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For Netherlanders on welfare, it may be time to go dutch

Economic slump forces nation to consider rolling back its vast social safety net

AFTER decades of building a social welfare system that took care of everyone and elevated full protection against calamity to a universal right, the Netherlands is busy debating how to pull down part of the edifice.

The reason for the debate is clear enough. After a postwar prosperity that permitted the Dutch to develop what may be the most complete system of social protections in the world, stagnant economic growth and increased international competition have made the system too costly.

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Now they see a system that favors inactivity over labor, encourages employers to shunt employees off to welfare programs, and costs more than 10 times the amount spent on defense.

``People are used to certain rights, having grown up in a society where the debate was how to spend the fruits of growth,'' says Jacques Wallage, secretary of state for social affairs and employment. ``They understand that situation has evolved, and the system must change, but no one ever likes giving up something they've already got.''

This change in attitude was born out in the May 3 parliamentary election - a campaign largely dominated by the issue of the country's social-welfare program - when Dutch voters dealt the long-ruling Christian Democratic Appeal Party a crushing defeat.

The Dutch debate mirrors a discussion going on across wealthy Western Europe, where recession and the worst unemployment since World War II have led to deep questioning of a vaunted social system often called ``the European model.''

Most economists say the system's cost must be brought down to promote substantial job creation - 500,000 by the end of the decade. Others plead for change as a means of restoring some of the individual's lost responsibility. ``We are trying to get rid of a culture we developed in the '60s and '70s that said, in essence, `If you have a problem, you go to the government,'' says Hans Dijkstal, a Liberal member of parliament.

Change will not come easily to a system that is intertwined with European identity.

It's in the numbers

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By now most every informed, voting Dutchman seems to know a stunning statistic about his country: For every 100 Dutch of the working-age population who have a job, 85 are living on some form of social welfare.

``If we did nothing to alter the current direction we'd be at 1 for 1 in five or six years,'' adds Flip Buurmeijer , a prominent Labor parliamentarian and expert in social welfare issues. ``We all agree this has to change.''

``We'' in this case means the three political parties, which after May elections seem most likely to form the Netherlands' next coalition government: Labor, the Democrats 66 left-of-center party, and the Liberal (conservative) Party.

In the elections, the Liberals raised alarms after proposing that unemployment, disability, and other benefits be reduced to 60 percent of the annual minimum wage to encourage the inactive to get back to work. For some, the problem starts with the minimum wage. At about $15,000 a year, it is blamed for discouraging job creation and encouraging inactivity.

``The minimum wage, which also determines benefit levels, is considered too high to act as an incentive,'' either for companies to create jobs or to entice people back to the job market, says A. J. Bockting, a specialist at the Dutch organization of employers' and employees' representatives. Unemployment compensation is initially based on the worker's last wage, but long-term benefits are based on the minimum wage.

Reforming disability rules may be of greatest urgency. Dutch companies have taken advantage of the country's generous disability law to get workers off the payroll. ``It's one of the reasons we didn't have the strikes [against restructuring and work-force reductions] that they did in Britain, Germany, or France,'' Mr. Bockting says. ``Here it's been difficult to fire people, so companies look to reduce their work force by putting people on disability.'' About two-thirds of those on disability are there for what are considered vague complaints. And the system covers the worker wherever the disabling accident occurs, not just at the workplace.

In a parliamentary investigation he headed last year, Mr. Buurmeijer concluded that the central breakdown of the Dutch system is the lack of a link between the system providing social welfare benefits and efforts to get people back to work. As a result, people find it normal to go on social security after five years' work and to stay there. Mr. Wallage calls the Buurmeijer report a ``devastating'' indictment of the Dutch system. But he adds that those advocating a reduction in social benefits forget the key stumbling block: a lack of jobs.

To change that, he says the government has to make it attractive for companies to create low-skill jobs by reducing their costs.

``We are willing to pay the inactive person 22,000 guilders [$11,880] a year in benefit income, but as soon as he's hired we want 13,000 a year from the employer in taxes and other payments,'' he says. ``We can't afford controllers on our trams any more, and companies can't afford the low-wage person to make copies so the high-wage earners waste time doing it.''

Reforming too slowly?

The past government already undertook some reforms. Beginning this year, the employer must pay the first period of a disability leave. Disability claims are already going down. But unemployment claims are rising, with job losses reaching 18,000 a month.

As the Netherlands' new government begins tackling the social welfare problem, the question is whether the reform will be broad or fast enough.

``For Europe the real danger is that our political structure won't be flexible enough to make the needed changes fast enough,'' Wallage says. ``At the same time, the changes in the international economy and the globalization that are having such an impact on us, aren't slow.''

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