“Following the inflationary shock, household spending has soared” in recent years, notes Statec in a study published this Wednesday. This shows that “since 2019, the average purchasing power of households has nevertheless increased”. Indeed, income “has increased significantly under the effect of indexation and various measures”. And purchasing power should continue to rise “slightly” this year, with adjustments to tax scales.
But not all households are equal in this area. Thus, “low-income households are more affected by increases in energy and food prices”. Statec explains that between 2019 and 2023, inflation caused energy spending to explode by 35% on average, food spending by 20% and other goods and services by 11%. However, low-income households devote a larger share of their budget to energy and food.
However, the income of these households which earn the least increased, between 2019 and 2023, by 7,700 euros annually, which represents a gain of 21%. For the wealthiest families, the increase was 20,000 euros, which is “only” a 15% increase. Increases that Statec explains in particular by the indexation of salaries, but also family allowances and study grants, or even the increase in the minimum social wage. Various measures, such as tax credits, have also helped the lowest-income households keep their heads above water, and will continue to do so in 2024 and 2025.
Ultimately, all of this put together allowed purchasing power to increase between 2019 and 2023, regardless of income level. The 20% with the lowest salaries saw their purchasing capacity increase by 20%. At the other end of the social scale, those with the highest incomes gained on average 7,800 euros in purchasing power. The latter declined in 2024, but should rebound again in 2025, predicts Statec.
Over the period 2019-2023, the savings rate also increased overall, rising to 19%, compared to 15.6% before Covid. But here again, the inequalities are great. Naturally, the richest have much more room to put money aside than others. Thus, the wealthiest 20% could set aside 40% of their income until 2022. For the next 20%, this rate drops to 16%.
-Conversely, the lowest 20% of households experience a negative savings rate which can “be explained by dissaving and debt behavior as well as a possible less stability” of these households, according to Statec. Clearly, these families used up the money they had been able to put aside or contracted debts. Of all the money saved in Luxembourg, 80% comes from a fifth of households, the richest.
Are you already following us on WhatsApp?
Subscribe to our channel, activate the little ???? and you will receive a news recap every day in early evening.
