A discussion of the Netherlands' remarkable transformation of its social policy from 1984, when the crisis-ridden system swallowed up a staggering 21 percent of gross domestic product, to its dramatic turnaround in the mid-1990s. Today the Netherlands stands out in continental Europe for combining strong growth and low unemployment without abandoning the welfare state.
This achievement was no grand reform but a series of gradual adjustments: the minimum wage was reduced to 66 percent of the average wage from 80 percent, welfare eligibility criteria were tightened to minimize abuse, and benefits were slightly cut. The government also liberalized labor laws to expand part-time work, especially for women. While wage inequality rose somewhat, it remained far less than in Britain or the United States. Altogether, these steps reduced social spending to 16 percent of GDP in 1997.
The authors also address the unique Dutch approach toward decision-making among business, labor, and government, as well as the political consequences of this policy transformation. Other European countries attempting to streamline entitlement spending will find this account useful.