Dutch productivity growth requires radical change, says TNO
The Netherlands lags behind in the development of labor productivity. In comparable countries, value creation per hour of labor has been rising faster than in the Netherlands in recent years.
Published on January 21, 2025
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TNO calls for a complex change in the economic approach to the Netherlands. The country must focus on higher-quality growth. This means investing in research and development (R&D), technology, and skills to increase labor productivity. The Netherlands lags behind other European countries in productivity growth despite being above the Eurozone average of $88 per hour. Flexible and low-productivity forms of labor have increased since 2014, weakening competitiveness. In a white paper published today by TNO, the research institute calls for a concerted effort by government, industry, and educational institutions. The goal? Implement innovations faster, especially in SMEs, and increase public R&D investment to 3% of GDP. Without these changes, the Netherlands risks declining prosperity and a weaker competitive position. In short, innovation and cooperation are crucial to keep the Dutch economy on track.
The remarkable Dutch labor productivity
The Netherlands is in a remarkable position. With a labor productivity of $88 per hour, the country is significantly above the Eurozone average of $77 and the EU27 average of $71. Still, there is cause for concern. Labor productivity growth lags behind other European countries. A significant reason is that since 2014, the Netherlands has increasingly relied on flexible and low-productivity labor. This has led to reduced investment in the training of temporary staff. Current R&D investment in the Netherlands is about 2.2% of GDP, below the European target of 3%.
The big question is whether the Netherlands uses the available manpower most constructively. The focus is still too often on diplomas rather than actual skills, which hinders the efficient use of human capital.
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Innovation as key to growth
Much of the innovation potential, especially in SMEs, currently remains untapped. TNO advocates accelerated adoption of labor-saving technologies such as robotization and AI. This requires a joint effort by the government, companies, and educational institutions to increase investment in innovative sectors. Specific attention is paid to sectors with growth potential, such as the high-tech manufacturing industry and knowledge-intensive services. These innovations are essential for a strong economy and maintaining good public services.
Investing in retraining, leveraging talent
To increase labor productivity, a multi-track policy is needed. TNO emphasizes the importance of developing the right skills in employees to apply innovations effectively. This calls for a trend break in the current approach. The emphasis must shift from flexible labor to sustainable employment with continuous training. This means investing in retraining and making better use of available talent, focusing on skills rather than just formal qualifications.
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