Purchasing power up 1.3 percent last year

The purchasing power of the Dutch population increased by 1.3 percent in 2019 relative to 2018. This is reported by Statistics Netherlands (CBS).

The increase in purchasing power is higher than in the previous two years. This was partly due to the largest increase in CAO wages in ten years. Partly because of this, the purchasing power of employees rose more than that of the average household, by 2.5 percent. Furthermore, people were left with more money as a result of a number of tax cuts, such as a lower income tax.

The 1.3 percent is the average increase, but that does not mean that the purchasing power of all households increased. That is only the case for 62 percent. For 38 percent of households, purchasing power either decreased or remained the same. Such a drop in purchasing power may be due to people losing their jobs or choosing to work fewer hours.

Purchasing power self-employed still unknown

The purchasing power figures for 2019 for independent entrepreneurs as a group are not yet known. They can file their tax returns later than employees, which means that Statistics Netherlands does not yet have a complete picture of the incomes of the self-employed.

One year previously, in 2018, the purchasing power of entrepreneurs (2.9 percent) grew faster than that of employees (1.9 percent). At the same time, there was more variation among the self-employed than among employees. At 43 percent, purchasing power declined in 2018, despite an average increase by 2.9 percent. For employees, purchasing power declined by 39 percent in 2018.

Forecast 2020: 2.2 percent

CBS does not make any predictions about purchasing power. The Netherlands Bureau for Economic Policy Analysis (CPB) does. In its latest August forecast, the CPB expects an average purchasing power increase of 2.2 percent this year and 0.4 percent next year.

The CBS’s retrospective purchasing power calculation works differently from the CPB’s prediction. CBS measures what actually happened to a person’s purchasing power as a result of changes in his or her personal situation. For example, you earn less when you lose your job or sometimes more when you change jobs.

CPB can hardly predict such personal developments, so CPB only predicts the so-called ‘static purchasing power’. CPB actually assumes that everyone’s situation remains the same: everyone keeps the same job in the forecast and no one loses their job,

In times of corona, such a prediction is of course of little use, because the situation of many households is changing. People lose their jobs and there is more uncertainty than in previous years.