The Netherlands has 18 million inhabitants. In just eight years, the population grew by 1 million people, the Central Bureau of Statistics announced last week. Foreign migration appears to be a major driver of this growth. What does this figure mean for the affordability of retirement provisions in the Netherlands? We posed this and other questions to APG economist Charles Kalshoven.
How unique is the current population growth?
"Population growth is higher than we have seen in years. If we look at a slightly longer trend - the five-year average - we are now experiencing the highest population growth since 1973-1977. Additionally, the composition of the Dutch population has not only grown rapidly but has also changed significantly, as research from the Central Planning Bureau (CPB) shows. Both the proportion of elderly people and the proportion of residents with a migration background have increased sharply. However, in international terms, the Netherlands remains a fairly average Western country on various demographic measures, such as birth rate, life expectancy and the proportion of immigrants."
The number of Dutch people is growing rapidly. Is that economically good or bad?
"There are different sides to it. If you look closely at the figures from CBS, it turns out that more people died in 2022 and 2023 than were born. The population only grew because there were more immigrants than emigrants. That was also the case in the first half of 2024. Now, these immigrants can solve shortages, for example, in the labor market, where extra hands are needed. Healthcare, education, ICT, and technology have been struggling with shortages for years. But that doesn’t immediately mean this is economically beneficial for the Netherlands. If the economy only grows because there are more people, you don't really gain anything per capita. You should focus on productivity. Productivity growth is the source of prosperity. So, what do these hands do? What do they contribute? In 2023, the (meager) growth of the economy was entirely attributable to an increase in employment. Labor productivity, calculated as gross domestic product per hour worked, was 0.6 percent lower than in 2022. The number of hours worked increased by 0.7 percent. In short, we work more hours but are slightly less productive.
You also run into another problem. Immigrants also need somewhere to live, and the housing market is already very tight. Incidentally, I think the growth in the number of labor immigrants is temporary. Countries like Poland, Romania, and Bulgaria are aging faster than the Netherlands and will face a 10 to 15 percent decline in the number of 20- to 64-year-olds over the next fifteen years. Currently, the Netherlands still sources more than half of its labor immigrants from these countries. If those hands are soon needed in their own countries, the flow to the Netherlands could dry up. And what about the Netherlands? Well, we will have to make choices. Do we maintain labor-intensive industries, automate some parts, or move that industry to other countries? In the 1960s and 1970s, we faced the same choice. First, Italian and Spanish, and later also Turkish and Moroccan guest workers were brought to the Netherlands. But that also turned out to be a temporary solution. What remains of the textile industry today? But that doesn't change the fact that guest workers can play an important role in the labor market, and good policy is essential. The history of guest workers shows that it is advisable to pay attention to the long-term employability of migrants and to pursue a (labor) migration policy consistent with the desired direction of the Dutch economy."