A dash of data: Spotlight on Dutch households

Florence Wolff, OECD Statistics Directorate

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing it’s interesting to look at other indicators that focus more on the actual material conditions of households. Let’s focus on a few alternative indicators to see how households in the Netherlands are doing.

GDP and household income

Real household disposable income per capita increased at a slower pace than real GDP per capita in Q3 2016. Whereas real GDP per capita increased by 0.6 % from the previous quarter (the index increased from 102.2 in Q2 2016 to 102.8 in Q3 2016), real household income increased by 0.4% (the index increased from 97.1 in Q2 2016 to 97.5 in Q3 2016). The rise in household disposable income in Q3 2016 was driven by an increase in compensation of employees but this gain was somewhat offset by an increase in taxes, which explains the drop in the net cash transfers to households ratio (chart 2).

Chart 1 also provides a longer-term perspective and shows that Dutch households have yet to recover to their pre-crisis level of household income, which means that households have less purchasing power now than they had before the crisis. Also of note is that household income has been more volatile than GDP and has been trending upward since Q3 2014.

The divergent patterns between household disposable income and GDP are often related to changes in net cash transfers to households (chart 2), from government as well as from pension funds. For instance, government intervention that cushioned households’ material conditions in Q2 2009 resulted in a large increase in net cash transfers to households during that quarter (seen in chart 1 as a sharp increase in real household income in Q2 2009 compared with a slight drop in GDP). Since then, net transfers have been trending downwards slightly, mainly because of government acting to consolidate its finances.

Confidence, consumption and savings

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household material well-being one may also want to look at households’ consumption behaviour. Consumer confidence (chart 3) continued to rise in Q3 2016 (the index increased from 100.4 in Q2 2016 to 100.8 in Q3 2016). Coupled with a rise in real household income, this boosted real household consumption expenditure per capita by 0.7% in Q3 2016 (the index increased from 96.9 in Q2 2016 to 97.6 in Q3 2016) (chart 4). Real household consumption expenditures have been trending up since Q3 2014, in line with a similar trend in household income; however, Dutch households are still buying less goods and services per capita than they were before the crisis.

The households’ savings rate (chart 5), which shows the proportion that households are saving out of current income, was relatively stable at 12.3% in Q3 2016 indicating that Dutch households chose to spend the increase in their income in Q3 2016 on goods and services while preserving the level of their savings. Like in many other OECD countries, it is worth noting that Dutch households increased their savings during the economic crisis (with a peak at 16.9% in Q2 2009) – as a buffer to the deterioration in financial markets and the increased uncertainty over future income -, and that their savings rate has still not dropped back down to the levels observed before the crisis, indicating that Dutch households remain cautious.

Debt and net worth

The households’ indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, may reflect (changes in) financial vulnerabilities of the household sector and provides a useful yardstick to assess their debt sustainability. In Q3 2016, household indebtedness was 255 % of disposable income, slightly above the minimum reached in Q1 2016 (254.7%), yet remaining one of the highest levels among OECD countries. One reason for the high debt levels in the Netherlands relates to generous tax incentives on mortgage loans which constitute the bulk of household debt. Debt levels had been declining for several years because households redeemed relatively large amounts and took up fewer new mortgages. In the more recent period however, the decrease of the debt ratio has ended, mainly due to the revival of the housing market and the low interest rates.

When assessing households’ economic vulnerabilities, one should also look at the availability of assets, preferably taking into account both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households.

In Q3 2016, financial net worth of households was at its highest level, at 477.4% of disposable income (chart 7) – an increase of 7 percentage points from the previous quarter, and of 214.1 percentage points since 2010. These levels are amongst the highest among the OECD. The increase in Dutch households’ financial net worth in Q3 2016 mainly reflects the increase of pension entitlements (a large proportion of Dutch households’ wealth). Not counting assets related to pensions, the financial net worth of Dutch households was 15.5% of disposable income in the third quarter of 2016. All in all, the increase in assets significantly outpaced the declining trend in households’ debt (chart 6).



The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s well-being. In Q3 2016 the unemployment rate dropped to 5.8% confirming a downward trend observed since Q1 2014 when it reached a maximum of 7.8% in the period observed. The labour underutilisation rate, which takes into account underemployed workers and discouraged job seekers, is on average a little more than two times the size of the unemployment rate, indicating unmet aspirations among Dutch workers to work more. It is interesting to note that part-time employment is a long-standing characteristic of the labour market in the Netherlands: it is the OECD country with the highest part-time employment rate – with more than 35% of employed people working part-time – and where the share of involuntary part-timers (wanting full-time work) is low. This indicates the Dutch people’s preference for part-time work arrangements, in particular Dutch women, and therefore does not affect much the labour underutilisation rate.

One should keep in mind that households’ income, consumption and savings may differ considerably across various groups of households; the same holds for households’ indebtedness and (financial) net worth. The OECD is working on these distributional aspects and preliminary results can be found here and here. In addition, the Dutch Central Bureau of Statistics has information on income, consumption, and wealth broken down by household characteristics.

Like in many other countries, the economic crisis affected Dutch households who still haven’t recovered their pre-crisis income and consumption levels. Yet, overall, the third quarter of 2016 saw an increase of Dutch households’ material well-being, with expanding income and consumption per capita while their savings remain stable and unemployment continued to decrease.

However, to fully grasp people’s overall well-being, one should go beyond material conditions, and also look at a range of other dimensions of what shapes people’s lives, as is done in the OECD Better Life Initiative.

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our household’s economic well-being dashboard.

Statistical Insights: What does GDP per capita tell us about households’ material well-being?

OECD Statistics Directorate

Although GDP per capita is often used as a broad measure of average living standards, high levels of GDP per capita do not necessarily mean high levels of household disposable income, a key measure of average material well-being of people. For example, in 2014 Norway had the highest GDP per capita in the OECD (162% of the OECD average[1]), but only 115% of the OECD average for household disposable income[2]. And in Ireland, GDP per capita was 24% above the OECD average, while household disposable income per capita was 22% below the OECD average. Conversely, in the United States GDP per capita was 34% above the OECD average while household disposable income was 46% above the OECD average. These differences between GDP per capita and household disposable income per capita reflect two important factors. First, not all income generated by production (GDP) necessarily remains in the country; some of it may be appropriated by non-residents, for example by foreign-owned firms repatriating profits to their parents. Secondly, some parts may be retained by corporations and government and not accrue to households.

International rankings of household disposable income per capita and GDP per capita can differ significantly

GDP per capita, by design an indicator of the total income generated by economic activity in a country, is often used as a measure of people’s material well-being. However, not all of this income necessarily ends up in the purse of households. Some may be appropriated by government to build up sovereign wealth funds or to pay off debts, some may be appropriated by firms to build up balance sheets, and yet some may be appropriated by parent companies abroad repatriating profits from their affiliates. At the same time, households can also receive income from abroad for example from dividends and interest receipts through investments abroad.

As such, a preferred measure of people’s material well-being is household disposable income per capita, which represents the maximum amount a household can consume without having to reduce its assets or to increase its liabilities.

The above-mentioned factors can create significant differences between measures of household disposable income per capita and GDP per capita. The United States for example see its position relative to the OECD average jump by more than 10 percentage points (46% above the OECD-average of household disposable income, compared to 34% above the OECD average of GDP per capita), ranking it 1st among OECD countries on household disposable income compared to 3rd on GDP per capita (figure 1). This reflects in part repatriated (and redistributed) profits from US multinational activities abroad but also relatively lower general government expenditure and taxes on households..

On the other hand, Norway falls from 1st on a GDP basis to 4th on a household disposable income basis while Ireland drops dramatically (from 4th to 19th). For Ireland, one of the reasons relates to the presence of a significant number of foreign affiliates of multinational enterprises (responsible for around half of private sector GDP). While Irish GDP per capita was well above the OECD-average (24% higher), Irish household disposable income was significantly below the OECD-average (22% lower). Similar differences in household disposable income per capita relative to GDP per capita can also be seen in other countries where foreign affiliates play an important role in overall GDP (and that have only limited outward foreign investment) such as Hungary and the Czech Republic. Switzerland also sees falls in its household income vs GDP ranking, partly because of the relatively large number of cross-border workers.

For Norway, however, the divergence reflects other factors, linked to the large surplus generated by the Norwegian mining sector (around 25% of total economy value added), which is invested by the Norwegian government in its sovereign wealth fund[3].


Note: Data refer to 2013 for household adjusted disposable income for Mexico, New Zealand, and Switzerland.

Developments in household disposable income per capita can also differ significantly from developments in GDP per capita

Many factors can also contribute to diverging patterns of growth between household disposable income and GDP, for instance, declining shares of compensation of employees in value-added, and rising shares of profits retained by corporations. And in real terms, differences in consumer price inflation and changes in the GDP deflator, reflecting in part evolutions in terms of trade, can also contribute to divergences. Differences in tax and redistribution policy can also play a significant role.

Prior to the global financial crisis (2001-2007), real economic growth in many countries outpaced growth in real household disposable income, (figure 2, panel 1). However, post crisis (2008-2014), around 60% of countries saw real household disposable income grow faster than real GDP, as governments intervened (including through automatic stabilisers) to cushion the negative impact of the crisis on households’ income. But countries hit hardest by the crisis saw real household disposable income contract at a faster pace than GDP (figure 2, panel 2).

Figure 2. Real GDP and real household disposable income, per capita

Average annual growth rates; adjusted for price changes


Note: In panel 1, average annual growth rates for Mexico 2003-2007. In panel 2, average annual growth rates for New Zealand and Switzerland 2008-2013

The measures explained

Gross Domestic Product (GDP):

Gross domestic product (GDP) is the standard measure of the value added generated through the production of goods and services in a country during a certain period. Equivalently, it measures the income earned from that production, or the total amount spent on final goods and services (less imports).

Household adjusted disposable income:

Household adjusted disposable income equals the total income received, after deduction of taxes on income and wealth and social contributions, and includes monetary social benefits (such as unemployment benefits) and in-kind social benefits (such as government provided health and education).

Purchasing power parities (PPPs):

In their simplest form, PPPs are price relatives that show the ratio of the prices in national currencies of the same good or service in different countries. The Big Mac currency index from The Economist magazine is a well-known example of a one-product PPP. The Big Mac index is “the exchange rate that would mean that hamburgers cost the same in America as abroad”. For example, if the price of a hamburger in the UK is £2.29 and in the US, it is $3.54, the PPP for hamburgers between the UK and the US is £2.29 to $3.54 or 0.65 pounds to the dollar.

Where to find the underlying data

The underlying data are published in the OECD data warehouse: OECD.Stat.

Further reading

  • Bournot, S. , F. Koechlin, and P. Schreyer (2011), “2008 Benchmark PPPs measurement and uses” OECD Statistics Brief no. 17. www.oecd.org/std/47359870.pdf
  • European Commission; IMF; OECD; UN; and World Bank (2009), “System of National Accounts 2008“ http://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf
  • Lequiller, F. and D. Blades (2014), Understanding National Accounts: Second Edition, OECD Publishing,Paris.
    DOI: http://dx.doi.org/10.1787/9789264214637-en
  • Ribarsky, J., C. Kang and E. Bolton (2016), “The drivers of differences between growth in GDP and household adjusted disposable income in OECD countries”, OECD Statistics Working Papers, No. 2016/06, OECD Publishing, Paris.
    DOI: http://dx.doi.org/10.1787/5jlz6qj247r8-en


For further information please contact the OECD Statistics Directorate at [email protected]

[1] In all graphs and calculations, the following OECD-countries have been excluded, because of lack of data on household disposable income: Iceland, Israel, Luxembourg and Turkey.

[2] For convenience, household disposable income refers to household adjusted disposable income, which includes goods and services provided for free or at reduced prices by government and non-profit institutions serving households. It predominantly consists of health and education services and provides a more comparable measure, across countries and over time.

[3] Note that this suggests that some care is needed in interpreting the sustainability of household disposable income over the longer term.  Contemporaneous comparisons for example look at sustainability in the context of sustainable household finances, i.e. not building up household liabilities or reducing assets. But over the longer term persistently high government deficits or unfunded pension schemes may imply future declines in household disposable income (all other things being equal), while government surpluses may act as a buffer against potential declines (again all other things being equal).

The anxieties of the rich

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“What’s it like to have too much money?” Vanity Fair asked recently. “Very stressful.” The problem, it seems, is that even the humongously rich grow tired of just buying stuff. If you already own a dozen houses, a 13th is unlikely to make all that much of a difference. The same goes for sports cars, private jets, yachts, diamond necklaces and anything else you might care to splurge on.

So, after a while, you stop worrying about quantity and begin obsessing about quality: “What you need is to have not just the most but the very, very best,” writes A.A. Gill in the magazine, “ … a slightly better loafer, a pullover made from some even more absurdly endangered fur.” The name for this concern? Perfection anxiety.

Sadly, perfection anxiety is not the only worry creasing the botoxed brows of the super-rich. A few years back, there was the financial crisis, which threatened to knock a hole in their fortunes. And, more recently, there’s been what Paul Krugman calls the “Piketty Panic,” the tidal wave of publicity surrounding a new study that warns of a return to Victorian-era wealth divisions in our societies. We’ll come back to that in a moment, but, first, what about the crisis – did it hurt high-earners?

It did, says a new paper (pdf) from the OECD, but not for long. In nine OECD countries for which data are available, the top 1% of earners saw their incomes slide by 3% in 2008, followed by an even bigger fall of 6.6% in 2009. But as the incomes of high earners tend to be very responsive to economic swings, these sorts of declines in a recession aren’t such a surprise. Indeed, by 2010, the worst was over: The incomes of the top 1% rose by 4% while pretty much everyone else’s stagnated.

These temporary dips also didn’t do much to alter long-term trends. Top earners’ incomes remain at historic levels in many OECD countries, confirming a trend that has been developing for around three decades. In effect, what’s happened is that, as the economic pie grows, top earners have been taking an ever bigger slice of it. In the US, for example, the share of pre-tax income wending its way to the top 1% more than doubled since 1980, hitting 20% in 2012. There were notable rises in other (mostly) English-speaking countries, too, notably Australia, Canada, Ireland and the UK. More surprising, the 1% in traditionally egalitarian economies like Finland, Norway and Sweden also saw rises in their share of income, although at around 7 to 8% they were well behind US levels.

Not much of this will be unfamiliar to anyone who’s been following the debate over rising income inequality. But in recent weeks, discussion has been focusing on another side of the debate: wealth – rather than income – inequality. That might sound like hair-splitting, but the difference matters. To simplify greatly, income represents your earnings, typically from your salary or wages – think of it as a flow. By contrast, wealth is a stock – it’s the accumulation of income in your bank account that you haven’t frittered away, as well as your assets.

In the debate over inequality, income attracts most of the attention because it’s the best indicator of people’s ability to put food on the table and pay the bills. But thanks to Thomas Piketty, author of Capital in the Twenty-First Century, a 700-page economics tome that’s crashing the top of the bestseller lists, wealth is now also getting a lot of attention.

Piketty argues, in effect, that the gap between the super-rich and everyone else will increasingly be driven by wealth, rather than income (definitions of wealth vary, but Piketty broadly equates it with capital). To explain: Much of the justification for the rising gap between the super-rich and everyone else in recent decades revolves around the idea that they essentially deserved to earn their fortunes – Bill Gates created software that everyone wanted, and reaped his rewards.

But in future, the super-rich may be more likely to inherit their fortunes, rather than earn them. That’s because, argues Piketty, the rate of return on capital, typically around 5%, will outpace economic growth, these days often no more than 2%. So instead of worrying about gaps between those on high salaries and those on low salaries, in future we’re more likely to be concerned by the division between those on salaries and those with inherited wealth. Sounds familiar? Yes, it’s the world of Jane Austen all over again.

To say that Piketty’s book has been getting noticed would be an understatement: Martin Wolf calls it “extraordinarily important”, while the World Bank’s Branko Milanovic calls it “one of the watershed books in economic thinking”; others are less complimentary, criticising the data for being too thin to support the conclusions or accusing Piketty of promoting “soft Marxism”.

Whether you agree with his findings or not, there’s no doubt that the attention given to Piketty’s book, and to research by others, including the OECD, on inequality only underlines growing concern about the impact of rising divisions on our societies and economies. Anxious times, indeed.

Inequality will be under discussion at OECD Week(5-7 May 2014), which will see publication of a new report, “All on Board: Making Inclusive Growth Happen”. Watch out also for sessions at the OECD Forum on inclusive societies and jobs and inequality.

Useful links

We’re all free to be poor (OECD Insights blog)

OECD work on inequality

Divided We Stand (OECD, 2011)

Growing Unequal (OECD, 2008)

From wigs to riches: trade, employment and growth

Click to go to the summit website

In the early 1960s when the OECD was created, you could buy a portable TV for 150 dollars in the US, around the same price as you’d pay for an entry-level LCD television today.

But 60 years ago, an average manufacturing worker would have had to work almost two weeks to pay for it, compared with less than a day at present.

For many other products we use all the time, a comparison like this is not even possible, since they didn’t exist.

Trade played a major role in boosting the growth that allowed the world economy to grow by so much in such a short time. Apart from providing cheaper goods for consumers or bigger markets for producers, it helped to spread innovation and technological progress. 

A paper submitted to the G20 meeting in Seoul today by the OECD along with the ILO, World Bank and WTO argues that: “Countries that have embraced openness have been more successful in sustaining growth and moving up the development ladder than those that have not”.

Korea, the summit’s host is a good example. In the 1950s, that country was less developed than Sudan, and its main export was wigs made of human hair. Trade helped it to integrate the world economy and move up the value chain to become a high tech powerhouse.

And yet, trade is often blamed for destroying jobs and driving down wages. Is that true?

The paper estimates the impact on growth and jobs of lower tariffs and a reduction of other, less visible kinds of protection applied “behind the border”, such as product standards and administrative procedures that put importers at a disadvantage compared to domestic producers.

Even though the case of Korea is extreme, similar outcomes can be seen to a lesser degree more generally. In the 1990s, per capita real income grew more than three times faster for those developing countries that lowered trade barriers (5.0% per year) than for other developing countries (1.4% per year).

In fact, more openness would benefit all countries. Full liberalisation of trade in goods and services would help increase average real incomes in developing countries by 1.3%, and by 0.76% in high-income countries. Developing economies would benefit most, and not just the stars such as Brazil. The second wave of emerging economies, including Egypt, Thailand and Nigeria, would gain 3% to 6% of GDP.

The idea that trade destroys jobs and drives down wages, especially for the less skilled, doesn’t match the data either. If the G20 economies reduced tariffs and non-tariff barriers (such as import quotas) by 50%, employment of lower-skilled workers would rise by 0.9% to 3.9% over the long run depending on the country, and employment of skilled workers by 0.1% to 4%.

Wages would rise too, by at least 4.5% in the OECD countries in the G20.

So, all we have to do is open borders to the free flow of goods and services and all will be well? US president Harry Truman once implored his staff to find him some one-armed economists, because every time the lot he had promised him some good news, they always continued, “But on the other hand…”.

There’s another hand to trade too. First, it exposes economies to shocks like the recent recession that increased unemployment by 30 million worldwide (210 million today versus 180 million in 2007). Second, the gains from more openness can take time to materialise, and be spread thinly among the population, or, worse still, benefit only an elite. The pain from jobs losses is immediate and visible.

The answer is not to cut the country off from the potential benefits of trade, such as cheaper goods for consumers or bigger markets for producers. Governments should apply measures that help those hardest hit, both financially and to find a new job. In the wake of a recession, this is difficult because revenues are falling at the same time as needs are growing.

Moreover, in order to attract foreign investment, governments may reduce taxes on capital and increase spending on R&D and infrastructures at the expense of other public programmes, including unemployment and other benefits.

This means that an open trade policy alone will not solve all the problems. It has to be part of a package that includes labour policies, education policies and social policies to give everybody, and every region, a chance to share the benefits of trade, and build up financial reserves for the next time they’re needed.

Useful links

OECD Insights on International Trade

OECD work on trade

South Africa – winners and losers

The arrival of the World Cup to South Africa is a tribute to that country’s transformation since Apartheid ended in the early 1990s. It’s now a thriving emerging market–the “S” in the BRICS–and participates in the G20 and OECD work too.

But behind this success story lies a troubling and persistent problem – poverty. Based on the national definition of poverty – $4 a day – more than half of South Africans (54%) are poor. And, as the chart below shows, poverty and inequality still reflect race. While the African community’s access to services such as housing, water and electricity has improved substantially, its income continues to lag far behind other social groups. By international standards, this link between race and poverty is remarkably strong. Nor have there been too many signs of this link weakening.