The Dutch Central Planning Bureau (CPB) foresees in its  June 16, 2009 Forecast a historic contraction of the Dutch economy: a 4¾ percent decline in GDP this year and a further ½ percent for next year. Unemployment will go up sharply according to the CPB: an average of 5½ percent of the labor force will be out of work in 2009 and 9½ percent in 2010. These unemployment rates correspond with 430,000 unemployed persons in 2009 and 730,000 unemployed persons in 2010.

A couple of weeks ago I wrote in Going Dutch? Not So Fast! that in the Netherlands ‘more than one million and a half people under 65 are living on some type of state benefit. If the crisis persists, and chances are that it will, this number will likely increase to two million people, or a quarter of the working population.’ Some readers questioned these numbers.

According to the Dutch Central Bureau for Statistics’ (CBS)  most recent dataset there were in September 2005 1,727,000 persons in the age range of 15-to-65 living on welfare. At that time the number of unemployed persons stood at 456,000.

The CPB uses the same definition of ‘unemployed’ as the CBS does. That is to say: the criteria to be classified as unemployed concern availability for work (at least 12 hours per week) and actively seeking work. Being counted as unemployed does not imply eligibility for benefits (e.g. married women seeking to reenter the labor market count as unemployed but aren’t eligible for benefits) and vice versa (e.g. women with young children living on welfare are exempted from the job-search requirement).

Since most people losing their job will be eligible for benefits for some period of time under the unemployment act (WW) and economic downturns generally discourage people from actively seeking work, the number of people in the age range of 15-to-65 living on some type of state benefit can roughly be expected to rise to about 2,001,000 in 2010. That is almost 30 percent of the employed labor force (7,020,000 persons).

Furthermore, by 2010 there will be about 2,900,000 persons receiving old age benefits (AOW), which puts the welfare recipients to employed persons ratio in the 70 percent range. If you bear in mind that employment in actual labor years is expected to be 6,442,000 in 2010 (Source CPB, no link), the actual ratio comes closer to 80 percent.

The good news is that, while Europe seems to be going off the cliff, elsewhere  (most notably in China and the US) the economy is picking up. As Willem Buiter put it Wednesday in his Maverecon-blogpost Green Green Shoots of Home: ‘I’ve been down so long, it looks like up to me.’ Given the better-than-expected unemployment figures that the CBS released yesterday, that may even ring true for the Low Countries.