How wise is the elimination of the STAP labor market budget?

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: chief economist Thijs Knaap on whether eliminating the STAP budget is a wise idea. “Nothing is more expensive than someone losing their job and then not being able to find work.”

Ninety minutes. That’s how long it took for the 10-million-euro STAP budget to be forgiven, on Monday morning. The government’s subsidy pot, intended for job-training for the labor market, thus remains as popular as ever. Despite the tightened rules. To prevent government money from being used for low-quality courses, the Ministry of Social Affairs and Employment has conducted a sweep through the supply. In this round the only option was to apply for budget for OCW-recognized training and courses. Another difference with previous rounds is that this time “only” 10 million euros was available. In previous rounds that amount was much higher: in May there was 34 million euros in the pot. On November 15, 10 million euros will be allocated again. This will be the last round, as the government has decided that the subsidy program will end in 2024 due to budget cuts. How wise is that in view of the importance of a dynamic labor market?

Food for inflation

“It’s good that the government is cutting spending a bit,” says Knaap. “The deficits are now running quite high in times when the economy is actually doing very well. That feeds inflation. Also, the old adage applies that you make money during times when things are going well. Money that you can spend during times when things are not going as well. So, in that respect, I do understand. After all, those millions that don’t get spent can be entered directly as savings. That there are also costs in the long-term matters just a little less in The Hague logic.” On top of that, Knaap feels that criticism of the offer was strong. “Hence the tightening of the rules in this latest round. But what they haven’t adjusted is the application procedure. That’s something I don’t get. The system feels unfair; it’s a lottery. Whoever is lucky, or clever and logs in on time with multiple devices, has a better chance.”

But despite the fact that it doesn’t feel fair to Knaap, he says the benefits of a freely accessible training pot are also widely available. “Before the introduction of the STAP budget, you could claim study expenses as a deduction. And if you looked at who did that then, it was mainly the people with a high income. Maybe that makes sense; after all, you had to advance the cost of the education. And that was quite risky for lower-income people: will I get the money back? Will the tax authorities agree? That dilemma played much less of a role with the higher incomes.” Besides, if you’re in a higher tax bracket, you also automatically get more back from the IRS. In short, it was a regressive arrangement, which was good for rich people and of less interest for those with lower incomes. Knaap: “The STAP budget changed that; a simple scheme where you hand out 1,000 euros to people who want to upskill or retrain. That turned out to be successful. Previous budgets were not used as well. With STAP, the government is succeeding in encouraging people to get educated.”

Basic qualification

From that perspective, the elimination of the STAP budget therefore raises Knaap’s eyebrows. “In the Netherlands, we really value education. You are obligated to go to school until you have some basic qualifications. That school is largely paid for by the government. We do that because the country needs well-educated people. But once you have that basic qualification, you still have a long way to go. The labor market career today spans 40 to 45 years and during that time it is all up to you. There is no more mandatory education. And now the government won’t help you anymore either. It’s a pretty hard cut that’s being made.” The APG economist is well aware that the importance of well-educated people is great for society. “We want people with good skills in the right place, where they are productive. For that, you need to help people upskill or retrain themselves from time to time. Simply because the world changes and sometimes you can use some training. Especially if you are in a sector where things are a bit more precarious. That is precisely when you should seize the opportunity for further training. Not only does that benefit you, it is also good for the labor market. After all, you are more productive in a sector that is doing well. Training costs money, but nothing is as expensive for BV Nederland as someone who loses his job and is unable to find work.”

In that context, Knaap talks about a dynamic labor market. “That is the dream of every policymaker and economist. After all, in such a market people can respond quickly in the event of a shock. And shocks are coming. Just take the rise of artificial intelligence that some say is going to cause major changes. And yes, to be resilient and flexible, and to be able to respond to them, education is needed. It helps if you make that education accessible, as the government did with the STAP budget.”