Two years ago he co-wrote a lengthy report with an optimistic message about income equality in the Netherlands: it was not too bad. In a new study, professor of economics Egbert Jongen now makes major comments about this. Because if he delves deeper into the figures, he now knows, he can still see worrying trends.
In that first study, at the end of 2021, Jongen described with colleagues from Leiden University and statistics agency CBS that the Dutch have fully benefited from economic growth since the 1970s. Their purchasing power has increased by almost 60 percent. And income inequality has been stable since 1990.
But “under the hood” of these positive developments, there are still growing income differences and disappointing growth in prosperity, he concludes with fellow economist Heike Vethaak in a new study, which will be published this Thursday. The study was paid for by the FNV trade union.
More women at work
The averages are heavily influenced by one major development: more women have started working in recent decades. Now that the increase in working women is decreasing, inequality also appears to be growing again.
Over the past forty years, men have barely earned more money, corrected for price increases. Their ‘market income’, which does not include any government benefits, rose by only 0.3 percent per year.
The average market income of women increased ten times as fast, by 3.4 percent per year. This was not due to higher hourly wages, but mainly because more women went to work. Anyone who takes the step to work will benefit greatly financially.
“So yes,” concludes Jongen, “in the end we became richer. But the women who have started working more have also given up something: time for informal care, for example.”
No one becomes a multi-millionaire on their own merits
The same thing happened with inequality. It increased among men. “Just like in other countries,” says Jongen. “The men with the lowest incomes even saw their market income, adjusted for inflation, decline. Their pay has fallen: that is quite dramatic.”
Inequality is often measured with the Gini coefficient: a number between 0 (everyone has the same income) to 1 (all the income belongs to one person). This figure has increased by 22 percent among men in forty years, since 1981.
In women it actually fell by 22 percent. Because women with lower incomes in particular started working more often. This increased their income and reduced the gap with the richest women.
If you include government redistribution through taxes and benefits, the differences become smaller. But they are not disappearing: women, especially with low incomes, still improved significantly, men did not. And it still appears that the men with the lowest incomes have deteriorated over the past forty years.
This may be a cause for pessimism for the future. Because the strong increase in the number of working women, which has dampened the growth of inequality all these years, is over. There is therefore a risk that inequality will increase again.
This is already visible in the figures for the last ten years, says Jongen. “Income inequality among women is no longer decreasing. In fact, we now see the incomes of women with higher incomes rising more than those with lower incomes.”
That also explains why this study sounds more pessimistic than the one from two years ago: it is more current. The previous study ended in 2019, this one also includes figures for 2020 and 2021. “And then inequality increased again.”
Since 1981, inequality, calculated with the Gini coefficient, has increased by 12 percent, the study says. That is the inequality after redistribution by the government. “Most of that was in the eighties,” says Jongen. Then inequality increased by 8 percent, followed by stagnation in the 1990s and 2000s. “We previously thought that the income distribution had remained stable, but in the last ten years we have seen inequality increase again by 5 percent.”
The growing inequality in the Netherlands is not nearly as extreme as in the United States and the United Kingdom, says Jongen. “There is really a factor of three in between.” This is mainly because the government redistributes so much money, because the incomes that Dutch people earn themselves vary widely. Boy: “The differences are indeed large on the Dutch labor market.”
Will inequality continue to increase in the coming years? That is not necessary, says Jongen. Some experts expect that artificial intelligence will mainly threaten the jobs of highly educated people. “That could put pressure on the wages of higher incomes,” says Jongen. “But if current trends continue, inequality will indeed continue to increase.”