While my previous post on county incomes (based on the CSO’s publications County Incomes and Regional GDP, 2015) considered the changes in Disposable Income over time, in this post I look at the components of Disposable Income, some of the changes in these since 2000, differences among Western Region counties and their impact on the changes in Disposable Income. The key component of Disposable Income is Total Household Income (which includes Primary Income and Social Transfers) and this is examined first.
Total Household Income is the amount of income from available to the household from earnings, and Rent of Dwellings (imputed) and net Interest and Dividends, as well as ‘Social Benefits and Other Current Transfers’. Total Household Income grew steadily (Figure 1) in all counties between 2000 and 2008 (in Donegal there was a tiny decline between 2007 and 2008). In most counties it declined between 2008 and 2011 and then began to grow slowly. Despite this growth, preliminary figures show that by 2016 neither in the State nor any Western Region county had Total Household Income per person recovered to 2008 levels. In Roscommon, for example, it was €25,061 per person in 2008 and €21,522 in 2016 (a difference of €3,539) , while in contrast in Sligo it was €24,940 in 2008 and €24,818 in 2016 (a difference of only €122).
Figure 1: Total Household Income per person
Source: CSO, 2018, County Incomes and Regional GDP ; Estimates per person based on own calculations using inferred population estimates. 2016 figures are preliminary.
Primary Income
Primary Income is the main component of Total Household Income and Figure 2 shows Primary Income as a percentage of Total Household Income over the period 2000-2016. It should noted that Total Household Income also includes Social Benefits and Other Current Transfers and is balanced by the Statistical Discrepancy (arising from different collection methods being used to estimate income and expenditure). Therefore that Total Household Income does not equal the sum of Primary Income & Social Transfers.
Nonetheless, it is useful to see how the importance of Primary Income (and by inference social transfers) has been to Total Household Income. In 2000, in the State as a whole, Primary Income was 87% of Total Household Income. It was also 87% in Clare but as low as 80% in Donegal but by 2016 it was 81% in the State, 79% in Clare and 70% in Donegal, indicating the increased importance of social transfers.
Figure 2: Primary Income as a percentage of Total Household Income
Source: CSO, 2018, County Incomes and Regional GDP
What is Primary Income made up of?
Looking at the breakdown of Primary Income (Figure 3) in 2015[1], it is clear that the main component in all counties is wages and salaries (Compensation of Employees (i.e. Wages and Salaries, Benefits in kind, Employers’ social insurance contribution) which nationally makes up 77% of Primary Income. In the Western Region, Primary Income accounts for 77% in Sligo, 76% in Galway and 75% in Clare. It accounts for 74% of Primary Income in Donegal, Mayo and Leitrim while in Roscommon it is only 73%.
Figure 3: Contributors to Primary Income, 2015
Source: CSO, 2018, County Incomes and Regional GDP
Other elements of Primary Income are accounted for by Net Interest and Dividends (4% in the State and all Western Region counties), and Rent of Dwellings (imputed) which is between 8% and 10% in Western Region counties and 9% in the State.
Income from self employment is the other main component of Primary Income, and this accounts for 14% of Primary Income in Roscommon and Leitrim, and 11% in Galway and 10% in Sligo and 10% in the State as a while. Income from self employment is more significant in all Western Region counties than the State as a whole.
Alongside a decline in self employment shown in recent years there has been a significant decline in the proportion of Primary Income coming from self-employment (Figure 4). In the State it accounted for 16% of Primary Income in 2000 and was 10% by 2016. Western Region counties, though starting from a higher base, have followed a similar pattern. For example in Roscommon income from self-employment was 24% of Primary Income in 2000, but 13% in 2016. It is not clear why this decline has taken place, perhaps because of a decline in the numbers in farming, or perhaps because of poorer earnings from self-employment.
Figure 4: Self employment as percentage of Primary Income
Source: CSO, 2018, County Incomes and Regional GDP
Social Benefits over Time
Looking again at Total Household Income, it is interesting to examine the changes in social benefits (Figure 5) over time. With the growing economy in the early part of the century, the amount received in social benefits per person grew alongside the growth in Primary Income, peaking in most counties in 2009. After the downturn, however, there was a slow decline in the level of social transfer per person. This was during a period of significant in some of the social benefits, but high levels of unemployment kept the level of transfers per person quite high. The decline has continued, to 2016, presumably as the numbers claiming unemployment benefit and assistance has decreased.
Figure 5: Social Benefits and Other Current Transfers per person
Source: CSO, 2018, County Incomes and Regional GDP ; Estimates per person based on own calculations using inferred population estimates. 2016 figures are preliminary.
Taxation levels over time
Much of the discussion above has related to the components of Total Household Income, but in order to get to a figure for Disposable Income taxation has to be taken into account.
As would have been expected (see Figure 6), in line with growth in incomes between 2000 and 2007 taxes on income (per person) also grew to 2007. With pay cuts and job losses, there was a sharp decline between 2007 and 2010 but then then taxation on income grew again to 2016. It is likely that in the first few years this related to increases in tax levied, and then in more recent years the growth has probably come from the increase in the numbers employed and paying tax.
Figure 6: Taxation on Income (2000-2016) per person
Source: CSO, 2018, County Incomes and Regional GDP ; Estimates per person based on own calculations using inferred population estimates. 2016 figures are preliminary.
While I have looked at changes in taxation and social benefits estimated on a per capita basis from 2000 to 2016 it is also interesting to see a direct comparison of the two for each county in 2015. Figure 7 shows social benefits and taxation as a percentage of Total Household Income (as noted above, these percentages should be used to compare the differences amount the Western Region counties, rather than as absolute proportions, as they do not take account of the effect of the statistical discrepancy). Nonetheless it is useful to compare the different levels of taxation on income and social transfers among the counties. Higher numbers of people in non-working categories (children, older people and people with disabilities) influences both the amount of tax paid and the level of social transfers received. For a more detailed discussion of the levelling effects of the redistributive tax and transfer system (as relates to income inequality rather than regional inequality) see this paper from the ESRI.
Figure 7: Social Benefits and Taxation as a percentage of Total Household Income 2015
Source: CSO, 2018, County Incomes and Regional GDP; own calculations.
In the State as a whole taxation (24%) is a higher proportion of Total Household Income than Social Benefits (20%), and this is also the case in Galway and Clare. In the five other Western Region counties social benefits are a higher proportion of Total Household Income than taxation. This is most evidently the case in Donegal with taxation 18% and social benefits 31% of Total Household Income in the county.
Conclusion
Finally, given that this post has examined the various components of disposable incomes Figure 8 gives an overview of the different broad income components in Western Region counties in 2015. As discussed above, Primary Income is largely made up of earned income (and imputed rent and net interest and dividends), while Total Household Income also includes social benefits. Taxes are deducted from Total Household Income to give Disposable Income per person.
Figure 8: Primary, Total Household and Disposable Incomes for State and Western Region counties in 2015
Source: CSO, 2018, County Incomes and Regional GDP ; Estimates per person based on own calculations using inferred population estimates.
Disposable Income, the key ‘county income’ measure, is made up of different sources of income and transfers and is also affected by taxation, therefore it is valuable to understand the changes in each of these components in the different counties when considering changes to income.
Helen McHenry
[1] Figures published this year (2018) are for 2015, with provisional figures for 2016. Therefore when looking at the most recent components of income, 2015 is examined
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