People would rather not see the value of their income and assets being eroded and are therefore not happy with inflation. Geld depreciation can also affect the international competitive position of the business community, so that entrepreneurs are not waiting for inflation. The confirmation last Tuesday that Dutch inflation, with 2.9 percent, was again clearly above the inflation level of the other rich EU countries, was therefore not received with cheers. But it does show that the labor market is functioning well.
Wages rise less hard: ‘Loss of purchasing power already compensated’
Rise
It is not so long ago that many analysts believed that the power of the trade unions in the Netherlands is so tackled that they are no longer able to convert shortcut on the labor market into a significant increase in wages. Especially in the second half of the 2014-2019 high conjuncture period, the unfortunate stories about the alleged dysfunction of the Dutch labor market were not of the air. Those stories were not right. They were based on the development of nominal wages, while in the end it is all about the development of the- for inflation-corrected- real wages. They did rise in the 2014-2019 period, even almost twice as much as in the preceding period of high conjuncture (2004-2008).
Inflation
That current inflation in the Netherlands is relatively high is explained by several factors. For example, the increase in excise duty and the rent increase have recently made a serious contribution. According to a study by Rabobank, however, the development of wage costs is the most important explanation for deviating from Dutch inflation to the top. The Rabobank study shows that the average nominal wage between the first quarter of 2019 and the second quarter of 2025 has increased by more than a quarter. That is slightly more than the rise in the general price level, which has also risen sharply due to the energy price shock of 2022 in recent years. In many other countries from the top ten richest EU countries, wages rose less than the general price level and employees have suffered a loss of purchasing power. In those countries there are fewer staff shortages than in the Netherlands, so that the trade unions could demand a more limited wage increase.
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Staff shortage
According to the booklet, the fact that the relatively extensive staff shortages in the Netherlands ensure a relatively high wage increase. The sensitivity of the outcome of the Dutch wage negotiations for the shortage on the labor market is nothing new. When the labor market was very wide in the early 1980s, the wage requirement fell sharply. This wage moderation led to unemployment in the late 1980s. The same development occurred on the wage front in the 1990s. After ascending wage increases at the start of that decade, wage moderation then again ensured a halving of unemployment, so that the surpluses of labor in many sectors turned into deficits.
Smaller price increase at home rents pushes inflation down, food and energy more expensive
Just like now, the real wages rose in response to these staff shortages. Together with the disappearance of the hard guilders, this ensured that Dutch inflation was higher than the European average in the first decade of this century.
Labor market
All in all, the fact that Dutch (wage) inflation is higher than in similar European economies shows the wrong of those who argue that the Dutch labor market is not functioning because the trade unions can no longer make a fist. At most, the real wage increases could have been a little higher in recent years. But first the unions had to bring in compensation for the inflation shock of 2022 (more than 10 percent). Now that it has been successful, a clear rise in real wages is still being used. This year the unions are well on track. The wage increase is heading for a score of more than one and a half percent above the level of inflation with just under 5 percent and more or less the same development of the real wage is expected for 2026. No, the much criticized Dutch labor market and its institutions are not doing so badly yet!
Raoul Leering is a macro economist and columnist. Read earlier columns here: