Profits are rising faster than wages

© ANP / Marco de Swart
In the period 2019 to 2023, the Dutch economy was hit hard by two shocks — COVID-19 and a sharp increase in energy prices due to the Russian invasion of Ukraine. Despite this, business profits and remuneration of employees grew. Profits grew faster than wages, by 32 percent versus 24 percent (not adjusted for price changes). This is according to the article in Dutch on Wages, profits and rising prices during the pandemic period, 2019-2023, published by Statistics Netherlands (CBS).

Profits and wages
JaarRemuneration of employees (billion euros)Gross profit before tax, non-financial corporations (billion euros)
2019384272
2020398241
2021415316
2022444375
2023478358

Real disposable income of households up by 5.4 percent

Remuneration of employees increased on the one hand because more jobs were added and on the other because of higher wages. Strong economic growth in 2021 and 2022 and tightness on the labour market were the main reasons for this.

The remuneration of employees, combined with other types of income, such as pensions, social benefits, income from self-employment, and income from assets add up to the total disposable income of households. Adjusted for price increases, disposable income increased by 5.4 percent between 2019 and 2023.

During this period the population also grew, in particular due to (labour) migration. In 2023 the average disposable income per capita was 2.2 percent higher than in 2019. That average does not apply to everyone, and there can be large differences between population groups. The figures available on income groups show that households on lower incomes have benefited more than households on higher incomes.

Real disposable income of households
JaarReal disposable income (2019=100)
2019100.0
2020101.7
2021103.3
2022103.9
2023105.4

Profit ratio reaches record levels

The economic growth of recent years caused profits of non-financial corporations to soar. These high profits were achieved partly due to various grants that were part of the financial support measures during the coronavirus pandemic. Higher profits do not automatically mean that businesses have increased their profitability, as profits can also be generated by increasing production. The profit ratio is a commonly used measure of profitability. This is operating profit as a share of value added. In 2022, the profit ratio was 44.3 percent, which was the highest level since 1995, the first year for which this figure is known. In 2023, the profit ratio declined slightly despite limited economic growth. The profit ratio remained at historically high levels.