Is more compensation desirable?


"Bad-luck generation, we demand compensation!" Last Saturday, more than 7,000 students were shouting this at compensation protest at the Museumplein in Amsterdam. They would like to see more compensation for the generation of students who had to use the loan system. In 2023, that system will be abolished and the ‘grant’ (in dutch: basisbeurs) of 300 euros per month will come back again. For the students who had to miss out on this, 1 billion euros - 1,000 euros per student - has been set aside to compensate. That sounds like relatively little, but is that the whole story?

First of all, it is very unfortunate that one generation will soon be saddled with extra debts. It is logical that many students want full compensation, equal to the basic grant ('basisbeurs'). Count on 14,000 euros per student for those living in a student room (270 euros of basic grant per month for four years). For students still living with their parents it equals about 6,000 euros. The total of additional government spending amounts to about 8 billion euros. Nice, then you can pay off part of your loan, if you have one. It also solves the disadvantages of having debt.

Full compensation is the most obvious and attractive option, but is it the best? For the government, this is a short-term investment, if you can even call it an investment. What the government prefers to do is to invest money in society, and to do so in such a way that it creates a lot of value over several years. Furthermore, the government does not have unlimited financial resources. Just as we wait for a transfer from the government (in Dutch: ome DUO) at the end of the month, the government waits for money to flow into the treasury via taxes.

When drafting the coalition agreement, it goes like this: if more money goes to student compensation, that could mean that less money could be invested in healthcare, into the economy, in education, or in addressing the climate crisis. And all of the latter things are also incredibly important. Investing in those things gives much more back in the long run to the generation that has now fallen victim to the loan system. A stronger economy makes for better wages, and investments in the climate makes for a habitable earth. Seems to me not unimportant either. You have to make choices as a government with the limited resources at your disposal.

Fortunately, the negotiating table for the new coalition agreement did include political parties who were in favor of abolishing the loan system and who also proposed other additional investments (see the programs of the CDA, the CU and D66). Not all of these ended up in the coalition agreement - thanks VVD! - which led to, among other things, the proposed compensation of 1,000 euros. D66, for example, as the only party of the four, had bet on compensation in the form of a sum of money of 4,000 euros.

But long-term investments are also there for the 'bad-luck generation': free childcare, there will (hopefully) be affordable houses, there is a better pension scheme and there will be a lot more investment in tackling the climate crisis. In addition, work will become more rewarding - if I may believe the Court of Audit, which analyzed the coalition agreement. And quite honestly: if I have to choose between more compensation and less investment in the climate, in the housing market and less wage for work, I choose less compensation. In the long run, that's going to pay of a lot more than those 6,000 or 14,000 euros. Although I admit that 1,000 euros is very meager in the short term.

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