The research is published at a time when both Brussels and The Hague are seeking to reduce regulatory burdens. The study highlights what is economically at stake: while regulation delivers important societal benefits, an accumulation of rules can also hamper innovation, investment, and productivity growth.
Baarsma: 'Politicians, policymakers, and economists are looking for ways to boost productivity growth, as future prosperity will increasingly depend on improvements in productivity. At the same time, our research shows that a growing share of the workforce is engaged in regulatory and compliance-related activities. The key question, therefore, is not only how much regulatory burden costs, but also what the Dutch economy loses when scarce labour shifts away from innovation and entrepreneurship towards compliance with regulations.'
Compliance costs increased by 28 per cent over the past decade
Adjusted for inflation, total compliance costs increased by 28 per cent tween 2013 and 2024. The impact is also visible in the labour market. An estimated 8 per cent of all employment now consists of jobs in which more than 10 per cent of working time is devoted to regulation and compliance. Lawyers, accountants, and public sector employees in particular spend a significant share of their time on compliance-related activities. 'This now exceeds the share of jobs related to research and development,' says Baarsma.
Professional services and the financial sector face the highest compliance costs
Within the private sector, the highest compliance costs are found in professional services (2.9 billion euros per year) and the financial sector (1.2 billion euros). In the case of professional services, a substantial amount of compliance work is carried out on behalf of companies in other sectors. As a result, part of these compliance costs reflects not their own regulatory burden, but that of their paying clients.
Compliance costs in the financial sector have grown faster than labour productivity. The same applies to the energy sector and manufacturing. This directly erodes their competitiveness.
How was the research conducted?
Using several large language models (LLMs), we analysed the task descriptions of 923 occupations to determine which tasks are related to compliance with laws and regulations and which are not. By combining these insights with employment and wage data, the researchers calculated how many working hours and labour costs in the Netherlands are associated with compliance-related activities.
When does regulatory burden become excessive?
According to PwC, regulation delivers important societal benefits. It protects consumers, workers, and the environment, promotes financial stability, and helps prevent market failures. It is therefore only natural that regulation also entails costs, such as reporting requirements, audits, permits, and administrative obligations. However, the researchers argue that the regulatory burden becomes problematic when the costs of compliance increase more rapidly than the societal benefits generated by regulation. When rules accumulate over time, they can begin to hamper innovation, investment, entrepreneurship, and productivity growth. Small businesses are often disproportionately affected compared with larger companies.
Why does the study distinguish between the public and private sectors?
The study deliberately distinguishes between the public and private sectors. Within government, developing, implementing, and enforcing laws and regulations is often part of the core mission. For businesses, however, time and money spent on compliance cannot be used for product development, innovation, or other productive activities. For this reason, the researchers view the 9.1 billion euros in compliance costs borne by the private sector as an important indicator of the economic impact of regulatory burden. At the same time, they emphasize that healthcare providers, educational institutions, and other public-sector organizations may also face administrative burdens that divert resources away from their primary activities.
Government should focus on fewer and smarter rules
The researchers are not advocating less protection for consumers, workers, or the environment, but rather smarter regulation. This means that new rules should be assessed not only on their policy objectives, but also on the costs they impose on businesses and public-sector organisations. Governments should also be cautious about introducing national requirements that go beyond European or other international standards, and instead seek to align with them wherever possible. The researchers further argue that existing regulations should be evaluated more frequently and that unnecessary complexity should be reduced. Baarsma: 'The report also calls for a return to politically binding regulatory burden reduction targets for each ministry, similar to those that existed under the Balkenende administrations. At the time, the Advisory Board on Administrative Burdens (Actal) monitored whether the targets agreed by policymakers were actually achieved. Formal oversight by the current Advisory Board on Regulatory Burden (ATR) alone is not sufficient. Ministries should be held accountable for reducing the regulatory burden they create, to prevent an ever-growing accumulation of rules from placing further pressure on Dutch productivity and innovation.'
Companies should adopt a ‘compliance by design’ approach
For companies, reducing compliance costs will increasingly depend on investments in labour-saving processes and technologies. Organisations can benefit from integrating compliance requirements directly into their operational systems through automation, digital reporting, and AI-driven compliance solutions. A so-called 'compliance-by-design' approach reduces the amount of manual work, minimises errors, and frees up scarce legal and compliance professionals to focus on activities with a higher added value.
The rising cost of compliance: how regulatory burden is weighing on the Dutch economy
Barbara Baarsma
Chief economist, PwC Netherlands
Barbara is chief economist of PwC Netherlands and in this role she heads the economic office of PwC. Since 2009, she has been professor of Applied Economics at the University of Amsterdam. In addition, she holds various other societal positions.
