Toespraak minister Dijsselbloem opening academisch jaar Tilburg

Toespraak | 05-09-2016

Ladies and gentlemen,

I was born 50 years ago, not far from here. It was a time when Philips was still synonymous with light bulbs, when globalisation meant eating Chinese food once a year and when meeting people from abroad meant talking to Belgians or Germans. It was a time when Tilburg University had just opened its Law Faculty, when hoola hoop was still an attraction on the yearly fair and when Lans Bovenberg was only six years old. And look at where we are now.

I’m talking to you in English today. Not as a statement; as you know there is a public interest and debate about the use of English in universities. But for practical reasons. 15 percent of your students and half of your PhD’s is from abroad. Globalisation is moving on. And, Tilburg University is moving on with it. Your university belongs to the top of the world in social sciences and more specifically in economics.

And what’s more, your 12.000 students, almost 300 PhD candidates and nearly 900 researchers, lecturers and professors have a shared goal: to solve problems in society. You do this in refreshing ways. This summer, for instance, you invited 35 Syrian refugees to learn about Dutch corporate culture, so as to boost their chances of getting a job. I can’t tell you how pleased I was to read about this initiative.

If we zoom out a bit, the future of Brabant looks strong. Eindhoven still ranks as the smartest region in the world. And last year Tesla opened its first factory outside the United States, in Tilburg.

If we move up yet another level, our national economy is also doing better. From a macroeconomic point of view the Netherlands has made great strides since the crisis. The national debt is shrinking, unemployment rates are finally going down and after years of decline, the housing market – which contributed so strongly to our prolonged recession - is picking up again.

What’s more, the Netherlands scores well in international rankings: The Dutch economy is the 5th most competitive in the world, after Switzerland, Singapore, the US and Germany, beating Japan, China and the UK.

Our infrastructure is among the best in the world, especially by road and water, as this elevated roundabout for bicycles in Eindhoven shows. We are also one of the internet hubs of the world, with the second-highest online connectivity and the most competitive internet market.

If you factor in performance indicators of well-being, like life expectancy, health, literacy and educational standards, the Netherlands emerges as the 4th most prosperous country in the world. We rank fifth on the Human Development Index of the United Nations. And, to top it all, according to Unicef, the Netherlands is the best place in the world to live if you are a child.

If you hear this, you would be tempted to think that if Cees Nooteboom finally wins the Nobel prize for literature, we are done. Of course, that’s not the case. Even though we compare favourably to many other countries, we still have challenges to tackle. Why do we rank so high on all these lists? Yes, we have excellent infrastructure. Yes, we have good institutions. And yes, our country is a fine position for trade. But we are also a country that tries to provide everyone with equal opportunities for education, income and wealth.

Today, I would like to focus on these equal opportunities. Because we should not let our high international rankings lure us into a false sense of accomplishment. We may have one of the highest employment rates in the world, but that doesn’t really help the 541.000 Dutch men and women without a job. For a more nuanced perspective, we need to take a closer look at our own society. Then the picture becomes less rosy.

The Netherlands Institute for Social Research, or SCP, recently wrote: 'To get ahead in the Netherlands, you need economic capital such as income and wealth, but also other forms of capital like education, a good position on the labour market, physical and mental health and a high-quality personal network.'

So the question is: can everyone get ahead in the Netherlands? The answer is: no. Several organisations, including the OECD, and the Dutch Inspectorate of Education have also warned us for a growing 'opportunity divide'. Now, how is this possible in 1 of the most equal countries of the world? In the Netherlands we have a progressive tax system and a social security system that distributes income and wealth quite evenly and effectively. Equal distribution is also the ground for the passionate discussion about purchasing power – in Dutch, ‘het koopkrachtplaatje’-  we have this every year preparing for the new budget.

As a consequence, roughly 70 percent of all Dutchmen and -women are, according to the SCP, relatively well-off. But the remaining 30 percent runs the risk of being excluded. Half this group is classified as: ‘the insecure employed’. These are medium-educated people on low incomes who are frequently unemployed. The other half consists of 'those who already lag behind'. These people have the lowest income, wealth and education; they lack good networks and have more physical and mental problems. Women, the elderly and Dutch with a non-Western background are overly represented in this group. This bottom thirty percent runs the highest risk of falling victim to the opportunity gap.

The opportunity gap manifests itself in many ways: If you’re ‘included’, for example, you’re likely to live more than 7n years longer and enjoy good health more than a decade longer than the ‘excluded’. The ‘included’ divorce less, have a richer social life, live in better, healthier and safer houses and have better access to information. You can even speak of a digital divide. The ‘excluded’ are more pessimistic about the future, about Europe and about globalisation than the included. And they have more reason to be, because they run a greater risk of unemployment, poor health, poverty and social isolation.

Harvard professor Robert Putnam writes about this issue in his book Our Kids. He was focusing on the United States, where the social divide is much more visible than in the Netherlands. But his book shows clearly what a deep opportunity gap can do to any country: It harms the economy, creates political unrest and makes a whole generation of kids feel inadequate through no fault of their own. And I would like to add that there’s a correlation between people feeling excluded and the rise of populism. Something we are seeing in the US as well.

So we have to ask ourselves two questions:
1. What causes the opportunity gap?
2. What can we do to close it?

Everyone in the Netherlands, regardless of socioeconomic background, has access to schools. In its most recent State of Education, however, the Dutch Inspectorate of Education warned about those who are being excluded and the dangers of a downward spiral. It turns out that children with highly educated parents have increasingly more opportunities than children whose parents haven’t had much education.

According to the Inspectorate there are several causes: Highly educated parents are more involved in their children’s education. They are more informed about school choice and more active in getting their children into the best schools. They are more alert and able to send their children to homework tutors and extracurricular trainers. Teachers also play a role. They often have higher expectations of children of highly educated parents and lower expectation of children with lower educated parents, regardless of the intelligence or abilities of the children in question. As Putnam puts it: 'There is a creeping pessimism about the chances for upward mobility for the next generation.'

Children who don’t have the same opportunities to get a good education stand less chance of getting a good job. Most new jobs require skilled workers – and this will apply even more in the future. On top of that, new technological fields like robotics may even eliminate the need for certain low-skilled jobs. A 2015 study by the International Monetary Fund concluded that technological progress is a major factor in the increase of inequality. Or, as economists Jeffrey Sachs and Laurence Kotlikoff write: 'Smart machines now check us out at stores, take our blood pressure, massage our backs, give us directions, answer our phones, print our documents, transmit our messages, rock our babies, read our books, turn on our lights, shine our shoes, guard our homes, fly our planes, write our wills, teach our children, kill our enemies, and the list goes on.'

Moreover, robots may increase the gap in another way. As economist David Autor argues, wages for highly educated workers with special skills will go up faster than wages for medium- and less-educated. So even if the tide rises for everyone, it won’t lift up all boats to the same height. This widens the gap between the included and the excluded.

We have a double challenge ahead of us. First,  we need to stay ahead of the curve. We have to be smarter and more innovative to keep benefitting from globalisation and technological progress. Secondly, we need to rebalance the distribution of the pro's and the cons of globalization and technological development.  The winners and the 'losers' are drifting apart, and that has to be stopped. This is about opportunities for all. This is about investing more in people, preventing them from falling behind. This is about remaining 'one society'. This is the big issue. And for that we need all the help we can get from the academic world.

Of course, an equal distribution of income, wealth and opportunities leads to a relatively equal society. And education is the key to combating inequality. According to the OECD: 'Many policies entail a double dividend as they reduce income inequality while at the same time boosting long-run GDP per capita. Examples include making educational potential less dependent on personal and social circumstances.'

Every year, the OECD publishes Education at a glance, its yearly report on education in developed countries. During the financial crisis, the OECD was alarmed to note that in some countries, including the US and the UK, spending on education had dropped significantly over the course of the crisis. A matter of wrong priorities and short-sightedness. Now, after the crisis, I’m pleased to see that – at least in the Eurozone – on average education budgets have suffered relatively little from the crisis and are increasing again. In the Netherlands, the amount we spend on education per student has actually gone up during this government.

But focusing only on the quantity of public investment is not enough. In the Eurogroup we also regularly discuss the quality of public spending. One of the issues we touched upon is education. When we look at the quality of education, we see big differences between countries. Italy and Portugal, for example, spend as much on education as Finland, calculated as a percentage of the GDP. Yet while Italy and Portugal only achieve average scores in comparative assessment, Finland has the highest score of the EU. Some countries manage to deliver more for the same amount of money. These countries should be our examples.

In the Netherlands we also have to look at the quality of our education. As you may remember, I was chairman of the committee in 2008 that reviewed the overhaul of our education system in the 1990s. The committee concluded that many of these reforms were ineffective and the way they were designed and implemented did a lot of damage. This was partly because many of its elements had not been scientifically tested and proven to work beforehand.

So I was pleased this year with the report by the Netherlands Bureau of Economic Policy Analysis called Promising Education Policy. This report was a direct answer to the call for more proven effective innovation in education. The CPB concluded that our system could improve in several ways, for example by investing more in training and coaching teachers much more intensively in social skills. Most importantly for now, however, the CPB advised that more should be done for children who run behind at school, which - not coincidentally - are often children hit by the opportunity gap. In fact, research suggests that kids with highly educated parents go up a few intelligent points during summer holidays, while kids with low educated parents drop a few points. We have to counter that effect. One example of an investment on that particular topic that helps are summer schools. Extra school time for kids that otherwise would have to repeat a whole year is an effective way to support those kids and to improve their opportunities. The minister of education will, in 2 weeks time, announce extra investments in equal opportunities in education.

We also have to increase the adaptability of our economies, to make sure that people are not sidelined by trends like technological innovation or migration, and that we all have the chance to reap the benefits of globalisation. We need a highly skilled labour force to compete in tomorrow’s economy. The European Investment Bank, of which the finance ministers are the governors, invested almost 14 billion euros in 2014 in Europe’s young people. In the Netherlands, for example, the EIB invested 15 million euro this year for research and development in the company of Erik de Bruijn, alumnus of Tilburg University,  that makes 3D-printers. After six years, this company already employs 200 people.

The project of the EIB has two aims. First small and new companies should get better access to finance and thus stimulate innovation and job creation. Second, it wants to improve the employability of young people without jobs by increasing their skills through education and training. From its launch in 2013 to the end of 2014, the initiative supported the jobs of roughly 800.000 young people throughout Europe.

Another way to increase the number of jobs is by reducing the taxes on labour. Particularly the ‘tax wedge’, which means the difference between the net income earned by an employee and the total cost of labour for the employer. Almost all countries in the euro area have a tax wedge that’s higher than the OECD average. This obstructs our efforts to boost growth and create jobs. But we are making progress in this area. In the Eurogroup, we've set a benchmark against which we measure our tax wedge performances. Together with sharing best practices, this encourages reforms and reductions in the tax burden on labour in our member states. The Netherlands did this with the 5 billion tax reduction package. Starting next year we will introduce the low-income tax credit for employers who take on employees in the lower wage scales. A number of Eurozone countries like Spain, Austria, Belgium and others are doing the same. Lowering the tax wedge doesn’t just foster economic growth and employment. If designed well, it also reduces income inequality.

It’s also important that people who lose their jobs due to globalization or technological advances can find new jobs. Fortunately, technological progress also leads to the creation of all sorts of jobs. Research by former World Bank Chief Economist Justin Lin shows that new job titles account for a large part of employment creation in the US. Think of jobs like app developer, graphic designer or IT system administrator. But at the same time we need to make it easier for people to access new professions. Too often, regulated professions operate as a kind of closed shop, creating another boundary between insiders and outsiders. In Europe more than a 1.000 professions in different countries are regulated or protected. We can open up a large number of these jobs for young people. Sure – some professions require strict qualifications and even protection by national governments, but do chimney sweeps, notaries and bouncers need to be among them?

As many of you know, studying abroad has great academic advantages, but it also helps to break down the mental barriers to working in another country later. So we encourage students to study abroad for a while with the Erasmus programme. In Eindhoven the international community is growing so fast that the government will present proposals on Budget Day so Eindhoven can adapt its services like schools to support the successful economic development. Also, we are determined to improve the financing of new, successful companies and of the big transitions needed per example related to climate change and sustainable energy. Before the end of the year, we will put our proposals forward for a new Dutch investment institute.

So far, I have talked about measures to make sure we are all prepared for the future labour market. But it's equally important that we keep innovative. This brings me to the academic world. I’ve already talked about robots and how they can have an impact on the opportunity gap. But this is no reason to object to robotics. Those who think we should get rid of the robots should remember this. We don’t want to rise against the robots, we want the robots to help us rise.

And that’s exactly what you have been doing here at Tilburg University. Your Center for Cognition and Communication has been working with other universities – and with the support of private investment and the European Committee - developed L2TOR. L2TOR is a robot that helps kids learn languages. This is great, but it becomes even better when we consider that acquiring other languages is crucial in this globalised world. And since small children are basically information sponges that walk funny, they can absorb a second language at an early age, before school, even if their parents don’t speak that language. Imagine what a robot could achieve in the space of a summer!

Of course, you don’t all build robots. And I’m not telling you to drop your research in economy, econometrics or law to start building Wall-E, R2-D2 or Iron Man. Simply do your best in your particular field. I know Schumpeter is all the rage at the moment. Everyone is looking for the next thing that disrupts the old and ushers in the new. But the reality, as you all know, is that the house built by scientific progress is laid one brick at a time. So those of you who research pension systems, make sure we have all the state-of-the-art, insanely complex calculations we need to keep our pension system the best in the world. Those of you who study macro-economics, build even more advanced models that improve our understanding of the effects of fiscal policy. Those of you who study behavioural economics: figure out in even more detail how people respond to incentives so we structure our economies and financial markets to stimulate good and prevent bad behaviour. Because this is what you do best at Tilburg University: you carry out research at the most advanced level, but always with a view to how society can benefit from your findings. Please keep up the good work.

As I hopefully made clear at the beginning, the Netherlands is doing better.  In fact it’s doing quite well, according to international rankings. But these rankings tell us little about the risks and challenges for the future. So we cannot afford to sit back. Ever since the Olympics in Rio, it’s not very hard to imagine how we should deal with this.  Take Anna van der Breggen who won a gold medal last month. Do you know what she did the day after she won? She trained.

She didn’t stop, she keeps preparing for the future. She sets the example for us. So let’s prepare. There are known and unknown challenges ahead. One that is staring us right in the face is the growing opportunity gap in our western societies, and the Netherlands is no exception. It may create a new divide between highly educated and low-skilled workers. Between old and young. Between insiders and outsiders. It brings unease, polarisation and feeds into populism. But making the right policy choices matters. And you matter. We can combat opportunity inequality by creating jobs, by improving opportunities in our schools, by triggering new investments, by keeping people in touch with the labour market and... by having academics who invent robots that talk to kids.
Thank you very much.