Would cutting Dutch unemployment benefits help job growth? CPB finds out

Plans by the Dutch cabinet to shorten the maximum duration of the unemployment benefit (WW) will do little to boost employment, according to a report by the Netherlands Bureau for Economic Policy Analysis (CPB). While the government claims the cut will encourage job seekers to find work faster, new calculations show the impact will be negligible.

Dutch cabinet's proposal to cut unemployment benefit duration

Under current proposals, the cabinet aims to reduce the maximum duration of the unemployment benefit from 24 to either 18 or 12 months. The government argues that shortening the payout window provides job seekers with a stronger financial incentive to re-enter the workforce quickly.

However, a new analysis by the CPB shows that reducing the limit to 18 months would increase structural employment by just 0,1 percent, which equals roughly 8.000 full-time jobs.

"We observe that such a shortening has a limited effect on employment growth," CPB sector head Jonneke Bolhaar told NU. "Such a measure does, however, impact people's income, as they receive benefits for a shorter period."

Reducing the maximum benefit period further to 12 months yields a similar 0,1 percent gain in structural employment, but affects a much broader group of people in the Netherlands, including workers with shorter employment histories.

The motivation: Financial gain or job growth?

Shortening the maximum benefit duration to 18 months would save the government 400 million euros, while cutting it to 12 months would net 1,3 billion euros in savings. However, the CPB pointed out that these measures directly reduce income protection for long-term unemployed people, placing greater financial pressure on job seekers to accept new roles quickly.

The CPB also evaluated potential changes to payout amounts during the first two months of unemployment, which currently stand at 75 percent of previous earnings. Lowering the rate to 70 percent created a minor incentive to find work, while raising it to 80 percent slightly reduced urgency, though both options resulted in an overall job growth effect of virtually 0 percent.

Dutch trade unions prepare for new strikes

These proposed unemployment benefit cuts are part of a broader push by the cabinet to slash 6,8 billion euros from social security, which also includes planned cuts to occupational disability benefits (WIA) and recent proposals to cap full sick pay for employees.

Trade unions in the Netherlands have firmly rejected the austerity package, demanding that the cabinet scrap the plans entirely before any further talks can take place. Following an initial round of strikes, union leaders announced they are currently planning additional industrial action across the country.