This message concerns the average purchasing power development. One half of the population (group) has a lower purchasing power development, while the other half has a development that is at least as high or higher. The development of purchasing power is related to the main source of income of the household to which people belong.
Three-quarters of people in employee households saw an increase in purchasing power. Their purchasing power increased relatively significantly, on average by 5.3 percent. Against the collective labor agreement wage increase of 6.8 percent stood an inflation rate of 3.1 percent, resulting in a real wage development of 3.7 percent. Employees also benefited from the once again increased labor tax credit. Furthermore, employees can increase their purchasing power themselves, for example by working more hours or by taking another job with higher pay. Conversely, factors such as (temporary) job loss or reduced working hours led to a decline in purchasing power for a quarter of people in an employee household.
The increase in purchasing power among self-employed individuals is, on average, 3.1 percent lower than that of employees. Measures that reduce purchasing power, such as the reduction of the SME profit exemption and self-employed tax deduction put pressure on the increase.
The increase in purchasing power for people in welfare households was 0.2 percent. Welfare recipients and others in low-income households received an energy allowance (usually 1,300 euros) in 2023 to help pay the sharply increased energy bill. The loss of the energy allowance in 2024 had a dampening effect on purchasing power for low-income households. The increase in the minimum wage, and the associated increase in welfare benefits and old-age pensions, as well as the expansion of housing benefits and child-related budgets ensured that the loss of the energy allowance did not result in a decline in purchasing power.
For retirees, purchasing power increased on average by 1.8 percent in 2024. This was the first increase in purchasing power after three years of decline. People with an additional pension benefited from the indexation of pensions, in addition to the increase in old-age pensions. Retirees in the lowest decile group did experience a slight decline in purchasing power. The higher old-age pension and housing allowance could not fully compensate for the loss of the energy allowance. The purchasing power of retirees in the highest income group decreased on average by 1.8 percent. This was related to the increased tax rate and the freezing of the tax-free allowance in box 3.
Due to changes in the child-related budget and an increase in child benefits, people in households with children saw a greater increase in purchasing power on average than single individuals and couples without children. In a two-parent family, the average increase in purchasing power was 5.6 percent, and in a single-parent family, it was 4.8 percent.