Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Charles Kalshoven, macroeconomist and expert strategist at APG, on whether the wage gap in the Netherlands is still widening.
Anyone who visited an Albert Heijn store in recent weeks ran the risk of encountering empty shelves. Cause: a strike in the supermarket chain's distribution centers. The reason was dissatisfaction among the staff in the distribution centers about the increased wage gap between the company's employees and its top management. Whereas the supermarket chain’s management is taking good care of itself, the collective bargaining agreements of ordinary employees are being increasingly squeezed, says CNV negotiator Roel van Riezen in Trouw.
Over the past decade, income distribution actually appears to be quite stable, Kalshoven said. This is true both for the primary income distribution (income before it is redistributed by the government through taxes, benefits and allowances, ed.) and for standardized disposable incomes. The so-called Gini coefficient for income inequality has fluctuated around a value of 0.29 for about a decade. This puts the Netherlands in the same range as Belgium and the Scandinavian countries. Before redistribution, the Gini coefficient is 0.55. “So, the government’s measures are bringing inequality down considerably,” he says.
Incidentally, that does not mean that nothing is changing. The top 10 percent of incomes earn about a third of total income - a proportion that has remained the same over the past decade. Kalshoven: “But the income of the richest 1 percent and especially the top 0.1 percent of big earners did rise over that period, CBS figures show. In 2019, that top tier earned 3.7 percent of total primary income, up from 2.3 percent in 2011. In disposable income - after government measures - it is less extreme, but still an increase of 1.8 percent to 3.2 percent. So the ratio between lower and middle incomes on the one hand and the absolute top on the other did grow more skewed in recent years, although this recovered somewhat during the Covid crisis.”
Most attention is focused on the 0.1 percent of the Dutch population that earn the most, but that top tier has little impact on the inequality rate. Precisely because it is such a small group. But even if the impact on, say, the company's unit costs is negligible, there are indirect economic effects of a higher wage for the top earners, Kalshoven continued. “People see it as unfair and unjust, as we saw with the strikers at the distribution centers. That can lead to calls for raising the wages of other staff as well. The main argument for this, of course, is high inflation, but top salaries do add up. The increase in wages of all employees is of course reflected in the wage bill. And that in turn can translate into higher prices for products in stores, higher wage demands and so on. In other words, wage moderation at the top can also help prevent a wage-price spiral.”