able to produce impressive figures. At the end of the second quarter of last year, for example, there were 143 vacancies for every 100 unemployed, a record. With such a tight labor market, you would think that the number of permanent jobs would increase. After all, workers have something to choose from, and if they don’t like the working conditions, there are plenty of other jobs. Yet the Netherlands remains flex-addicted, nu.nl recently wrote. But is that really true? According to Kalshoven, the situation is more nuanced than that.

On-call workers

The number of flex workers in the Netherlands in the third quarter of last year was 2.7 million, down 97,000 from the second quarter. In addition, CBS figures show that the number of employees with permanent employment rose by 46,000 over the same period, to a total of 5.3 million. The number of permanent jobs has never been higher, Kalshoven notes. “The number of fixed-term contracts, usually for one or two years, has actually declined somewhat recently. Probably partly because it was easy to part with these workers during the Covid years.” Figures regarding the number of temporary workers also do not seem to support the claim of increased flexibilization. However, the number of on-call workers has risen sharply in recent years, especially in the hospitality industry.

Covid plays an important role in this, Kalshoven believes. “In a normal business cycle, when the economy comes out of a recession, employers are not sure whether economic growth is sustainable. Therefore, they prefer temporary workers. After all, they don’t want to risk being stuck with employees if the economy does slump again.” At some point the growth becomes steady and then employers do dare to hire people on a permanent basis. “The Covid crisis represented an interruption of the normal business cycle. Many sectors were forced into a kind of coma state and there was little investment. As a result, the need for temporary ‘hands’ was less. Now that the lockdowns are over, economic activity has returned. But the economic environment is uncertain: high inflation, rising interest rates and fears of recession. In sectors that have taken a hit, such as the hospitality industry, business owners are therefore paying extra close attention to costs. For example, by using on-call workers, so that you only incur costs when it is really necessary and there is turnover in return.” 

The self-employed

Not all flexibilization is a social problem, according to Kalshoven. “Some people actually choose flexibility and variety. And sometimes it just pays better. Being self-employed can also be seen as a form of flexible work.” The story of flex work versus permanent employment is also a story of power dynamics. “If a permanent contract is the highest that anyone aspires to, you would expect that in a tight labor market many more permanent contracts would be offered. The number of permanent jobs has now indeed increased, but so has the number of self-employed workers.” That number rose by 65,000 in the third quarter of last year to a total of 1.2 million. “Staff shortages also mean that there is less entrepreneurial risk for dentists, construction workers and healthcare staff who hire themselves out flexibly, for example.”

What does pose a problem is false independence. Kalshoven: “You don’t want people to actually have an employment relationship with the company they work for, but still be forced to work as self-employed.” That saves the employer premiums for pension and employee insurance, among other things, but costs the employee security. Another problem, pointed out by the Borstlap Commission two years ago, is that in the Dutch labor market, a permanent job is often too permanent, and flexible work is often too flexible. “People in permanent jobs are perhaps too well protected, and flex workers too little,” Kalshoven argues. “Actually, you want a convergence between the two, because if a permanent job and a flexible job are too far apart, you get the classic ‘insider-outsider’ problem. If you are lucky enough to have a permanent job, then you count as an insider: someone with access to all kinds of social services and, for example, the ability to buy a house. On the other hand, you have the outsiders, who go from annual contract to temp job. Then buying a house and accruing a good pension are often beyond their means. More security also promotes investment in ‘human capital’ and thus labor productivity. That is not superfluous luxury in a structurally tight labor market - think of the aging population.”