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The labor market is shrinking permanently

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  • The labor market is shrinking permanently
  • March 21, 2026 by
    Paolo Maria Pavan


    What is the situation?


    In 2025, 806,000 people in the Netherlands were out of work due to illness or disability. Of these, 79%, about 661,000, expect never to return. Meanwhile, the truly available talent pool, combining unemployed and semi-unemployed groups, is only 640,000.

    This forms the basis for our analysis, which follows.

    This is not a normal hiring squeeze and not a short-term fluctuation in unemployment. It is a structural reduction in the available labor force. For small businesses, the issue is no longer just how to recruit. It is about preventing exits from happening within the business. Headline unemployment can suggest slack. The underlying workforce reality does not.


    Analysis


    For micro and small businesses, the challenge is clear: macro labor numbers seem stable, but day-to-day realities grow tighter.

    The issue goes beyond fewer candidates. Small businesses are losing experienced people, especially those 45 and older, to stress, illness, burnout, and caregiving demands. Long-term absence or disability drastically lowers return rates, making replacement slower, less certain, and costlier.

    This matters more for small firms than for large ones because a single missing person can disrupt delivery, finance, administration, or client continuity. Prevention is therefore not a soft HR topic. It is a continuity control. The real risk is treating health loss as temporary when it is often permanent.


    Impact


    H1


    Treat employee health as an operational dependency. One long-term absence can disrupt invoicing, planning, delivery, or customer relationships. Review where one person carries too much process knowledge or decision load.


    H2


    Build retention capacity before recruitment pressure worsens. Cross-training, workload visibility, clear role boundaries, and limited caregiver flexibility may cost less than replacing a single experienced employee in a shrinking market.


    H3


    By 2030, workforce scarcity is likely to be structural rather than cyclical. Small companies that redesign around resilience, documentation, and lower dependence on irreplaceable individuals will hold a real competitive advantage.


    Daily operational takeaway


    List your three most critical roles today. For each, state one health-exit risk and assign a named backup within 72 hours to immediately reduce operational dependency.

    in MARKET
    # Paolo Maria Pavan TODAY'S MARKET PULSE
    Paolo Maria Pavan March 21, 2026
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