Social Security Systems In The Netherlands

From decades social security policies are in question all across the Europe. Moreover, the future expectations of changes in the social security systems due to the variations in household structures and ageing of the society bear new social security systems. As most of the European countries the Netherlands, had a substantial growth in the 1960s. After the oil crises, the economy of the Netherlands worsened. Despite the successful creation of a large number of new jobs in the 1980s the growth of unemployment continued and remained persistent in character and still today. However, the social security system in the Netherlands is not alike to the 1970s and 1980s. The Dutch government expenditure on social benefits is characteristic of the well-developed welfare states - at 27.4 percent it is now above the EU average of 22.9 percent. It is among the high taxation countries and over average GDP per capita. Public employment is low and it has one of the lowest poverty rates.

The extraordinary level of economic growth of the 1960s created the economic surplus in the Netherlands but by the world's two oil crisis in the early 1970s the economic climate started to deteriorate. A stunning increase of unemployment in the late 1970s provoked a policy of labor cost reduction and cuts in the social security budget. It was believed that an increase in the real wages and social benefits would imply a further rise of unemployment. Moreover, it was predetermined by the government that the country could only recover from the economic downfall of the 1970s if free entrepreneurship and the functioning of market mechanisms would be restored. Gradually social policy lost its position as a more or less independent domain. It became the servant of economic policy as it was strongly believed that once the aim of a healthy economy was reached, social and economic deprivation would consequently vanish.

In the 1980s the reduction of public expenditures became a keystone of Dutch socio-economic policy, partly to decrease a growing budgetary deficit of the state, partly to reduce the costs of labor as many social insurances were paid for by employers' and employees' contributions. As a result the levels of social security benefits like social assistance, unemployment and disability benefits were significantly lowered, while at the same time the definitions as to the eligibility for these benefits were reduced. Moreover, the Dutch social security system offered too few incentives for the non-active part of the labor force to participate in the market. Consequently, "the replacement ratio which was in the period 1954 -1964 less than 60 per cent and reached in 1975 a peak of 75 per cent, after 1983 started to decrease with about 2 per cent annually. The proportion of long term unemployment in total unemployment rose from 15 per cent in 1970 to 21 per cent in 1980 and 50 per cent in 1984.19 In the years 1992 and 1993 about 45 per cent of the Dutch unemployed were without a job for more than one year. It is argued unemployment in the Netherlands is foremost a social problem because of its persistent character. Firstly, there were many new entries to the country from foreign countries. Most of the jobs were occupied by newcomers. What is more, women participation to the labor market increased. Secondly, in the 1970s and the 1980s the employment structure changed. A shift took place from industry to services. Especially those branches within industry characterized by low paid labor suffered from the rise of the New Industrializing Countries. The last factor may be the Dutch social security system and the existence of a minimum wage level. The unemployed people are enabled to be selecting the jobs while at the same time the costs of labor of a low marginal utility become too high. Thus the unions complain that the jobs available at the bottom of the market are of low quality, have no job security and offer no prospects to the employees. On the other side, employers' associations try politically to promote the abolition of the minimum wage level as a major barrier to the solution of the unemployment problem.

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

(1) 8.5 11 11 9.2 8.4 8.0 7.8 6.9 6.0 5.5 5.4 6.5 7.6 7.1

(2) 14 21 26 29 31 34 34 36 40

(1) Unemployment rate;

(2) Unemployment duration in average number of weeks.

Source: CTSV (1996)

In the Netherlands, the system of social security arrangements is highly sophisticated. All of the social security arrangements can be classified into three main categories. The first one is the 'General social insurances' which apply to all citizens and have been implemented in the form of a compulsory insurance. The general social insurances consist of Old Age State Pensions, Widow's or Orphan's allowances, Child allowances and Disability benefits. The second category is the 'Employees' social insurances' which are compulsory for only employees. They are: Sickness Benefits, Disability benefits and Unemployment Benefits. The last category is 'Social provisions' in which there is no insurance principle. Expenditures are totally financed by the tax revenues. These provisions are welfare and unemployment benefits. Although, the Netherlands is one of the most developed countries of the Europe, it still has problems in the health care system.

In the Netherlands, the administration of unemployment insurance is transferred to different parts of the industry. The tasks of these parts are to allocate, suspend and pay unemployment benefits as well as to collect the contributions that provide the financing. The Netherlands has unemployment insurance schemes that pay cash benefits for unemployment to insured unemployed applicants who satisfy certain qualifications. Moreover, the Netherlands has social assistance schemes for unemployed workers who are not entitled to unemployment benefits nor have access to other sources. What is more, there are supplementary or alternative unemployment support systems. Unemployment support is different from unemployment benefit. To get unemployment benefit, in the Netherlands, the applicants need to work for 26 weeks previous employment during 12 months immediately before the period of unemployment. As in the most countries, the age requirement for entitlement to unemployment benefits is between 15 and 65. In the Netherlands, the benefits provide 70%