The aging process at work: CBS investigation reveals worrisome labor market development

Besides its ‘normal’ statistics on unemployment, trade and consumption, the Dutch Central Bureau of Statistics (www.cbs.nl) sometimes executes out-of-the-box investigations that reveal interesting and unexpected information on the situation in The Netherlands.

Last Thursday March 15 was one of those days, as the CBS published a very interesting investigation on the Dutch labor market.

One of the so-called ‘facts of life’ is that it is very hard to get a job when you are above 50-55 years old and unemployed. Presumably, companies always tend to hire younger workers, as ‘the older workers are presumed to be sliding on auto-pilot into their retirement’ and they are told to be ‘less productive’ and ‘sick’ more often.

Therefore, it was a little surprising for me to see that the average Dutch labor force is aging; not by a few months, but by no less than 5 years since the 1990’s. Here is a substantial part of the CBS investigation, accompanied by my comments:

Employed labour force is ageing

The average age in the employed labour force has risen further in 2011 to just over 41 versus 36 in the early 1990’s. Men in their fifties for the first time outnumbered men in their thirties. The ageing process was most obvious in the sector public administration and government services.

The average age in the employed labour force has risen by 5 years to 41.2 between 1990 and 2011. The population has aged during this period. The labour participation rate among 50 to 65-year-olds also increased noticeably, i.e. from 35 percent in 1990 to 60 percent in 2011. The increase was mainly recorded among women.

Average age employed labour force and net labour
participation rate in the 50 to 65-year-old population
Source: www.cbs.nl
Click to enlarge

Last year, there were 95 employed in the 50–60 age bracket in every 100 employed in the 30–40 age bracket versus only 42 in the early 1990’s. In those days, relatively few 50 to 60-year-old women were engaged in paid employment and the labour participation rate among men in the same age category was rather low, partly due to the then generous early retirement schemes. In 2011, employed men between 50 and 60 for the first time outnumbered those between 30 and 40.

People in their fifties versus people in their
thirties in the employed labour forceSource: www.cbs.nl
Click to enlarge 

In the period 1990–2010, the average age increased in all sectors. With 7 years, the increase was most substantial in public administration and government services, followed by health care and welfare, manufacturing industry and financial institutions with met 6 years.

The highest average age in 2010 was recorded in the sector agriculture and fishing (44 years), followed by education and public administration and government services with 43 years. The average age was lowest in the sector hotels and restaurants (more than 34 years).

Average age employed labour force by sector
Source: www.cbs.nl
Click to enlarge

There are of course the obvious reasons for the fact that the average age of the worker has increased so much during the last 22 years:

• The (post) baby-boom that was born directly until twenty-odd years after the second world war was a much bigger generation than the generations before it or after it (see chart). And this generation is now between 45 and 65 years old

Population pyramid in The Netherlands in 2011
Source: www.cbs.nl
Click to enlarge 

• As the first red-printed text already states, there have been very generous retirement schemes in the nineties; people had the chance to retire at ages as old as 55, due to pre-pension arrangements and the fact that there was no duty to seek work for 55’ers.
  Especially banks ‘fired’ people at the age of 55 and replenished their unemployment benefits until 100% of the last earned wages until they reached the age of 60 and an official pre-pension arrangement kicked in. This ‘present from the boss’ was mainly paid for by the taxpayer, who ponied up the extensive Unemployment Benefits that could last for five years (dependent on the number of worked years). This was a kind of reversed Robin Hood-scheme.

However, I suspect that there is also a more sinister explanation for this very big age-difference between the 1990’s and the current time: the comeuppance of flex / temp contracts and ‘independents without personnel’  (aka freelancers) in the labor market.

The second red-printed text already gives a clue on this and much more background information can be found in my article Credit Crisis forces Dutch companies to change their HR policy and other, older articles that you can find through my search engine:

“Of the people that were hired in 2011, virtually nobody gets immediately a fixed contract anymore (less than 3%). In 2011, this number dropped to 2,000 from 83,000 in 2010” [snippet from a UWV (www.uwv.nl) survey].

For me this was the most shocking result of the UWV investigation. This development speaks volumes on a number of circumstances in The Netherlands:

• Dutch employers don’t have any confidence in the economy and don’t want to get stuck with excess personnel. It must be easy to lay off people quickly and without any hustle and bustle
  
• The Dutch labor and dismissal legislation is too rigid and too old for the current demands on the labor market. Therefore companies don’t want to take any risk and hire everybody on a temp contract.
  
• The condition of access to a fixed contract is often nothing more than an empty promise from companies that want to bind their personnel without being bound to them.

The results of this policy of mainly handing out flex-contracts to youngsters (aka beneath 35 years old) is that youngsters are very easy to get rid of in difficult times (now, for instance).

If a company or government service (like public administration or education) needs to cut down on personnel, it just doesn’t prolongate the flex / temp contracts, while leaving the people with fixed contracts, that are much harder to fire, unharmed.

Especially in education, for ages the situation has been that older teachers were virtually untouchable due to seniority, while younger teachers needed to fear for their job when a school or university needed to take austerity measures. I’m afraid that this situation is now spreading over the whole Dutch labor market like an ink spot, as a consequence of fixed vs temp contracts.

The older generation that still enjoys its fixed contracts stays put and doesn’t change its job if it has one. However, once this generation is fired after all, it is very hard for it to find a new job. This leads to the following chart:

The situation on the Dutch Labor Market
Source: Ernst Labruyère
Click to enlarge

  

• The ‘core’ of the commercial / non-commercial labor market of 35-65’ers with a fixed contract is virtually untouchable and hardly moves with the economy, unless their company defaults or they get fired for other important reasons.
• The flex-layer of youngsters with temp / flex contracts absorbs the shocks of economic expansion or contraction, without having a fair chance for a fixed contract in difficult times.
• The periphery of jobless workers that are older than 50 has hardly a chance of access to the labor market, as these people are ‘suspect’ to employers, while being ‘very hard to fire’, once they have a contract.

You can consider this a flexible system indeed, but it’s not a fair system in times of economic hardship. It leaves both the youngest and oldest, jobless generation of workers being in a very awkward position, while the core generation with the fixed, expensive (!) contracts has virtually nothing to worry about.

While stating this, I realize that I also belong to the core generation with the fixed contracts. Still, I would not mind if the labor market becomes a little bit more flexible, if this would offer a better and fairer chance to generation that have a hard time currently.