Distribution of income in the Netherlands
The distribution of income in the Netherlands deals with the personal distribution of income in the Netherlands . Personal income distribution describes how the income of an economy is distributed among individuals or groups (e.g. private households ).
In 2017, the Gini coefficient in the Netherlands was 0.27, which is calculated according to Eurostat using the equivalised disposable income . In comparison with the member states of the European Union , the Netherlands took 6th place. The mean equivalised disposable income in the Netherlands in 2017 was € 26,350, the median income in the same year was € 23,560. The top 10% of the income distribution earned 14.2% of total Dutch income, below the EU-27 average. The income quintile ratio was 4.0 in 2017, so the richest 20% of the income distribution received 4 times the disposable income of the poorest 20% of the income distribution. The at-risk-of-poverty rate in the Netherlands was 13.2% in 2017, which is below the EU-27 average, which was 16.9%.
Methods for displaying and calculating the distribution of income
Differentiation between market income, secondary income, disposable income and equivalised income
The market income represents the primary income. This is made up of the income from self-employed and salaried employment, business activity, rental and capital before taxes and duties. Secondary income takes into account social security contributions, direct taxes and public (e.g. social assistance, unemployment benefits) and private (e.g. maintenance) transfers. Secondary income is thus the disposable income of private households which is available for private consumption and private saving. The comparison between market income and disposable income provides information about the strength of the distribution policy measures implemented by the public sector.
In 1987 the poverty rate in the Netherlands before state benefits was 26.4%, after state distribution measures it was only 6.4%. Just a few years later, in 1993, the poverty rate before government benefits was 27.9% and only fell to 9.8%. This period also represents the most striking changes in the post-war period. This development can also be seen in the Gini coefficients, for both market income and disposable income. This shows that from 1987 to 1993 the Gini coefficient of disposable income rose from 27.5 to 31.1 and the Gini coefficient of market income from 40.3 to 43.1. In 1995 there was a tax reform in which a more progressive income tax was implemented. This led to a falling Gini coefficient up to 2005, since then, with the exception of short-term fluctuations after the economic crisis in 2008, a relatively constant development has been evident.
The equivalised income is the income that would enable every member of a household, if they had grown up and lived alone, the same (equivalent) standard of living that they have within the household. To do this, the income of the entire household is added up and then weighted using an equivalence scale. The weighting depends on the number and age of the people in the household.
Overview of income distribution indicators
Average and median income
If one arranges the disposable income according to income level, the person who lies in the middle of this distribution corresponds exactly to the mean income ( median ). The mean value describes the average income. If the average income is compared to the median income, this can provide information about the income distribution . If the difference is high, this is an indication of an unequal distribution. This is because the median is statistically robust to outliers compared to the mean. These outliers are, for example, very high incomes at the end of the income distribution.
The mean value of nominal equivalised income was always higher than the median over the period from 1996 to 2017 (with the exception of 2002-2004 due to a data gap). Nonetheless, both the mean and the median of nominal equivalised income (not adjusted for inflation) rose significantly during this period. In 2005 the mean value of the nominal equivalent income was 18,900 euros, the median in the same year was 17,000 euros. By 2017, the mean value of the nominal equivalent income rose to 26,350 euros and the median to 23,560 euros, which corresponds to a growth rate of around 39% of the mean and median. The nominal equivalent income stagnated from 2008 to 2014 before rising again from 2014.
Real equivalised income (adjusted for inflation using the HICP ) increased more slowly than nominal equivalised income over the period from 1996 to 2017. Up to 2000 the average real equivalent income was around 20,000 euros, from 2005 to 2009 it rose somewhat more rapidly to 22,000 euros. A downward trend in real equivalised income can be observed from 2009 onwards.
Gini coefficient
The Gini coefficient is a measure of the distribution of income and has values between 0 and 1. A Gini coefficient of 0 means that all individuals in an economy have exactly the same income. On the other hand, a Gini coefficient of 1 represents the greatest inequality - one person holds all income. The Gini coefficient can also be mapped on the basis of an index scale, the Gini index , which lies between 0 and 100, with the interpretation being the same as the Gini coefficient. A value of 0 means perfect equality and a value of 100, perfect inequality of income.
When considering the Gini coefficient / Gini index, it is important to note that the data on which the calculation is based does not include the entirety of the population. Individuals who die in the informal sector and the homeless are excluded from the survey. Furthermore, the Gini coefficient does not provide any information about the absolute income level of the respective population. This means that a country with very low incomes can have an equal income distribution (low Gini coefficient) and still have a poor population.
When dealing with the Gini coefficient, it is important to note which income category is used as the basis for calculation. A distinction must be made between market income and disposable income. The comparison between the Gini coefficient of market income (before taxes and transfers) and disposable income (after taxes and transfers) provides information about the redistributive measures of a state. The Gini coefficient of market income in the Netherlands was slightly less than 0.45 in 2017. The Gini coefficient of disposable income was 0.28. The role of the Dutch state in redistributing income becomes clear here. The Gini coefficient in the Netherlands based on disposable income is around 0.15 lower than when the inequality measure is calculated based on market income.
Compared to the neighboring countries and also to the EU-27 average, the Netherlands recorded relatively lower income inequality in equivalised disposable income over the entire period from 2005 to 2017 (here calculated with the Gini index from Eurostat). Only in Belgium is the Gini index before the economic crisis and after 2013 at a lower level. The Gini index in the Netherlands rose from 25.0 to 27.1 in 2013, which suggests a more unequal distribution of income.
S80 / S20 income quintile ratio
The 80/20 income quintile ratio is the ratio of the total income of the 20% of the population with the highest income (top quintile) to the total income of the 20% of the population with the lowest income (bottom quintile). The quintile income ratio has changed only slightly in the Netherlands over the past twelve years. The value was 4.2 in 1995 and 4.0 in 2017. This means that the richest 20% of the Netherlands had four times the income compared to the poorest 20% in 2017. For the EU-27 average, the 80/20 ratio was 5.0 in 2017, which is above the value in the Netherlands. Basically, the Netherlands have always been well below the EU-27 average since 2005.
| S80 / S20 income quintile ratio in the Netherlands and EU-27 | |||||||||||||||||||||
| 1995 | 1996 | 1997 | 1998 | 1999 | 200 | 2001 | 2002 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EU-27 | 5.0 | 5.0 | 4.9 | 4.9 | 5.0 | 5.0 | 5.0 | 5.2 | 5.2 | 5.2 | 5.1 | ||||||||||
| Netherlands | 4.2 | 4.4 | 3.6 | 3.6 | 3.7 | 4.1 | 4.0 | 4.0 | 4.0 | 3.8 | 4.0 | 4.0 | 4.0 | 3.7 | 3.8 | 3.6 | 3.6 | 3.8 | 3.8 | 3.9 | 4.0 |
Top 10% income share
If you sort people in ascending order according to income and divide them into ten groups of equal size, i.e. 10% of the total population each, you get the income decile of an economy. This shows what proportion a decile (e.g. the tenth decile) has in total income. The top 10% income share describes the equivalised disposable income of the richest 10% of the total income in the Netherlands (thus social security contributions and wage tax are included in the calculation). In the Netherlands, the share of the richest 10% in 1995 was 23% of nominal equivalised income. In 2008 the share was 22.3% and in 2017 it was 22%. The share of the top 10% has fallen since 1996 despite upward and downward fluctuations. The Netherlands is also below the EU-27 average: in 2017, the share of total income in the top 10% was 23.9.
Gender income inequality
S80 / S20 income quintile ratio
The income quintile ratio can be examined separately by gender between 1995 and 2017 (with a data gap between 2000 and 2004). The equivalised disposable income of men and women is used as income. Over the period under review, the 80/20 ratio for both sexes is around 4 and changes only slightly over time. A ratio of 4 means that the top 20% of the population in the income distribution has around 4 times as much income as the part of the population with the lowest 20% of incomes. In general, the 80/20 income quintile ratio for men is slightly higher for almost the entire period. The highest difference between the top 20% and the lowest 20% of incomes was observed in the Netherlands for both women and men in 1996, with a ratio of 4.3 for women and 4.5 for men. This value then falls slightly for both genders and reaches the lowest value with 3.7 for women in 1999, 2010 and 2011 and 3.6 for men in 2010. After 2010 the income quintile ratio rises again for both genders, with that The value for the men in comparison to the women increases somewhat more strongly.
Gender pay gap
The graph on the gender pay gap shows the development of the unadjusted gender wage gap in the NACE branches of industry, construction and services (excluding public administration, defense and social security) in the Netherlands compared to the EU-27 member states. The adjusted gender wage gap represents the difference between the average gross hourly wage of women as a proportion of the average gross hourly wage of men. If the gender pay gap was still over 19% at the beginning of the observation period 2007, this will decrease continuously until 2017 (with the exception of 2011) to around 15%. In the Netherlands, the unadjusted gender wage gap was thus reduced by 4 percentage points within 10 years. The situation is somewhat different for the gender wage gap in the same sectors on the European average. In 2008, the gender pay gap was measured at 17.3% on the European average, which is lower than in the Netherlands. In contrast to the Netherlands, however, the European countries manage no or only a slight reduction in the earnings gap over time. As early as 2012, the gap between the Netherlands and the EU-27 will be evened out and women earn 17.5% less than men. Even after 2012, the gender wage gap in the Netherlands will fall more sharply than the European average. As a result, the gender pay gap in the industry, construction and services sectors was 16% at the end of the observation period in 2017, one percentage point higher than in the Netherlands.
Regional income inequality
Disposable household income
When looking at the disposable household income according to NUTS 2 regions in the Netherlands in 2016, it is first and foremost noticeable that the regional income differences are small. Specifically, the disposable income per inhabitant in the Netherlands in 2016 was distributed between 15,800 euros in Groningen and Friesland and 18,400 euros in the regions of North Holland and Utrecht . The largest difference in the average disposable household income between the regions in the Netherlands is therefore only 3,600 euros. This value is particularly small in comparison to the regional income differences in other European countries. For example, the difference between the highest and lowest regional incomes in Italy is just under 13,000 euros.
Even if the regional incomes are distributed relatively evenly, a slight north-south divide can nonetheless be seen. While in the southern regions and in the central regions near the coast of the Netherlands, the per capita disposable income in 2016 was between 17,000 and 18,000 euros, the population in the north and in the central regions within the country only recorded an average income of 15,000 to 17,000 euros . At the upper end of the income distribution, the regions of Noord-Holland with the capital Amsterdam and Utrecht with the city of the same name should be emphasized. Apart from the city of Groningen, there are no major metropolitan areas in the lower-income north.
The Netherlands has a progressive tax system . Since the concept of income used in the data includes disposable income after taxes and transfers, all redistributive effects of a progressive income tax and a social transfer system are already taken into account in the present regional income distribution from 2016 .
Poverty and social exclusion
Based on the Eurostat definition, a person is considered to be at risk of poverty and social exclusion if they are at risk of poverty or material deprivation or if they live in households with very low employment . A person with an equivalised income below 60% of the national median equivalised income is considered to be at risk of poverty . Material deprivation includes, on the one hand, the economic burden and, on the other hand, the lack of durable consumer goods and is defined as the involuntary inability to afford certain goods of daily life.
In general, the proportion of the population at risk of poverty in the Netherlands in 2016 ranged between 13.4% (Noord-Brabant) and 23.7% (Groningen). In other words, while in the province of Utrecht, for example, a little more than one in ten people were affected by poverty and social exclusion in 2016, in Groningen it was one in five. In the high-income provinces of North Holland and Utrecht, the likelihood of experiencing poverty and social exclusion is 18.1 and 15.2%, respectively. With these values, the two regions are roughly in line with the Dutch average, which was 16.7% in 2016. In comparison to the distribution of disposable household income, it is also noticeable that a lower income is not necessarily associated with a higher risk of poverty. In 2016 , the population in the Overijssel region had only a comparatively low disposable income, but in terms of the risk of poverty it did not do any worse than many regions with higher incomes and even better than one of the highest income regions of North Holland. The same applies to all other regions in the north with the exception of Groningen. If you take a look at the Noord-Holland region, you can even see a positive correlation between income and the likelihood of being affected by poverty.
In summary, it can be said of the regional distribution of income and poverty in the Netherlands that, especially in the southern and central regions with large cities, higher incomes are generated than in the less populated areas of the north, but these regional differences are not reflected everywhere in the poverty level. and the risk of exclusion. Since the values presented are purely regional averages and no regional inequality indicators, such as a regional Gini coefficient, are available, no statement can be made as to whether the higher incomes in the south can be explained purely by the existing cities are.
Inequality in metropolitan areas
| Inequality in metropolitan areas in 2016 | |||||
| city | Population share | income | |||
| Amsterdam | 16.0% | $ 29,310 | |||
| Groningen | 2.1% | $ 24,265 | |||
| Utrecht | 5.2% | $ 29,739 | |||
| Eindhoven | 4.4% | $ 27,318 | |||
| Rotterdam | 9.9% | $ 27,631 | |||
| The hague | 6.3% | $ 26,970 | |||
Since regional income inequality in the Netherlands appears to be related to populous and poorly populated areas, a more detailed analysis of the inequality between and within the Dutch metropolitan areas may be of interest. The table shows the average income in the larger cities of the Netherlands based on OECD data. Income is measured as household disposable income in US dollars at constant prices. In many other countries, indicators are also available that measure inequality and the risk of poverty within the metropolitan regions. For the Netherlands, on the other hand, this option does not exist and there are only entries for income for the six cities shown. However, these six cities represent over 40% of the total population of the Netherlands. In the six metropolises, the disposable household income is between USD 24,200 in Groningen and USD 29,310 in the capital Amsterdam , with the remaining four cities also just below the disposable household income in Amsterdam. With the exception of Groningen, all the cities mentioned are located in the south and central regions of the Netherlands. Similar to the distribution of income at the regional level, the north-south divide in income can also be determined on the basis of the metropolitan regions.
Although the income values listed cannot be compared one-to-one with the disposable household income according to NUTS 2 regions due to different currencies, a conversion from USD to euros shows an extreme difference between the incomes in the cities and the average values in the regions in which they are located. For example, the region where Amsterdam has an average disposable household income of 18,400 euros, while the same metric in the city of Amsterdam itself is almost 8,000 euros higher at 26,283 euros. A similarly high difference can be observed between the average values of the other cities and their regions
All in all, it can be said that the already slight regional income differences between north and south can possibly be explained primarily by the higher incomes in the heavily populated regions of the south. One possible explanation for the higher incomes in the densely populated areas would be the higher cost of living in the cities.
Individual evidence
- ↑ Eurostat: Gini coefficient of equivalised disposable income Source: SILC. Retrieved January 19, 2019 .
- ↑ Eurostat: Average and median income by age and gender - EU-SILC survey. Retrieved January 19, 2019 .
- ↑ Eurostat: Income distribution by quantile - EU-SILC survey. Retrieved January 19, 2019 .
- ↑ United Nations Economic Commission for Europe: Canberra Group Handbook on Household Income Statstics. Retrieved January 19, 2019 .
- ↑ Muffels, R., Fouarge, D., & Dekker, R .: Longitudinal Poverty and Income Inequality A Comparative Panel Study for The Netherlands, Germany and the UK. 2000.
- ↑ Bonesmo Fredriksen, K .: Income Inequality in the European Union . Ed .: OECD Economics Department Working Papers. tape 952 . Paris 2012.
- ↑ Average and median income - EU-SILC survey. Retrieved May 5, 2019 .
- ↑ HICP (2015 = 100) - Annual data (average index and rate of change). Retrieved May 5, 2019 .
- ^ Gini coefficient. Retrieved May 12, 2019 .
- ↑ Glossary: Income quintile share ratio - Statistics Explained. Retrieved January 19, 2019 .
- ↑ Eurostat: S80 / S20 income quintile ratio by gender and by age group - EU-SILC survey. Retrieved January 19, 2019 .
- ↑ S80 / S20 income quintile ratio - EU-SILC survey. Retrieved May 10, 2019 .
- ↑ Distribution of income by quantile - EU-SILC survey. Retrieved May 7, 2019 .
- ^ Living conditions in Europe - income distribution and income inequality. Retrieved January 19, 2019 .
- ↑ Eurostat: Income distribution by quantile - EU-SILC survey. Retrieved January 19, 2019 .
- ^ Austrian Chamber of Commerce: Tax rates in the EU countries. April 1, 2018, accessed May 3, 2019 (German).
- ↑ Glossary: Rate of people at risk of poverty or social exclusion (AROPE) - Statistics Explained. Retrieved May 3, 2019 .
- ↑ Glossary: Rate of people at risk of poverty or social exclusion (AROPE) - Statistics Explained. Retrieved May 3, 2019 .
- ↑ Glossary: Material Deprivation - Statistics Explained. Retrieved May 3, 2019 .
- ↑ Metropolitan areas. Retrieved May 3, 2019 .