GINI Country Report: Growing Inequalities and their Impacts in the Netherlands

TLDR: In this paper, the authors used the GINI coefficient of net equivalised household incomes in the Netherlands to measure the impact of inequality on the distribution of income in the Dutch economy.

Abstract: Inequality as measured by the Gini coefficient of net equivalised household incomes has risen substantially (+14%) in the Netherlands. Most of the rise is concentrated in a short episode, the late 1980s, and came about in the wake of deep recession of the early 1980s. Over the 1990s and 2000s a new plateau seems to be reached with little further change. In accordance with the GINI project, these outcomes are used below when considering impacts of inequality. However, as an important caveat, further scrutiny reveals that the Gini coefficient misses out on important changes at the tails of the distribution and therewith significant further increases in inequality over the 1990s and 2000s. The changes have been very drastic for the bottom decile, where average real income is still 30 per cent below the level reached at the end of the 1970s. This has greatly widened the lower half of the income distribution while dispersion in the upper half has hardly changed. Top income shares basically show stability – in spite of some recent growth for the Top 10% after long years of stability. However, underneath that stability top incomes shares from labour earnings show a secular and strong increase, from 19 per cent to almost 27 per cent of total gross income. The shares of top incomes from enterprise and wealth declined correspondingly. The rising role of earnings can be attributed entirely to the growing role of second earners. Nevertheless, the combination of earnings into household incomes in general halves the inequality of individual (annual) earnings in the labour market. That inequality has increased significantly as a result of a widening of hourly wage inequality (+40%) combined with an increased dispersion of annual hours worked because of growing part-time and temporary employment. In spite of these increases the inequality of net equivalised income of labour household has remained strikingly stable. An important implication is that the focus on net equivalised incomes misses the picture of growing inequality of primary, gross and disposable income and the equalising effect of changing household formation on net equivalised incomes.