Distribution of well-being: material well-being

10/07/2024 00:00

Obviously, a person’s financial situation is important for many aspects of his or her life. A higher level of prosperity affords people more opportunities and choices, for example in terms of housing, social activities and health. A sound financial basis also provides greater security.

These aspects of well-being are measured here using indicators for median standardised disposable income and median wealth. Standardised disposable income is suitable for comparing levels of household prosperity, as it has been adjusted for differences in the size and composition of these households.

Material well-being encompasses more than just income, however. Household spending and the presence – or not – of financial buffers are also important factors. It is the interplay of transactions in income, spending and wealth that make up material well-being of individuals and households. Households use their disposable income to pay for their outgoings. If they do not spend all their income, they can save and increase their wealth; if they cannot pay for everything with their income, they have to dip into their savings, and their wealth decreases.

The CBS reports on poverty and exclusion (CBS, 2023) and material well-being (CBS, 2022) provide more detailed information on the financial position of households in the Netherlands.

Households with a main earner younger than 25 years old, a low level of education or born outside the Netherlands have a relatively low median household income.
The older the household’s main earner, the higher household wealth is. Households with a main earner born in the Netherlands to parents who were also born there have substantially higher median wealth. Households with a low-educated main earner and households with main earners born abroad or whose parents were born outside Europe have the lowest median wealth.

Standardised disposable income

Situation in 2022

Median household income in the Netherlands was 31.6 thousand euros in 2022. Average income was higher, at 35.4 thousand euros. The arithmetic average is higher than the median because incomes at the top of the range pull the average up. In order to limit the influence of these high incomes, the median income is used in all the descriptions below.

The level of household income depends partly on the age of the main earner. Younger households generally have less to spend, as the adults in these households are still starting out in their careers. Median income in the group younger than 25 years is well below average. Median incomes subsequently rise with age, and households with a main earner aged 35 to 64 years have higher-than-average disposable income. Once people retire, their income declines somewhat: households with a main earner aged 65 years or older have less than average to spend
Education level is also clearly related to income. The higher educated the main earner is, the higher is the median income.
Households whose main earner was born in the Netherlands and whose parents were also born in the Netherlands had the highest median income, households with a main earner with a migrant background had the lowest. For the latter group there is a difference between those with country of origin within or outside Europe. Households whose main earner was born outside Europe had lower median incomes than those with a main earner born in Europe. Second-generation households had higher incomes than migrant households, but lower than Dutch households. For the second generation, there is relatively little difference between origins within or outside Europe.

The characteristics age, education level and origin/country of birth correlate with each other. The percentage of people with higher education, for example, is not the same in every age group, and the average age of main earners is not the same for different origin/country-of-birth groups. When we take these relations into account, more main earners in the middle age groups still have an income above the median than households with main earners in younger and older age groups. This is also the case for higher educated main earners compared with main earners with medium and lower levels of education. The situation for main earners born in the Netherlands and whose parents were also born in the Netherlands also remains the same: they still have a higher income than other households, although after correction the differences are often smaller.

Changes between 2019 and 2022

Median income of the population in 2022 was 3.9 percent higher than in 2019.
The increase in median income from 2019 to 2022 was substantially larger for younger age groups (main earners younger than 35 years) than for the population as a whole. This was also true for people born outside Europe.

Wealth

Wealth can be defined as the net balance of assets minus liabilities. On 1 January 2022, the combined wealth of the 8.0 million Dutch households amounted to 2,490 billion euros, comprising 3,421 billion euros in total assets and 931 billion euros in total debts. Median Dutch household wealth amounted to 135.1 thousand euros, 47.7 thousand more than in the previous year, mainly due to the steady rise in house prices in that period. Fluctuations in values of own homes have a major impact on household wealth. Nearly six out of ten households owned their homes in 2022 and own homes constituted the largest share of assets, accounting for 62 percent of wealth. These were followed by bank deposits and savings, and substantial interests in companies. Mortgage debt was the largest debt item.

Situation in 2022

The older, the wealthier. Young people at the start of their working lives are earning relatively little, cannot put much money aside and often take on a substantial debt burden when they buy a home, especially with the substantially higher recent house prices. Starting a family brings additional costs and makes it more difficult to accrue wealth. The youngest households had not, therefore, accumulated any wealth at the beginning of 2022. As main earners grow older, their financial position also improves appreciably. More work experience and better-paid jobs lead to higher labour income, and inheritances also contribute to further lifetime asset accumulation. At the same time, they repay an increasing proportion of their mortgage. The income of older households decreases when the main earner reaches retirement age, but they often own their homes and by then many of them have almost repaid their mortgage. The group aged 75 years and older were less wealthy than the 65- to 74-year-olds: supplementary pensions are considerably lower than for 65-to 74-year-olds and fewer of them own their homes.
In 2022, households whose main earner had a low level of education had relatively low median wealth. The same was true – but to a slightly lesser extent – for those with a medium education level. Households with a higher educated main earner had high median wealth on the other hand.
Median wealth of households whose main earner was born in the Netherlands and whose parents were also born in the Netherlands was substantially higher than that of the total population. For households whose main earner was born in the Netherlands and of whom one or both parents were born in Europe (but not in the Netherlands) median wealth was slightly lower than average. For households with a main earner in other origin/country-of-birth groups, median wealth was well below the median for the total population.

Just as for income, an additional analysis was done to take into account the relations between age, education level and origin/country of birth. After correction for these characteristics, some differences become smaller, but the relations themselves still hold.

Median wealth also increases with increasing disposable income: from 1.0 thousand euros in the first income decile, to 498.3 thousand euros in the tenth and highest decile. Four percent of total wealth in the Netherlands was owned by the lowest income group and 33 percent by the highest income group.

Changes between 2019 and 2022

Median wealth of the total Dutch population was more than twice as high in 2022 than in 2019. The increase was mainly caused by the strong increase in the value of own homes of home-owning households.
Compared with this increase for the population as a whole, the following groups show different developments:

Median wealth of households with a main earner aged 25 to 44 years developed relatively favourably, especially for 35- to 44-year-olds: their median wealth almost tripled. Households with a main earner aged 45 years or older saw their median wealth increase by less than average, although the increase was still fairly substantial for these older households.

Median wealth of households with lower educated and those with higher educated main earners increased by less than average. For households with main earners with a medium level of education it grew by more than average, on the other hand.
For main earners born in the Netherlands and whose parents were also born in the Netherlands, median wealth rose by less than average. This was also the case for main earners born in the Netherlands and with at least one parent born in Europe (excl. the Netherlands). Households with main earners born in the Netherlands with at least one parent born outside Europe experienced a relatively large increases in median wealth. However, these groups did start out at a very low level of wealth, and even with sizeable growth rates, their amount of wealth remains small.