Can we expect a Great Resignation in the Netherlands as well?

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Chief Economist Thijs Knaap and Head of Policy Peter Gortzak on the question of whether there will also be a Great Resignation in the Netherlands. “People in America are more sensitive to economic stimuli.”

The Great Resignation is the term coined in the United States to describe a recent trend in the labor market: millions of Americans (there were 47 million last year, 10 million more than in 2020) are resigning. They are generally not doing this so they can sit on the couch at home and do nothing, but because they can get a job elsewhere with better working conditions. Can we expect the same wave of resignations in the Netherlands?

Terms of employment
Gortzak and Knaap see little reason for that at this time. And there are two main reasons for this. First, Gortzak mentions that the United States has a completely different labor market than the Netherlands, which has stricter regulation through collective bargaining agreements, among other things. “Those collective agreements prevent poor working conditions. What also differs from America is that the Dutch government prevented a lot of misery with its support packages, ensuring that employees had no reason to resign. Some economists do think that those support packages were too hefty here, keeping some companies alive artificially. They may have a point, but because of that there was no reason for workers here to resign en masse, as they did in America.”

Like Gortzak, Knaap sees collective bargaining agreements as a major cause that there is less movement in the labor market here than in the United States. There, companies often don’t have a collective agreement, and terminating an employment contract is easier. This leads to dynamism: companies are more likely to lay off, and employees are more likely to look at opportunities elsewhere. “For the service sector, which is big in the Netherlands and regulated by collective agreements, this is often more difficult. A factor like a wage increase therefore affects the labor market sooner in America than in the Netherlands. What you do see here is that, for example, healthcare personnel leave salaried employment and become self-employed for more money. In the Netherlands too, there are ways of negotiating better employment conditions outside of the collective bargaining agreement.”

Bitter fruits
There was some movement in the healthcare sector, as well as in the Dutch hospitality and events industry. “There they are now reaping the bitter fruits of having been closed down by Covid for a long time,” Gortzak states. “Many people who worked in those sectors on temporary or zero-hours contracts found themselves out on the street. Many of them subsequently chose to work at the Covid test stations. That is really different from America, where people start looking for a new, better job while they’re still at an existing job. Because in the Netherlands it only involves specific sectors, you can at most speak of a Resignation, not a Great Resignation.”

According to Knaap, the shift in the American labor market is also related to the retirement wave in that country. “In America, people were laid off and given a check by the government, whereas in Europe the companies were kept afloat by the government. The Americans who got such a check just before retirement didn’t go back to apply for jobs. They disappeared from the labor market, creating jobs. In Europe, everyone with a permanent contract stayed employed because they continued to be paid anyway.” That’s another reason there hasn’t been a wave of resignations here. “Because why would you quit if you are still getting your wages? It’s also much easier to fire employees in America. We’ve all seen the image of the American leaving the office with a box in his hands. People there are also more sensitive to economic stimuli. Americans are willing to change jobs for just a small difference in pay. This creates scarcity and then, before you know it, there is a Great Resignation. In the Netherlands, people are less quick to move, but the pressure on the labor market does exist here too.”

More people working more
This pressure, incidentally, is a fairly recent phenomenon. In the 1970s and 1980s, there was a surplus of labor and not enough jobs could be created to put all the unemployed to work. “Now we’re in a reverse situation,” says Knaap. “The baby boomers are retiring and continuing to spend money, so more labor is needed. At the same time, the influx from below, for example through labor migration, is not large enough. Labor market participation has increased dramatically over the past 20 years, in part because older workers are now working until they get their state pension and are no longer taking early retirement. The data therefore does not support the image of a Great Resignation. If anything, it’s the opposite: more people are going to be working more.”

Yet employers are struggling to fill their vacancies. According to Knaap, this has four consequences. “There is more labor migration heading towards our country. Consider the English-speaking lady who speaks to you in the coffee shop. Secondly, it leads to higher wages, at least at the companies that can afford it. The companies that are not able to don’t make it or at least, they can’t grow. And third, it encourages automation. For example, if a restaurant can’t find staff to take the orders, they’ll put a QR code on the table so the customers can order from their phones. A fourth consequence may be that the government comes up with measures to increase the participation of women in the labor market, such as more affordable childcare.”