Household income stabilises
HOUSEHOLD INCOMES stabilised last year after two successive years of significant changes, according to data published yesterday by the Central Statistics Office.
According to preliminary figures, the total gross income of all households in the State combined stood at €89.8 billion in 2011, an increase of more than €600 million on 2011. When the taxes and social welfare benefits are accounted for, household disposable incomes declined to €88.8 billion.
That gross income rose last year while disposable income fell was entirely the result of higher taxes. Households paid taxes on income and wealth last year of €29 billion. In 2010 they paid €27.7 billion in such taxes.
Household income, after accounting for taxes and benefits, has fallen every year since 2008, when it peaked at just over €100 billion.
Despite hefty increases in tax rates since the recession, the total amount of tax paid by households remains well below the €33 billion paid in 2007, the all-time high in nominal terms.
Wages continue to account for the lion’s share of household incomes. Last year, wage income stood at €69.3 billion, up slightly on 2010 but still well below the 2008 peak of €81.3 billion.
Social welfare payments are Irish households’ second largest source of income. Last year households obtained €28 billion in welfare and transfer payments. That was slightly higher than a year earlier and up sharply from pre-recession times. In 2006, welfare and transfers to households were just below €20 billion.
The welfare system has supported household incomes during the recession, partially offsetting declines in other sources of income. This is illustrated in the accompanying graphic, which shows that income before welfare (gross income) has fallen by considerably more than income including welfare transfers (disposable income).
The third-largest source of household income comes from entrepreneurial activity.
Last year household income from this source stood at €19.7 billion, a slight decline on 2010. In 2007 it peaked at €25 billion. This large decline reflects poor business and trading conditions.
The fourth source of household income, earned interest, is by far the smallest component, at just €4 billion last year. It has more than halved since 2007, reflecting very low interest rates.
Of total disposable income (€88.8 billion), households saved €12.9 billion last year, giving a “gross savings ratio” of 14.1 per cent, up from 13.4 per cent in 2010. These savings rates are much higher than in the pre-recession period, when households consumed much more of their incomes and saved less. In 2007, the gross savings rate was 7.1 per cent, or just half last year’s rate.