Income inequality in the Netherlands is well below the EU average

Inequality is generally expressed using the Gini coefficient <link 1>. The Gini coefficient takes the form of a value between 0 (representing a situation in which every household in a society has exactly the same income) and 1 (a situation in which only one household receives all the income while the others receive nothing). In 2022, income inequality according to the Gini coefficient was 0.285 in the Netherlands. Wealth inequality was much higher at 0.711, however. Wealth inequality fell sharply between 2015 and 2022 due to rising house prices.

Income inequality rose in the 1980s

Income inequality increased in the second half of the 1980s, following a severe recession. Wages subsequently rose sharply and the number of dual-income households also increased, while the minimum wage and many benefits remained frozen. Demographic trends such as ageing, immigration and the growing number of single-person households also played a role. The tax reforms implemented in 1990 then provided substantial tax relief for those in employment, in particular, and inequality rose once again.

The small increase in inequality seen in 2001 was also related to the tax reforms introduced that year. Subsequent increases in 2007, 2014, 2017 and 2019 were due to tax measures that benefited directors and major shareholders.

Ever more redistribution through pensions

The income received by households through work or from assets (primary income) is redistributed by the government through a system of levies, contributions and taxes on the on hand, and the distribution of benefits on the other. Inequality is higher before redistribution than after it: the Gini coefficient for primary income was 0.542 in 2022. Redistribution thus results in a reduction of inequality by 47 percent. State pensions and supplementary pensions combined accounted for most of this reduction. The remainder is attributable to other social benefits, contributions and taxes. The contribution of supplementary pensions to reducing inequality has increased as a result of our ageing population. But this effect stagnated between 2011 and 2022 because many pensions were capped or no longer indexed, and the retirement age also rose.

Income inequality in the Netherlands is relatively low

The Netherlands has the fifth lowest income inequality of all EU member states. Slovakia has the lowest inequality in disposable income, followed by Slovenia. Czechia also features in the top five countries with the lowest income inequality. In these Eastern European member states (just as in Belgium and the Netherlands), a relatively large amount of income is redistributed. In other Eastern European countries, by contrast, inequality is much higher. It is highest in Bulgaria. Income inequality is also high in many southern European member states, such as Portugal and Greece. Relatively little income is redistributed in these southern and eastern European member states.

Differences in income inequality within the Netherlands

In municipalities with higher average incomes (such as Bloemendaal, Laren, Blaricum and Wassenaar), income inequality is well above the national average and the Gini coefficient is around 0.50. Income inequality is often higher in university cities, too, because there is a relatively large disparity between low-income student households and other households.

In municipalities where many elderly people on lower incomes live, by contrast, incomes tend to be much closer together. This is the case in ageing municipalities in Limburg (such as Landgraaf and Brunssum), where income disparities are comparatively small. Income inequality is also lower in municipalities in the north of the Netherlands (such as Pekela, Veendam and Stadskanaal) for the same reason.