Gov’t corona support increasing inequality, Planning Office says

The government’s third support package for companies means that unemployment will rise somewhat less rapidly next year than previously expected, increasing to 5.9 percent instead of last month’s expectation of 6.5 percent, according to central planning office CPB. Government aid is mainly ending up with people with permanent employment, increasing inequality in the Netherlands, the CPB said in its Budget Day Macro Economic Outlook, NOS reports.

Should there be a second wave of the pandemic, resulting in another lockdown, unemployment will rise to 8.5 percent next year. For this year CPB expects economic contraction of 5 percent, followed by growth of 3.5 percent next year. That is slightly better than previously expected, partly due to announced investments from the National Growth Fund. If there is a second wave, the economic contraction will be greater this year, and the economy will deteriorate further in 2021.

National debt should come out above the European limit of 60 percent of GDP next year, the CPB expects. Due to the coronavirus crisis, countries are temporarily not required to adhere to that budget rule.

The average household will see their purchasing power increase by 0.8 percent next year. But the usual question of whether this will actually happen is even bigger now due to the economic uncertainties surrounding the coronavirus crisis, the CPB said. Retirees are expected to benefit the least, with their purchasing power only increasing by an expected 0.4 percent. This is partly because pension funds may have to cut pensions next year due to their funding ratio being too low.

CPB director Pieter Hasekamp is concerned that the coronavirus support measures are having the side effect of increasing dichotomy in society. “Support mainly comes to people with a permanent job,” he said, according to NOS. Companies mainly use the NOW regulation to continue to pay their permanent employees and get rid of temporary or on-call workers more quickly. “These vulnerable groups often have fewer buffers and run into problems more quickly,” Hasekamp said. “It is good that the generous support measures are there. But the side effect is greater inequality.”