BrazilA talent shortage is hurting Dutch attractiveness to foreign investors
The Netherlands enjoys a strong economy, is one of Europe’s most competitive nations, and attracts a huge amount of foreign direct investment (FDI), though current levels of FDI are lower than in recent years. Lingering issues like a lack of talent have been taking a toll on investment and need to be overcome going forward.
A new study from Bain & Company and The American Chamber of Commerce in the Netherlands (AmCham) shows how the Netherlands needs to overcome a talent shortage if it wants to maintain the strong competitive advantage it has maintained over other European countries.
It would be tough to overstate the prosperity that the Netherlands has been enjoying in recent years. With some of the most varied trade of any country in Europe, and being the second largest exporter of agricultural goods, suffice it to say things have been good for the Dutch.
Despite some rough spots in recent years, including a technical recession in 2023, the country has long enjoyed economic growth, steady wealth accumulation, world-class quality of life, a robust healthcare system, quality education, and a strong jobs market. All of this has made the Netherlands a prime place to invest in.
Historically, the Netherlands has been one of Europe’s top FDI recipients, though that FDI has decreased markedly in the last four years. But this is not universal in Europe: France and Belgium have been continuing an upward trajectory in the same period.
This all points to a number of issues at hand: The Netherlands is struggling with an uncertain and volatile policy environment, increasing polarization, and other stubborn problems like a serious housing crisis. The lack of housing plays into the talent shortage, the other main problem faced by the Dutch.
Expatriates and immigrants alike have long flooded into the Netherlands to work, with many of them being highly skilled workers destined for industries like technology and finance. But if there is nowhere for them to live (or if housing is unaffordable), their moves becomes less attractive.
In particular the largest business hubs for expats, such as Amsterdam, Rotterdam and Eindhoven, face both housing issues and talent issues.
But it’s not just expats – the talent shortage spans across a wide range of occupations, from electrical engineers to nurses. The Bain & Company and AmCham study found around 100 key occupations that are facing talent shortages, with around two-thirds of those occupations facing ‘severe shortages’.
Meanwhile, the authors highlight that changing demographics will exacerbate the situation in the coming decades. Currently, 8% of the workforce is in the 60-64 age bracket, as opposed to only ~5% ten years ago, meaning that around 700,000 workers will likely retire soon.
Clearly, addressing this talent shortage is a major imperative for the Netherlands going forward. There is currently a sort of ‘war for talent’ being waged between different European players for the best skilled talent – and that talent is now also being drawn further afield to places like the Middle East.
Restoring labour market competitiveness
The report offers a number of interesting solutions that could help the Dutch overcome their talent problem. One approach would be for the Netherlands to create an overarching game plan, a vision for a future-proof economy to be achieved by a certain point, say 2050.
The Dutch can also decide to make bold commitments to certain shifts, for example devising policies that embrace innovative technologies like GenAI (a previous report found GenAI could add billions to the economy). This would include re-skilling a large number of workers, but the benefits would likely outweigh the costs in time and energy, as the country has the potential to position itself as a leader in innovation.
To put it simply, the report emphasizes the need for the Netherlands to make comprehensive, target-based plans going forward. Successful initiatives to address the talent shortage can boost the economy while also shoring up the FDI that has been drying up in recent years.
“Historically, FDI has been an important contributor to the Netherlands’ success,” the report notes. “Despite holding a large share of European FDI stock, the Netherlands has been progressively declining in its attractiveness to foreign investors. In order to maintain its current levels of prosperity, the Netherlands will need to proactively choose its future and pragmatically execute to unlock potential.”
