Inflation in the Netherlands: How are wages growing?
A small amount of inflation is excellent for a country. It encourages people to spend and invest their money, stimulating the economy. Nevertheless, many countries are momentarily struggling with higher inflation than usual. The average inflation in Europe was 5.3% in July 2023, which is already a slight decrease compared to the month before (Eurostat, 2023). In the Netherlands, inflation is even lower, with only 4.6% (CBS, 2023). Even though the Dutch economy is also facing inflation, employee wages are increasing, making purchasing power more stable.
After the Covid-19 pandemic, demand for employees started rising. Talent competition has skyrocketed, and companies are fighting for the best employees globally. The Netherlands is a popular place for employers to establish themselves. Because of the incredible location and infrastructure, the country is known as the 'gateway to Europe'. Furthermore, the stable political and economic situation makes establishing the country desirable for companies. However, this also creates a more competitive environment. In 2022, wages grew by 3%, and the average in 2023 is expected to grow by more than 5% (CBS, 2023).
Average wage increase
Nevertheless, compared to the average wage increase of over 5.7 per cent, real wages are lagging somewhat as consumer prices rose by about 6 per cent. This means that, for the time being, one can do slightly less with their money than a year earlier (Deijkers & Folkerts, 2023). Nevertheless, real wages are expected to pick up because inflation growth is somewhat stagnant.
The growing prices of raw materials and fuel mainly cause inflation. The war in Ukraine can explain the increase in these prices. However, the growing inflation is already slowing down, and the Dutch and European economies are more resilient than many forecasters had predicted (Cohen, 2023).
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