Income responds slowly to economic downturn

18/12/2008 15:00

The economic downswing will not necessarily have an immediate effect on household income in the Netherlands. Employment is still growing, and collectively negotiated wage increases are larger for 2008 than for 2007. In addition, inflation has dropped sharply in recent months, which is a bonus for disposable income.

It usually takes some time for the effects of economic recession to reach household income. In periods of low economic growth, employment will decrease at some point,  and wage increases will become smaller. These developments will continue for a time once recovery has set in. As a result, the greatest fall in income often takes place after the lowest point of the economy. Disposable income also decreased in previous periods of recession, in the early 1980s and 1990s and at the beginning of this century.

GDP and real disposable income

GDP and real disposable income