Prices are rising, but salaries are increasing more: CPB

People with a disposable income of 21,000 to 70,000 euros per year spent a smaller portion of their income on fixed and necessary expenses in 2023 than in 2019, the Netherlands Bureau for Economic Policy Analysis (CPB) reported. The decrease is due to the fact that the incomes of these middle groups have risen faster than their expenses.

In recent years, there has been much attention on the expenses of middle-income individuals due to high inflation. Fixed expenses and necessary expenses did become more expensive, but despite the large price increases, middle incomes had more money to spend in 2023 than before the coronavirus pandemic, according to the CPB. Most Dutch people belong to the middle-income group.

Fixed expenses include rent and subscriptions. Necessary expenses are essential costs, like food and clothing. In 2019, middle-income households spent 21,000 euros on fixed and necessary expenses. That rose to 23,000 euros in 2023. Partly due to wage increases, the average disposable income rose by 10,000 euros to 55,000 euros in those years. As a result, the average expenditure ratio fell from 50 to 46 percent between 2019 and 2023.

The increase in expenditure is mainly due to higher gas and electricity prices and more expensive groceries. Housing costs, like rent, mortgage, and other housing costs, are the largest expense item for households. In 2019, approximately half of the fixed and necessary costs consisted of housing costs. However, the housing costs ratio fell by 3 percent between 2019 and 2023, because housing costs remained stable and wages rose.

There are big differences between homeowners and tenants. Homeowners spend an average of 42 percent of their income on expenses. Tenants, both in the private and social sectors, spend almost 57 percent on this. According to the CPB, the difference is partly due to the fact that homeowners earn more on average. Tenants in private homes have similar expenses to homeowners, but a lower income. Households in social housing have lower expenses, but also lower incomes than homeowners.

In addition to higher income, the government’s energy support measures also helped to limit expenses, according to the CPB. In 2022, all households received 380 euros in compensation for the increased energy costs and additional arrangements were made for households around the social minimum.