Largest wage increase in years, but inflation is much higher

The collective bargaining wages in the Netherlands saw the biggest increase in years this past summer. However, workers’ purchasing power still declined as prices increased much more everywhere else. According to Statistics Netherlands (CBS), this was the first time since it started tracking these figures in 1973 that collectively negotiated wages lagged so far behind inflation.

On average, wages in the third quarter were 3.4 percent higher than in the same period last year. That is the largest increase since the first quarter of 2009. The wage increase in the Netherlands was limited for many years. But with the economy picking up after the coronavirus lockdown, there was an upward trend again recently.

AWVN, an essential advisor to Dutch employers in employment conditions, previously indicated that employers and unions agree to much stronger wage increases this year. That is partly due to the severe shortages in the labor market. Many companies have a high demand for personnel. They can only find new employees by significantly increasing remuneration.

Looking at the various industries, wages rose most in education at 7 percent. According to CBS, that is a record for that industry. The substantial increase is partly due to the closing of the pay gap between primary and secondary education from January this year.

But the wage increases are still dwarfed by the high inflation. In the third quarter, consumer prices were 12.3 percent higher than a year ago. So the actual wage development in the Netherlands was almost -9 percent. Energy prices, which spiked further since the Russian invasion of Ukraine, are the main driving force behind inflation. But many other things have also become more expensive.

The AWVN also previously stressed that wage increases could not wholly compensate for employees' loss of purchasing power due to the high inflation. In previous years, inflation was historically low. So wage increases of 1 or 1.5 percent already increased purchasing power. But that is clearly no longer the case.