During the early 1960s, the guided wage policy finally collapsed, bringing about an end to the relatively modest wage increases of the immediate postwar period. From the late 1950s until the early 1970s, labor costs were to grow much more rapidly in the Netherlands than in most other European countries. By extension, so would the Dutch welfare state. On the insistence of the labor union movement, a large share of the margin for pay increases was used to finance improvements to the social insurance system in this period. High growth rates and low unemployment in turn facilitated the introduction and expansion of related social programs. The result was a surprisingly rapid – and smooth – transformation of the Dutch welfare state. By the mid-1950s, social expenditure (i.e. expenditure on social insurance protection, health care, public education, social housing, labor market policy, and societal work) accounted for about fourteen percent of gross domestic product in the Netherlands, which was just below the European average at the time. By 1970, this figure had almost doubled to 27 percent. Having long been known for its conservative welfare outlook, the country was now spending more on social protection for its citizens than any other nation in the world. Its rapid pace, strong social and economic ramifications – as well as the absence of major parliamentary and societal opposition to this – all ensured that this transformation was truly remarkable.

It was also significant that this transformation largely took place under confessional-liberal – as opposed to socialist-led – governments. When the last Catholic-socialist coalition of the immediate postwar period fell in 1958, the Labor Party was to remain in the opposition benches for a period of almost fifteen years, with one short interruption. Despite initial assurances from the KVP and ARP – which consistently held power in this period – that they would change direction now that their cooperation with the Labor Party had ended, the confessional-liberal governments of the 1960s mostly pursued welfare policies similar to those favored by the Labor Party. In sharp contrast to their (social-democratic) predecessors, who had merely aimed to provide a modest level of state support to keep people out of poverty while limiting the system's costs and preserving workers’ sense of personal responsibility, the KVP and ARP ministers of Social Affairs of the 1960s were responsible for creating a welfare system that offered truly extravagant levels of state support.