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Allowances system reform to solve healthcare staff shortages

Bastiaan Starink Partner, PwC Netherlands 01/03/21

Allowances system reform to solve healthcare staff shortages

The outgoing cabinet's plans to reform the benefits system present an immediate opportunity to solve staff shortages in the healthcare sector. At first glance, this looks like two different problems the new government will be facing. But Bastiaan Starink, a PwC partner and Endowed Professor of Labour Market, Pensions and Taxation at Tilburg University since 1 February, sees this as an opportunity to kill two birds with one stone.

Labour market still faces big challenges

The developments on the labour market are also presenting the new government with some big challenges. The forthcoming coalition agreement will clarify how government policy responds to this, but as things stand unemployment in the Netherlands is still high whilst at the same time there are serious staff shortages, especially in the public sector. This will be thrown into sharper relief with the advance of computerisation and issues to do with the aging population. 

The corona crisis has made the mounting problems even clearer 

There is nothing new about staff shortages in healthcare, education, the police and defence, but the coronacrisis has made the mounting problems even clearer. According to the latest labour market forecast of the UWV Employee Insurance Agency, the number of vacancies in these sectors is set to rise by 100,000 this year. In the meantime, jobs are being lost, especially in temporary employment agencies, the hospitality sector and industry. According to the UWV, that will take the count to almost 10.6 million jobs in the Netherlands by the end of this year: a fall of 186,000 in two years.

Move people frome one sector to the other, but not without retraining them

Of course, we already know that digitalisation is having a serious impact on the labour market and that jobs are being lost or changing as a result, with other jobs arriving to replace them. That creates a need for retraining. We need to take a close look at the sectors, companies and organisations that will be shedding a lot of jobs in the near future, and where there is or will be a demand for labour. By building a bridge between those two groups, we can move people from one sector to the other, but not without retraining them.

Current retraining approach is too free and easy

I feel that a better approach could be taken to this. The government and employers are investing heavily in retraining, but the approach is too free and easy. Oversight is needed to make sure we only retrain people for sectors where there are jobs or for organisations that need those specific employees. Hans Borstlap of the Work Regulation Commission, which published its report on the future of the Dutch labour market just over a year ago, speaks in this context of 'new alliances' between the public and private sectors.

Start out from the needs of employers

I agree with Hans Borstlap that we should start out from the needs of employers. Where is there a demand for labour? Making a link between this and supernumerary labour makes it possible for us to start retraining people according to specific targets. And this should only be done if a new job is available for them and they have the motivation to accept it.

Link between the benefits scandal and staff shortages in the healthcare sector

This motivation is important and is what drew my attention to the link between the benefits scandal and staff shortages in the healthcare sector. The Ministry of Health, Welfare and Sport has calculated that 80,000 people will be needed in the healthcare sector next year. Government statistics also show that most care workers have part-time jobs. They work an average of 22 hours a week. It has already been calculated that the staff shortages in the healthcare sector could largely be solved if everyone worked an extra few hours a week.

Working a few extra hours does not make much difference to their net pay

So why don't healthcare workers do that? As well as the fact that the healthcare sector employs many women, who are traditionally more likely to have a part-time job, there is a financial reason. The problem is that working a few extra hours does not make much difference to their net pay. They stand to lose all or some of their care, rental or child allowance. In other words, there comes a point where there is barely any financial incentive for people to work extra hours.

Structure the system in such a way that the sectors with shortages become more attractive to work in

Given this and the fact that the outgoing cabinet has announced plans to shake up the benefits system, my advice is this: reform the system in such a way that it pays to work more hours. That means looking not only at taxation and social security, but also making sure that the system is structured in such a way that the sectors with shortages become more attractive to work in.

As well as offering better pay, we have to make the jobs more attractive

But this will take more than money alone. As I said, people's motivation is important, too. Employees are generally willing enough, but are no longer attracted by the work. As well as offering better pay, we have to make the jobs more attractive by reducing the administrative burden and computerising the repetitive tasks. That way, you ultimately end up with more nurses in the ward and police on the streets.

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Bastiaan Starink

Bastiaan Starink

Partner, PwC Netherlands

Tel: +31 (0)65 375 58 28

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