Projections to 2025 of the household sector within the Dutch economy

Abstract

The Netherlands is faced with an ageing society. This raises concerns about the sustainability of households’ current wellbeing reflected in household disposable income. In this article we aim to analyse the effects of population changes on the difference between labour income and age-specific consumption, defined as the lifecycle deficit in the National Transfer Accounts (NTA). To conduct this analysis, we extend the macro framework of National Accounts (SNA) with demographic data, detailed household sector data and detailed employment data, all classified by age groups. Using 2016 as the base year, we construct four scenarios for the year 2025 and use a Bayesian estimation approach to arrive at a complete and consistent framework of estimates for each of these scenarios. We find that the lifecycle deficit of the Dutch household sector worsens for all age groups. For the young this is partly covered by additional transfers received, but all households become more dependent on their assets and savings. To maintain the current level of disposable income wages must rise in all scenarios.