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 the full-time bonus will lead to more people working full-time. “You should always encourage a trial.”
Last year, 9.3 million people between the ages of 15 and 75 were employed in the Netherlands, Central Bureau of Statistics (CBS) figures show. Of that total labor force, 48 percent worked part-time, a percentage that has barely changed in recent years. Part-time is defined as a workweek of less than 35 hours. At 70 percent, the percentage of part-time workers among women is significantly higher than among men, 28 percent of whom work part-time. Health care, education and service professions have the highest rates of part-time workers. Because of the significant shortages in education, the government is starting a trial by introducing a full-time bonus in 10 schools. This means that teachers who want to work more will receive a bonus. But does such a financial incentive make sense?
The Netherlands’ progressive tax system plays an important role in this question, Knaap explains. "The more you earn, the more tax you pay and the fewer allowances you get. That is fine in and of itself, but it means that the last day of the work week, whether you work three, four or five days, is taxed the most; on that day you earn the least, comparatively.” The economic term for this is the wedge, which represents the difference between the employer’s labor costs and the employee’s take-home pay. “That wedge can be as high as 70 percent for some people, which means that out of every euro you earn, you only get paid 30 cents. That’s because you are paying payroll taxes and, in addition, possibly losing benefits.”
The question is whether the full-time bonus is the right solution to solve the current labor shortage now. “This is being debated in the House of Representatives and the biggest ambiguity is the size of the wedge.” It is different for everyone and depends on several factors, Knaap explains. For example, on your marital status, whether you have a family and which municipality you live in. “A lot of people also don’t know themselves what their wedge is, some go to a tax consultant to ask what an extra day’s work will get them. So, it’s hard for me to imagine someone deciding to work more hours based on a full-time bonus, when most people don’t know exactly what kind of financial difference that will make for them.”