Netherlands: How effective are Demand-side policies

 Netherlands: Unemployment

How effective are Demand- Side Policies?



In 2019 the unemployment rate was 3.4%. In 2020 it was 3.8%, while in 2021 it was 4%. As shown during the pandemic the unemployment rate in the Netherlands increased. To counteract the rising unemployment rate the Netherlands enacted supply side policies. The Netherlands created a social package to increase training and retraining effort, to help lessen job- losses, paying portions of workers wages. These policies did help the Netherlands curb a major increase in unemployment, as shown in the unemployment rate during 2020. The removal of these support methods is causing a risk for a higher unemployment rate, which can be seen with the increase to 4% in 2021. 

Demand- side policies could have been enacted instead of supply side policies. The OECD 2021 Economic Survey of the Netherlands, had some suggestions about using fiscal policies, but also claimed that highly expansionary and quick fiscal policy could derail the economy during the pandemic. An expansionary fiscal policy would increase demand for workers. The government could decrease taxes to increase consumption. However, this does not guarantee that consumption would increase, especially during the pandemic where people are more likely to try to save their money. The government could also increase government spending, but that would have opportunity cost and increase government debt. 

I think that demand side policies are not as effective at reducing unemployment. I think that a fiscal policy would not have been foolproof during the pandemic, and possibly unfeasible for the government to enact. I think that a small amount of demand side policies, like a very small reduction in taxes, along with what the government already did for supply side policies, would have had a better outcome when coming out of the pandemic.


Sources:

- https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?contextual=default&end=2021&locations=NL&start=2015 

- https://www.oecd.org/economy/surveys/Netherlands-2021-OECD-economic-survey-overview.pdf

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