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At the beginning of the 1980s, the Dutch government, in partnership with employers and unions, developed a policy to increase labour market flexibility in an effort to combat unemployment. Critics suggested that the introduction of more labour market flexibility would lead to further inequality and a gap in the labour market between workers with permanent employment and an underclass consisting mainly of women, immigrant workers and poorly educated workers with temporary contracts. The government claimed that legislation governing labour market flexibility would prevent this from happening. Almost two decades on, this article addresses the following questions: (1) who has a flexible labour contract and who is in permanent employment?; (2) what is the pattern of transition to permanent contracts?; and (3) what are the consequences for wage rates for those on permanent or flexible contracts respectively? In addressing these questions, data for the period 1986-96 is drawn from the survey undertaken every two years by the Netherlands Organization of Strategic Labour Market Research (OSA). The results indicate that labour market flexibility has been introduced into the Dutch labour market without adverse consequences for specific groups of workers. The share of flexible jobs in the Netherlands has gradually increased to around 10 per cent.