New method of measuring poverty: 540 thousand people in poverty in 2023

© ANP
A total of 540 thousand people in the Netherlands were living in poverty in 2023, which was 3.1 percent of the total population. In 2018, that share was over double. Over 115 thousand children under the age of 18 grew up in poverty in 2023, or 3.6 percent of all children under the age of 18. These figures were calculated using a new method for measuring poverty developed by Statistics Netherlands (CBS), the Netherlands Institute for Social Research (SCP) and the National Institute for Family Finance Information (NIBUD). The new poverty threshold replaces the previous threshold used to measure poverty. Under the new method, not only income, but also savings and other immediately usable assets count towards determining whether a household is living in poverty.

In 2018, 7.1 percent of the population was defined as living in poverty. Poverty fell in 2019, partly due to wage increases and it fell further in 2020 due to the package of support provided during the Covid-19 pandemic. Poverty also fell in 2022 and 2023. This was mainly as a result of measures to compensate people for higher energy prices, and in 2023 also due to measures to boost purchasing power, such as an increase in the minimum wage. In 2023, nearly 175 thousand people had been living in poverty for three consecutive years or more. That means that 1 in 3 poor people were in long-term poverty.

1.2 million people living just above the poverty line

There were more people just above the poverty threshold than there were below it. Nearly 1.2 million people had an income of less than 25 percent above the poverty threshold and inadequate buffer assets or no buffer assets at all. Over half of this group had an income of less than 15 percent above the threshold. In 2018, over 1.5 million people were in this financially vulnerable situation, but the group became smaller as many people's incomes rose more quickly than the poverty threshold. This was particularly the case in 2022 due to government support provided to cover higher energy bills.

Median income shortfall has increased

The median income shortfall among those living in poverty was 16 percent in 2023. Poverty was less severe in 2018, when the median income shortfall was 10 percent. So although the number of people living in poverty continued to decline in 2023, the severity of that poverty increased. The larger income shortfall relates to the changing composition of the people living in poverty. Among those living in poverty in 2023, there were fewer welfare recipients and more people in work than there were in 2018, in relative terms. The working poor tend to have a larger income shortfall than poor welfare recipients (23 percent, compared to 6 percent in 2023).

Amsterdam has the most poverty in the country

Looking at the breakdown by municipality, in 2023 the poverty rate ranged between 0.1 percent and 6.6 percent, and the average rate across the country as a whole was 3.1 percent. The five municipalities with the most poverty were Amsterdam (6.6 percent), Vaals (6.4 percent), Rotterdam (6.2 percent), The Hague (6.1 percent), and Vlieland (6.0 percent), where residents often do seasonal work. Municipalities with relatively high levels of poverty are found particularly in the northeast and in the south of the country.

The lowest poverty rates are found in smaller municipalities. In 2023, Rozendaal (0.1 percent) had the least poverty, followed by Hilvarenbeek, Oost Gelre and Dinkelland (all 1.0 percent).

How does the new method work?

Every household in the Netherlands has expenses for items such as housing, energy, insurance, clothing and day-to-day necessities. In addition, in order to participate in society, money is needed for such things as telephone and internet connections and social activities (such as membership of a club, outings or holidays). The National Institute for Family Finance Information (NIBUD) determined the minimum amounts required in order to participate fully in society for 35 different types of households in 2023. In 2023, the poverty threshold for a single person was 1,510 euros per month. For a couple with two children aged under 13, the threshold was an average of 2,535 euros per month. In the case of two adolescent children, it was 2,910 euros for a two-parent family and 2,500 euros for a single-parent family.

To determine whether a person is living in poverty, it is not only the household’s income that is important but also their buffer assets (savings and other assets that are easily available). A household is not poor if their buffer assets exceed the annual poverty threshold. A single person with a buffer assets of 18,145 euros or more in 2023 was not considered poor, even if their income is below the poverty threshold. For a couple with two children under 13, buffer assets of at least 30,405 euros were enough to avoid being classed as living in poverty.

Actual expenditure also plays a role in measuring poverty. For most households, housing, energy and healthcare (basic insurance plus mandatory out-of-pocket contributions) are their largest fixed expenses. They have little or no ability to save any money on these expenses. We therefore base the calculation on households’ actual expenditure on these items wherever possible. If, after deducting fixed expenses, there is not enough money left for other basic needs, then a household (and the people living in it) is categorised as poor.

The new poverty threshold and the methodological choices made are outlined in more detail in a report entitled ‘The new method of measuring poverty in the Netherlands’ ('De nieuwe methode om armoede in Nederland te meten', available on this website in Dutch only). The differences with previous definitions and calculations for the years 2021-2023 are also explained.