Economy of the Netherlands

The Dutch social security is very comprehensive, covering Dutch residents in an encompassing manner and is divided into the national security (Volksverzekeringen) and the employee insurance (Werknemersverzekeringen). Whereas the first covers all living in the Netherlands and the social benefits provided, the latter provides employment-related benefits.[31] All living in the Netherlands are required to pay into the social security system, including residents from outside the Netherlands, with a few exceptions.[32]

The Volksverzekeringen is compulsory for all and covers the residents under different forms of national insurance:[33][34]

• Long-term care under the Long-Term Care Act (Wet Langdurige Zorg (WLZ)) (formerly known as The Exceptional Medical Expenses Act (Algemen Wet Bijzondere Ziektekosten (AWBZ)))
• Pension care under the General Old Age Pensions Act (Algemene Ouderdomswet (AOW))
• Survivor benefits under the General Surviving Relatives Act (Algemene nabestaandenwet( ANW)) (formerly known as The General Widow's and Orphans’ Act (Algemene Weduwen-en Wezenwet (AWW)))
• Child benefits under the General Family Allowances Act (Algemene Kinderbijslagwet (AKW))

It is overseen by the Social Insurance Bank (Sociale Verzekeringsbank (SVB)) and financed through earning-related contributions of employers and employees up until a maximum income-ceiling. Whilst employed persons get their contribution deducted automatically from their wage, the unemployed pay by themselves. The AKW is financed by employers, whereas the AOW is financed by the employees. The AOW, additionally, is financed by a small government subsidy.

The Werknemersverzekeringen is compulsory for all employed people within the Netherlands. It includes the coverage of employees in the following areas:

• Unemployment benefits under the Unemployment Insurance Act (Werkloosheidswet (WW))
• Sick leave under the Sickness Benefits Act (Ziektewet (ZW))
• Disability benefits under the Disablement Insurance Act (Wet werk en inkomen naar arbeidsvermogen (WIA))

The financing for the Werknemersverkeringen is automatically deducted from the employee's income by the employer.[33][34]

The unemployment benefits in the Netherlands, as set out under the WW, covers almost all employees, that are employees based on a working-contract. Excluded from the WW are the following: self-employed, nationally employed, persons working less than four days a week, heads of stockholders and voluntary workers that earn up to €150 per year.[31][34]

To profit from the benefit the unemployed has to submit an application to the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen (UWV)) within one week of becoming unemployed and additionally has to register as job-seeker. The WW only covers employees with a sufficient work history, meaning that an applicant has to have been working for at least 26 weeks in the past 36 weeks before becoming unemployed. If so, the working-weeks requirement is met. Moreover, the employee is only eligible to unemployment benefits if the unemployment has not been due to his own fault (e.g. own termination of the job contract).[31][34]

The benefits received through the WW are earnings-related and amount to a sum of 75% percent of the previous earnings per day (which is based on 5 working days per week) for the duration of two months. After those two months the benefits amount to 70%. Part-time work is taken into account with a calculation of parts of the working hours. If this benefit is less than the minimum income, the unemployed has the possibility of supplementation through the Additional Allowances Act (Toeslagenwet) to sum up the amount. All jobs in the previous twelve months are counted in to the calculation of the benefits, if a change of work has taken place. To obtain the benefits for a continued time, the unemployed needs to be actively looking for work. Moreover, one needs to participate in e-coaching three and twelve months after the start of unemployment. After one year of unemployment one must register with an employment agency.[32][34][33]

The Dutch labour market has relatively strict regulations for employers on firing employees, although by June 2014 the House of Representatives has agreed to loosen these regulations. Due to the costs of employees and costs of firing them, a big part of the working force (about 15% of the working force) is an independent one person company (ZZP). They are independent and get paid by delivery without higher social costs. Another big part of the workforce is hired as temporary workforce. State unemployment benefits in the form of a 70% benefit of the employee's last-earned salary for up to three years (with a maximum of roughly 2500 euros per month) are available for fired employees, provided that they have worked for a certain minimum time period, usually 26 weeks. Moreover, the self-employed individuals (zelfstandigen zonder personeel (ZZP)) are not automatically covered under the Werknemersverzekeringen, and are not obligated to enroll into unemployment, sickness or disabilities insurance. Self-employed individuals, hence, are required to enroll themselves with private insurance companies.[33][35]

Every Dutch citizen gets the AOW, a state pension, from the age of 67. Married couples or those who live together receive 50% of minimum wage per person and a single person receives 70% of minimum wage. Most (about 70%) earn an extra pension from private pension funds. Employees are obliged to take part in the sector pension funds. In total the amount of pension funds are above 1400 billion in 2015 for less than 17 million people. Employees receive on average about 70% of their last salary. During the economic crisis and because of low interest rates, pensions funds have had difficulty keeping up with inflation. The Dutch pension system is regarded as one of the best in the world.[36][37]

With a Gini coefficient of 25.1 (2013) the income inequality is relatively low in the Netherlands. However, the inequality when measured in distributions of household wealth is high, where the top 1% owns 24% of all net wealth, and the top 10% own 60%. Moreover, rather large wealth disparities persist in the Netherlands in relation to age, where those under 35 years-of-age own 10% as much as older workers. This is a consequence from the low taxation of home ownership and a generous mortgage interest deductibility, which benefit the wealthier households.[38] Due to the generous pensions the pension-related savings are the most important part of wealth in the Netherlands, yet are not subject to capital income taxation, which increases the inequality.

The Netherlands was one of the few countries in the world where the interest paid on mortgages is almost fully deductible from income tax. Since 2013 big changes were made. The conditions allowing a borrowing of more that 116% of the value of the home ware reduced to 106% and are still continuously being reduced every year. The deduction is also capped to 50.5% and reducing every year.[39] Together with the after-effects of the financial crisis of 2007–2008 the result was a housing crisis, with a decrease of prices almost 25% percent in some areas. Recent years have shown a recovery of 10% to even 20% per year in the most popular cities.

The Service sector accounts for more than half of the national income, primarily in transportation, distribution and logistics, financial areas, software development and the creative industry. The breadth of service providers in financial services and a Protestant work ethic have contributed to the Netherlands achieving a DAW Index score of 5 in 2012. Industrial activity is dominated by the machinery, electronics/high tech industry, metalworking, oil refining, chemical, and food-processing industries. Construction amounts to about 6% of GDP. Agriculture and fishing, although visible and traditional Dutch activities, account for just 2%.

The Netherlands continues to be one of the leading European nations for attracting foreign direct investment and is one of the five largest investors in the United States. The economy experienced a slowdown in 2005, but in 2006 recovered to the fastest pace in six years on the back of increased exports and strong investment. The pace of job growth reached 10-year highs in 2007. The Netherlands is the fifth-most competitive economy in the world, according to the World Economic Forum's Global Competitiveness Report.[40]

The Netherlands produced, in 2018:[41]

• 6.5 million tons of sugar beet, which is used to produce sugar and ethanol;
• 6.0 million tonnes of potato (10th largest producer in the world);
• 1.2 million tons of onion;
• 961 thousand tons of wheat;
• 910 thousand tons of tomatoes;
• 538 thousand tons of carrots;
• 410 thousand tons of cucumber;
• 402 thousand tons of pear;
• 355 thousand tons of pepper;
• 300 thousand tons of mushroom and truffle;
• 295 thousand tons of lettuce;
• 269 thousand tons of apple;
• 247 thousand tons of barley;

In addition to smaller productions of other agricultural products. [42]

Natural gas concessions in the Netherlands. Today the Netherlands accounts for more than 25% of all Natural Gas reserves in the EU

Station Wildervank of the Groningen natural gas field, which transformed the Netherlands economy after its discovery in 1959, leading to the theory of Dutch disease.

The discovery of the large Groningen natural gas field in 1959 and the massive windfalls accrued over subsequent decades, were believed to have led to a decline in the manufacturing sector in the Netherlands,[27] leading to the theory of Dutch disease.[20]

While its oil reserves in the North Sea are of little importance, in the Netherlands have an estimated 25% of natural gas reserves in the EU.[43] Natural gas reserves of the Netherlands are estimated (as of 2014) to be about 600 billion cubic feet,[44] or about 0.3% of the world total. In 2014–2015 the government decided to reduce the production of gas in the province Groningen significantly due to problems of sinking ground, differential settlement levels and tremors (small earth quakes) causing damages to properties, end 2018 the government decided to completely abandon the gas production in the province of Groningen by reducing the production slightly each year, the production is expected to disappear entirely in 2028[45]

To reduce its greenhouse emissions, the government of the Netherlands is subsidizing a transition away from natural gas for all homes in the country by 2050.[46]

Researchers in the Netherlands began studying nuclear energy in the 1930s and began construction of research reactor Dodewaard in 1955. Researchers’ goal was to introduce nuclear power technology by 1962 and replace fossil fuels. In 1968, a test nuclear reactor was attached to the power grid. This unit was shut down in 1997. In the 1970s, the Dutch chose a policy that required reprocessing all spent nuclear fuel. In 1984, the government decided to create a long-term (100 years) storage facility for all intermediate and low-level radioactive waste and research strategies for ultimate disposal. In September 2003, the Central Organization for Radioactive Waste created an interim storage facility for high-level waste. The Netherlands' only commercial nuclear reactor is Borssele, which became operational in 1973 and as of 2011 produces about 4% of the country's electricity.[47] The older Dodewaard nuclear power plant was a test reactor that later got attached to the national grid but was closed in 1997. A 2MW research reactor is located in Delft, as part of the physics department of Delft University of Technology. This reactor is not meant for energy provision, but used as a neutron and positron source for research.

In 1994, the States General of the Netherlands voted to phase out nuclear power after a discussion of nuclear waste management. In 1997, the power station at Dodewaard was shut down and the government decided it was planning to end Borssele's operating license in 2003. This has since been postponed to 2034, if it complied with the highest safety standards. After the 2010 election, the new government was open to expanding nuclear power. Both of the companies that share ownership of Borssele are proposing to build new reactors.[48][49] In January 2012, Delta announced it postpones any decision to start building a second nuclear power plant.