The Internationalisation Monitor describes trends in internationalisation and the consequences thereof for the Dutch economy and society. The Internationalisation Monitor is published quarterly as part of the Globalisation programme at Statistics Netherlands (CBS), which is commissioned by the Dutch Ministry of Foreign Affairs.
In this edition of the Internationalisation Monitor, we focus on the relationship between internationalisation and employment. Few topics are more controversial and heavily debated, particularly in times of economic and political crises. On the one hand, globalisation seems to create more jobs than it destroys. In general, it leads to higher economic growth and thus more prosperity; on the other hand, such benefits are unequally distributed across the population.
The link between internationalisation and employment is less obvious than may appear at first sight. Technological developments and changes in legislation are closely linked to globalisation while contributing to the creation and destruction of jobs at the same time. Therefore, there is no easy answer to the question what the consequences of globalisation are for global employment and employment in the Netherlands in particular. This means that only a small part of this vast and complex phenomenon can be discussed here.
Chapter 1 briefly describes several aspects of the relationship between internationalisation and employment. What are the characteristics of people who work for internationally oriented companies? Who are more dependent on exports, male or female employees? What are some characteristics of foreign knowledge workers in the Netherlands? And which international alumni of Dutch universities set up most businesses in the Netherlands? Chapter 2 examines the employment effects for companies setting up as importers and/or exporters of goods, compared to companies that occasionally or never engage in international trade. As it turns out, structural export starters have a higher employment growth rate than incidental exporters and non-traders. In Chapter 3, the focus is on the offshoring of jobs by companies in the Netherlands. More than 30 thousand jobs were offshored in the period 2014-2016. The majority of jobs were lost in the manufacturing industry, due to offshoring of production activities. Chapter 4 zooms in on the consequences of import competition on employment, with a special focus on the skill composition of the labour market. Does a higher degree of import competition lessen demand for routine-intensive jobs?
Some of the main findings are:
Chapter 1: Employment in brief
- Within the Dutch business economy, foreign-controlled-companies and companies not engaged in international goods trade have relatively many jobs which are performed by non-Dutch employees (approximately one in ten).
- Foreign-controlled companies in the Dutch business economy have more high-paid jobs and fewer temporary jobs than Dutch-controlled companies.
- Companies in the business economy not engaged in international goods trade have fewer high-paid jobs and more temporary jobs than two-way traders.
- In 2016, indirect and direct exports generated 2.1 million full-time equivalents (FTEs) in employment within the Netherlands. This corresponds with 30 percent of total Dutch employment. More than 1 in 3 FTEs of men can be linked to exports versus over 1 in 5 FTEs of women.
- The employment of male workers is more often dependent on exports than that women, both in absolute and in relative terms. An important explanation for this difference is that women are relatively more often employed in non-commercial services. This includes government services and publicly funded services such as hospitals, schools and cultural organisations.
- In order to attract employees from abroad, Dutch employers may grant an (untaxed) reimbursement for the extraterritorial costs. This facility is known as the 30% facility, and serves as an indicator for knowledge workers from abroad.
- The users of the 30% facility are mainly young men. The largest group consist of people from India. The majority of these incoming employees live in the vicinity of Amsterdam, other Randstad cities or Eindhoven.
- These knowledge workers from abroad are predominantly working for large, foreign and internationally operating firms. Business sectors with the highest use of the 30% facility are IT services, wholesale, academic education, holdings and management consultancy.
- 35 percent of international students who graduated in 2009/2010 from Dutch universities were living in the Netherlands on 1 October 2014, while 65 percent had left the Netherlands before this date.
- 24 percent of these international graduates were working in the Netherlands on 1 October 2014. Within the same group of graduates, 6 percent established a company in the Netherlands within seven years after graduation.
- Most enterprises are established by Chinese and German graduates in the Netherlands. However, these two nationalities are relatively underrepresented: around 4.5 percent establish a company in the Netherlands (three study years combined). Graduates from Suriname (24 percent), the United Kingdom (12 percent), Italy (11 percent) and the United States (10 percent) rank higher.
- The universities in Nijmegen, Amsterdam, Delft, Rotterdam, Utrecht and Leiden have the highest percentage shares of international graduates who establish companies in the Netherlands. Maastricht, Groningen, Enschede and Wageningen score the lowest.
- Health care studies have the highest establishment percentage for international graduates and agriculture the lowest.
Chapter 2: Employment growth among export and import starters
- Companies that start to trade in goods on a structural basis have a higher job growth rate than companies that start incidental trade activities and non-traders.
- Starting an export business is associated with an increase of 1.0 to 2.3 percentage points in employment, although only in the starting year.
- Starting import activities is also associated with higher job growth when compared to incidental import activities and non-traders. This extra employment growth is estimated to be around 1 percentage point and is already present before importing has commenced. This effect disappears three years after import activities started.
- We find no significant impact of starting export or import activities on the composition of the workforce with respect to age, permanent contracts and part-time work.
- Our results are consistent with other studies in the field that use company-level data; an increase in employment at firms that start import or export activities. Note however that studies carried out at sector level show that higher import penetration can also lead to job destruction in sectors facing high levels of import competition.
Chapter 3: Offshoring by companies in the Netherlands
- More than 6 percent of enterprise-groups (hereinafter called enterprises) with 50 or more employees offshored one or more activities between 2014-2016. This is more than 500 enterprises.
- 3 percent of the Dutch enterprises offshored activities, mainly their production. Of the enterprises controlled by another company in the EU, 18 percent offshored activities. 23 percent of the enterprises controlled by another non-EU company offshored activities.
- Approximately 43 percent of enterprises offshored their primary activity (production or services). About 71 percent offshored one or more support activities. Administrative and management activities are offshored most often, especially by enterprises controlled by a non-Dutch company.
- More than 30 thousand jobs were lost due to offshoring between 2014-2016. The majority of jobs, more than 18 thousand, were lost in the manufacturing industry due to offshoring of production activities. Approximately 25 percent of offshored jobs were highly educated jobs.
- The EU was the most popular destination for offshoring of activities. The most popular destination outside Europe was India, especially for services and support activities.
- Cost reduction was the main reason to offshore activities, followed by decisions made by the parent company.
- Offshoring of activities also created jobs in the Netherlands, in total more than 3,150.
- One percent of companies reshored activities to the Netherlands, in total around 380 jobs. These were mainly in production.
Chapter 4: Import competition and demand for non-routine labour skills
- Increasing import competition has a positive effect on the relative demand for non-routine labour skills. As import competition increases, so does demand for non-routine skills.
- Intensification of technological upgrading activities by an industry leads to a slight increase in demand for non-routine labour skills.
- The impact of increasing import competition on the relative demand for non-routine workers is smaller for industries of which the activities are close to the technological frontier.