Has our purchasing power gone up or down?
Purchasing power development is the year-on-year change in people’s income, adjusted for price changes. In 2020, the buying power of the Dutch population increased relative to 2019, but not for everyone. Sixty-seven percent saw an improvement, whereas 38 percent experienced a decline. A relative majority of young people and the elderly were better off.
The median purchasing powernoot1 of Dutch residents went up by 2.2 percent in 2020. This was the seventh year in a row with an increase in purchasing power and the largest rise since 2016. One of the reasons for the positive development in purchasing power was the largest collective wage increase in more than ten years (2.9 percent). The wage increase was offset by 1.3 percent inflation, bringing the real wage development to 1.6 percent. In addition, various tax measures had a favourable effect on purchasing power. In particular, the increase in the general tax credit and the introduction of a two-tier income tax system let many households save more income. On the other hand, the purchasing power increase in 2020 was negatively affected by the coronavirus crisis, which was detrimental to some households due to loss of employment or income, for example. In order to mitigate the negative economic consequences of the coronavirus crisis in 2020, the government introduced temporary support measures.noot2
After 2000, purchasing power only declined in 2005 and in the years 2010–2013 as a result of the economic crisis. Those years also saw more people experience a decline rather than a rise in purchasing power.
|Jaar||Median purchasing power development|
|* Provisional figures|
Largest increase for employees
Purchasing power rose among all population groups in 2020, with employees experiencing the highest median increase (4.3 percent). Seventy percent of all employees saw a rise in purchasing power. In addition to benefiting from the agreed collective wage increase, employees can also boost their purchasing power by seeking to work more hours or get a better-paid job, among other things. Conversely, (temporary) job losses or choosing to work fewer hours are among reasons for a fall in purchasing power among 30 percent of employees.
For pensioners, purchasing power rose by an average of 1.0 percent in 2020. In 2017 and 2018, this group had experienced a drop in their purchasing power. Unlike employees, retired people have little or no opportunity to improve their own purchasing power and are much more dependent on government measures that affect purchasing power. In 2020, pensioners benefited relatively much from the increase of the general tax credit.
Households on income support saw a median increase in purchasing power of 1.5 percent. However, one-quarter of this group saw their purchasing power fall. Couples with children and single-parent families saw larger median increases than singles and couples without children.
|Social assistance benefit||1.5|
type of household
|* Provisional figures|
Median purchasing power
Purchasing power trends are defined as the median of individual changes in purchasing power: the change in purchasing power whereby exactly half of everyone is below the median and the other half above it.
Temporary support measures
Since March 2020, various support measures have been in place, including the Temporary bridging measure for self-employed professionals (Tozo). Self-employed entrepreneurs are able to apply for a benefit under this scheme in order to supplement their income up to the social minimum.
Other support measures for self-employed with a positive effect on purchasing power are TVL (Reimbursement of fixed costs) and TOGS (Reimbursement for entrepreneurs in affected sectors).
For employees in the affected sectors, the Temporary emergency bridging measure for sustained employment (NOW) is important. With this scheme, employers can continue to pay their employees with permanent and flexible contracts and keep them in employment.