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Purchasing power grows by 2.2 percent in corona year 2020

The Hague

In 2020, purchasing power grew by 2.2 percent on average, the highest growth since 2016. For employees, purchasing power increased the most, with 4.3 percent. Statistics Netherlands (CBS) reports this on the basis of new figures on the incomes of Dutch households and individuals.

Purchasing power changes due to external influences and changes in people’s personal lives. External influences include the development of collectively negotiated wages, the rise in consumer prices (inflation) and (new) government policy. The change in purchasing power as a result of these external influences is the static purchasing power development, which the CPB regularly estimates for the current year and the following year. The most recent CPB estimate of the average static purchasing power development in 2020 was 2.5 percent.

However, purchasing power also changes due to personal circumstances, for example when people start living together or separate, change jobs or retire. These influences are also taken into account in the dynamic development of purchasing power.

Wage development and government policy drive purchasing power

The positive dynamic purchasing power development in 2020 was largely the result of the favorable real wage development of 1.6 percent. The collective labor agreement wage increase amounted to 2.9 percent in 2020. Although the corona crisis broke out in 2020, a large part of the collective labor agreement wage agreements had already been made before the start of the crisis and are valid for the whole of 2020. The wage increase was offset by inflation of 1. 3 percent.

Government policy had a predominantly positive effect on purchasing power, including through planned fiscal measures, including increases in the general tax credit and the employed person’s tax credit, and the introduction of a two-band income tax system. Government policy is estimated to have contributed almost 1 percentage point to the favorable development of purchasing power.

Purchasing power grows by 2.2 percent in corona year 2020
Source link Purchasing power grows by 2.2 percent in corona year 2020

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