Is The Netherlands A Rich Country?

The Netherlands

As a Dutchman, I am often asked if the Netherlands is a rich country? The reason that this question is asked is the amazement that this tiny country has been doing so well economically for so long. So I dived into the economic data to find out if the Netherlands is a rich country?

The Netherlands is the 9th richest country globally, with a GDP/capita of USD 57.334 in 2020. The reasons for the Dutch wealth are an excellent geographical location, abundant natural gas resources, and innovative entrepreneurial mindset, an excellent business climate, and a stable political system.

It is a fascinating story of how The Netherlands has become rich and stayed rich for centuries.

How Rich Is The Netherlands?

At first sight, the question of how rich the Netherlands is looks like an easy question. However, it is more complicated than you think because being rich is always relative.

Economists like to use Gross Domestic Product (GDP) as a yardstick to compare the wealth of different countries because GDPs and the size of the population are relatively easy to measure. GDPs are then compared per capita (GDP/capita) to correct for different population sizes and recalculated in the same currency, usually USD.

I extracted the GDP/capita of developed economies from the latest IMF database (World Economic Outlook of April 2021) to determine the GDP/capita of The Netherlands compared to other countries. The table below shows that The Netherlands was among the ten developed countries with the highest GDP/capita (see the third column of the table below).

The Netherlands is among the ten richest developed countries globally, with a GDP/capita of USD 57.334 in 2020. The GDP/capita of The Netherlands is below that of the United States but significantly higher than neighboring countries as Germany, Belgium, France, and the United Kingdom.

GDP/capita is a general measure of the wealth of a country but says nothing about how the national income is divided among its inhabitants. The country as a whole may be rich, but that wouldn’t do much good if the national income was primarily pocketed by a few billionaires, leaving most of the population in dire straits. The Gini index is a measure of inequality that economists use most. The lower the Gini-index, the lesser the inequality. The worldwide range of the Gini-index is about 26-63.

The Gini-index of The Netherlands for income is 28,1 and at the lower end of the worldwide spectrum, indicating that the inequality in the Netherlands is low compared to other countries. The Netherlands is a very egalitarian country with its progressive tax system.

Ranking Country GDP/capita (USD) Gini index (%)
1 Luxembourg 118.002 35,4
2 Singapore 97.057 not available
3 Ireland 94.392 31,4
4 Switzerland 72.874 33,1
5 Norway 65.800 27,6
6 United States 63.416 41,4
7 Denmark 58.933 28,2
8 San Marino 58.427 not available
9 Netherlands 57.534 28,1
16 Germany 54.076 31,9
18 Belgium 51.096 27,2
21 France 46.062 32,4
23 United Kingdom 44.117 35,1
33 Spain 38.392 34,7

Economists may use GDP/capita to compare the wealth of nations, but GDP/capita is a measure of income. Although income has a relation to wealth, measuring income to compare the wealth of countries is not entirely correct.

Fortunately, several direct comparisons of the wealth of nations are available, among them the Credit Suisse Global Wealth Report 2021. In this report, the mean and median wealth per adult of the largest countries in the world are compared.

According to the Credit Suisse Research Institute, the Netherlands is the 5th most prosperous country in the world with a mean wealth/adult of US$ 377.090 (see table below)

Rank Country mean wealth/adult (USD)
1 Switzerland $ 673.960
2 United States $ 505.420
3 Hong Kong SAR $ 503.340
4 Australia $ 483.760
5 The Netherlands $ 377.090
6 Denmark $ 376.070
7 Belgium $ 351.330
8 New Zealand $ 348.200

The ranking of The Netherlands is not much different when Credit Suisse calculated median wealth/adult. Median wealth/adult provides a better insight into how the wealth is distributed than mean wealth/adult.

According to the Credit Suisse Research Institute, the Netherlands is the 7th most prosperous country globally with a mean wealth/adult of US$ 377.090 (see table below). This ranking confirms the low Gini index and shows that the Netherlands is among the most egalitarian countries in the world.

Rank Country mean wealth/adult (USD)
1 Australia $ 238.070
2 Belgium $ 230.550
3 Hong Kong SAR $173.770
4 New Zealand $ 171.620
5 Denmark $ 166.620
6 Switzerland $ 146.730
7 The Netherlands $136.110
8 France $ 133.550

Of course, some persons in The Netherlands own significantly more than the mean wealth of $136.110 per adult. A study of the Dutch Central Bureau of Statistics showed that in 2020 approximately 278.000 Dutch households owned more than € 1,0 million.

The average wealth of these millionaire households was € 1,6 million per household. Very few, only 3% of the millionaire households in The Netherlands owned more than € 10 million. The large majority of the wealth of the Dutch millionaire households was derived from their own businesses and real estate.

What Is A Good Salary In The Netherlands?

A high GDP/capita is an indication that a country as a whole is rich, but that is pretty much irrelevant for an individual. For individuals, their salary will decide how rich they will be.

The table below shows the gross and net minimum and median salaries for Dutch employees in The Netherlands in 2021. The minimum wage is mandated by law, and the median salary is the salary that most wage earners earn. The mean (average) salary for 2021 is still unknown but will be a few thousand euros higher than the median salary.

The net salaries for expats working in the Netherlands will be higher than for Dutch employees because expats don’t have to pay income tax over the top 30% of their income for the first five years of working in The Netherlands.

Salary Gross salary/year (€) Net salary/year (€)
Minimum salary € 20.412 € 19.104
Median salary € 36.500 € 27.850

The table below provides an overview of how (gross) salaries are divided between employees and will help you to understand what a “good salary” in the Netherlands will be for you.

If you want to belong to the Top 25% of wage earners in The Netherlands, you have to make more than € 40.000 annually. The top 5% makes more than € 70.000 annually, and less than 1% of all wage earners in The Netherlands earn an annual salary of more than € 90.000.

% of wage earners Gross yearly salary (€)
Top 25% > € 40.000
Top 5% > 70.000
Top 1% > 90.000

How Did The Netherlands Become Rich?

There are six reasons why The Netherlands has become so rich. As a whole, these six reasons have all contributed to the increasing wealth of The Netherlands.

The Netherlands has a fertile soil and a mild maritime climate

The Netherlands was rich in natural resources

The Netherlands has a good business climate for international companies

The Netherlands has an excellent geographic location with fantastic natural transportation routes

The Netherlands has an entrepeneurial innovative spirit and created an export powerhouse

The Netherlands has a stable political system with a collaborative and consensus attitude

1. The Netherlands has a fertile soil and a mild maritime climate

The Netherlands is located mainly on sea or river clay which is rich in minerals and moisture. In addition, rainfall in the Netherlands is much more regular than in countries with a continental climate. The combination of these two factors results in excellent agriculture yields and harvests that hardly ever fail and allowed The Netherlands to become one of the largest agricultural exporters in the world. Dutch cheese is already famous all over the world, and even Dutch wine is now exported.

2. The Netherlands was rich in natural gas resources

In 1959 an incredible amount of natural gas was discovered in the north of the Netherlands. The exploration of these natural gas resources generated tens of billions in wealth annually for Dutch society. Our welfare state has primarily become possible due to these natural gas resources. Education in The Netherlands is free of charge, and the Dutch Health Care system is one of the best in the world. The income from natural gas exploration has also been used to build excellent public transportation infrastructure.

3. Good business climate for multinational companies

The Netherlands has a good business climate for multinational companies, with their European or worldwide headquarters located in the Netherlands. The Dutch population is a highly educated workforce with a strong work ethic. In addition, the tax climate for multinational companies is favorable, to say the least. It is no coincidence that many of the high-ranking countries in the GDP/capital table above have good tax conditions for companies and individuals. These multinational companies, especially those in financial services, generate plenty of high-paying jobs and taxes for The Netherlands.

4. Excellent geographic location with fantastic natural transportations routes to most of Western-Europe

The Netherlands is located in the center of Europe with fantastic natural transportation routes via the rivers Rhine and Meuse. It is impossible to think of any better location than The Netherlands in Europe, making The Netherlands the gateway to Europe. Transport has never been a significant problem in the Netherlands. Even very heavy cargoes could be transported with ease by large ships using the vast, wide rivers. The port of Rotterdam is one of the largest harbors globally and one most important economic engines of the Netherlands, with its access to Europe via the Rhine and Meuse rivers. Schiphol airport is also contributing to economic welfare as the third largest airport in Europe.

5. Entrepeneurial innovative spirit created an export powerhouse

The Netherlands has been good at trading for as long as it existed, and the entrepreneurial Dutch sailed all over the world to trade their goods. These days, the entrepreneurial spirit is driving further innovations in what is already one of the most advanced economies in the world. The Netherlands is exporting annually more than € 500 billion in goods and services. One of the most interesting export products is the Dutch skills in water management. The Netherlands is also cleverly exploiting its rich cultural heritage, and tourism is a booming sector. A visit to Europe is not complete without visiting Amsterdam and its beautiful canals and walking around surrounded by the Dutch, the tallest people in the world.

6. A stable political system with a collaborative and consensus attitude

The Netherlands is politically stable, and the political parties strive (primarily) for collaboration and consensus. In addition, the Netherlands is known for its liberal attitude. Collaboration is a natural part of the Dutch culture because the Dutch had to work together for centuries to keep the water out of their country, mainly below sea level. In addition, The Netherlands has not been involved in wars for centuries, except for the Second World War.

By: netherlandsinsiders.com