Published: 11 June 2015
The number of long-term unemployed will decrease, automatically, as the economy recovers. For many of the older unemployed, however, economic growth offers no solution. In order to help them back into a job, labour market reform will be necessary.
This is the conclusion by CPB researchers Marloes de Graaf-Zijl, Albert van der Horst and Daniel van Vuuren in the CPB Policy Brief ’Long-term unemployment in the Netherlands’. This policy brief will be presented today during the annual CPB Lecture which, this year, will be delivered by Princeton economist Alan B. Krueger.
As the economy recovers, long-term unemployment will decrease, even without government intervention. Currently this involves a group of 270,000 people who have been without employment for more than one year. After previous recessions, long-term unemployment dropped to around 1% of the labour force. This is also a realistic prospect, this time round. Long-term unemployment in the Netherlands is currently relatively high as a result of a slower economic recovery than in other countries.
Nearly half of all the long-term unemployed people are over the age of 50. This is not because older employees lose their job more often, but because once they do become unemployed, their chances of remaining in this situation for the long term are almost twice as high, compared to the average.
The problem of older unemployed people dates back to the period before the Great Recession, when people were required to continue working for longer. But the labour market has not been properly adjusted to accommodate the entire group of older workers.
Policies by government and social partners award older employees more rights and make them more expensive. This makes prospective employers hesitant to hire older workers. Policies aimed to address this problem have to date appeared insufficiently effective. More fundamental reform is necessary, such as unemployment benefits that decrease over time, employment protection that is less dependent on the length of the labour contract, and a reduction in the age-dependent arrangements in collective labour agreements.
Read also: Background Document 'Are the Long-Run Unemployed on the Margins of the Dutch Labor Market?' and Background Document 'Labour market adjustments during the Great Recession: an international comparison'.