Stagnating incomes and the middle class in the Netherlands: Running to stand still?

Abstract

In the Netherlands, the public debate about the possible decline of the middle class is inspired primarily by international debates, which started in the United States. Domestically, there is some complacency concerning relatively low poverty and income inequality. At first sight, this may seem justified in relation to the present issue, because (as we will see) the majority – over 80 per cent – of Dutch households belong to the middle class when it is measured as between 60 and 200 per cent of net-equivalized median household income (as chosen for this collective work). In addition, this level shows very little change over time. However, this focus on net-equivalized incomes – the common currency of the European poverty rate as well as the Organisation for Economic Co-operation and Development (OECD) Income Distribution Database – ignores the important roles played by the acquisition of market incomes by households, on the one hand, and the redistribution and equivalization of those incomes, on the other hand. The personal, independent acquisition of market incomes should be at the core of any analysis as that income lends the middle class its independent basis in society and builds an element of autonomy into its definition. Evidently, this is essential also when linking the middle class to the world of work, a central aim of this volume. For example, it is this footing that is at stake in the current discussion about the polarization of the job structure and in the fears about the weakening of the middle class as the political backbone of society. Accordingly, this chapter starts by considering the distribution of gross incomes, which encompasses all possible sources of income. Starting here makes it possible to address the question how both the redistribution and the equivalization of household incomes affect the size and evolution of the middle class; it also examines the role of combining individual incomes into household incomes. In this way, first, earnings from labour as a source of income and its potential links to class can be examined. The public debate about the nature of top incomes underlines the importance of this – and gross incomes are the currency of that debate. Second, it is then also possible to study the effects of the demise of the single-breadwinner model and the ascent of the household with more than one earner in the labour market. Owing to this alteration, economic efforts and incomes are sorted rather differently now in terms of households than they were previously, concentrating on dual-and multiple-earners and potentially ousting some (persons and households) from the world of work which in the single-earner world might still have been part of it. These issues seem vital to an up-to- date consideration of the middle class, and they certainly are when focusing on the world of work. Third, proceeding from gross to disposable incomes allows us to analyse the role of income redistribution as a support of and/or a drain on the middle class, that is, the extent to which redistribution acts as a prop for the middle class. Fourth, the equivalizing adjustment of disposable income for household size and composition enables us to consider the family composition of the middle class and the effects of household formation. This formation has changed markedly in recent decades as the number of singles has multiplied and larger households have thinned as a result of declining or postponed fertility.