On household disposable income in 2011

21.01.2013

Data of the Central Statistical Bureau show that 2011 was the first year when after two years of decrease (2009–2010) household disposable income1 started to grow. In 2011, household disposable income at current prices increased by 6.8% and reached LVL 213 per household member monthly (LVL 2002 in 2010). Rise of household disposable income at constant prices (taking into account inflation) comprised 2.3%.

Disposable income in statistical regions, urban and rural areas of Latvia
(LVL, average per household member monthly)

In 2011, more notable growth of household disposable income was recorded in rural areas – of 10% as compared to 5.6% in urban areas. The most notable increase of income among statistical regions of Latvia was observed in Kurzeme, Pierīga, and Zemgale region (of 14%, 13% and 11%, respectively). More moderate income rise was recorded in Latgale and Riga (of 3.8% and 3.2%, respectively); while in Vidzeme income level did not grow.

In 2011, along with the income rise and reduction of social transfers3, the structure of population income has changed.

Structure of disposable income, 2010 - 2011
(in per cent)

 

2010

2011

Disposable income, total

100

100

  of which:

 

 

wages and salaries

64.2

66.3

self-employment earnings

3.4

4.7

income from property

0.3

0.7

received transfers

33.7

29.7

   social transfers

31.9

28.1

   private transfers

1.9

1.5

other income

0.0

0.0

Expenses decreasing total disposable income4

-1.6

-1.4

The main factor increasing income in 2011 was growth of wages and salaries, still their level did not reach the level of 2007 - 2008. Wages and salaries per household member have risen on average by 10%.

In 2011, self-employment earnings increased (by 45% per household member), reaching the highest level since the survey was launched in 2004.

Household income was influenced by the reduction of social transfers5. In 2011, they diminished by 5.7%, while social transfers of the 1st quintile6 (poorest) households have not reduced, on the contrary – they have increased. It indicates rather purposeful provision of social aid to the poorest (income from social transfers in 3rd - 5th quintile households has dropped).

Household disposable income by quintile group, 2010 - 2011
(LVL, average per household member monthly)

Quintiles

2010

2011

Increase rate, %

1st (poorest)

67

73

108.8

2nd

135

139

103.2

3rd

180

182

101.1

4th

237

247

104.1

5th (richest)

437

479

109.6

Significant growth of income in the 1st quintile households was not influenced solely by the rise of social transfers, it was affected also by economic activity of households themselves (wages and salaries and self-employment earnings). In 2011, wages and salaries and self-employment earnings for the 1st quintile households comprised the highest rise in disposable income.

The lowest income rise was recorded in the 3rd quintile households; moreover this quintile covers great part of pensioner households. It can be explained with the fact that amount of old-age pensions paid in 2011 increased only by 1.3%.

Income inequality indicators, 2010 – 2011

Indicator

2010

2011

Quintile share ration (S80/S20)7

6.6

6.5

Gini coefficient (in per cent)8

35.4

35.9

In comparison with 2010, Gini coefficient in 2011 has increased (from 35.4% in 2010 to 35.9% in 2011), while quintile share ratio (S80/S20) in 2011 has slightly decreased, as compared to 2010, from 6.6 to 6.5. Such situation may be explained with the fact that in households having the lowest (1st quintile) and the highest (5th quintile) disposable income the income growth in 2011 (in per cent) was approximately equal (9% and 10%, respectively), whereas in households belonging to the rest of quintiles the rise of income in 2011 ranged between 1% and 4%.

Data source of information on household disposable income is “Community Statistics on Income and Living Conditions” (EU-SILC) survey. Within the framework of EU-SILC 2012 survey 6.5 thousand households were surveyed and 13 thousand respondents aged 16 years and over were interviewed. Data on income were compiled on 2011. Data on income in 2012 will be compiled within the EU-SILC 2013 that will be started in March 2013 and will take place until the end of June.

More information on EU-SILC survey results and methodology is available in the CSB database.

 

Prepared by the Income and Living Conditions Statistics Section
Viktors Veretjanovs
Tel. 67366609

 

Methodological explanations

1Disposable income is cash income from labour, employee income in kind received by using company car for private needs estimated in cash, income or losses received from self-employment, received pensions and benefits, regular material assistance from other households, profit from interests of deposits, dividends, shares, income received by children aged under 16, income from property rental, receipts from tax adjustments from the State Revenue Service (for business activities, eligible costs – education, medical treatment etc.).

2 Hereinafter data of 2010 survey are re-calculated basing on population estimates acquired within the framework of the Population and Housing Census.

3Social transfersare pensions and benefits paid by State or municipality, child maintenance payments, scholarships, social insurance benefits and compensations, including the ones paid by other countries.

4 Expenses decreasing total disposable income – from the total amount of disposable income the following are deducted: real estate tax, amount of money regularly given to other households, amount paid to State Revenue Service due to unpaid or insufficiently paid income tax.

5 IIn 2010 in compliance withthe Constitutional Court Judgement on repeal of the provisions of the Law "On payment of State pensions and State allowances during the time period from 2009 till 2012” adopted on 16 June 2009 the pension sums withheld in 2009 were paid.

6 Quintile – one fifth (20%) of the number of the surveyed households grouped in increasing sequence according to the disposable income per one household member. The lowest (first) quintile includes one fifth of the households with the lowest income, bet the highest (fifth) - one fifth of the households with the highest income.

7 Quintile share ration (S80/S20) - ratio of total equalised disposable income received by the 20% of the country’s population with the highest equalised disposable income (top quintile) to that received by the 20% of the country’s population with the lowest equalised disposable income (bottom quintile).

8 Gini coefficient - characterizes inequality of income.  It varies from 0 to 100. Gini coefficient is 0, if there is absolute equality of income (i.e., all population have the same income), but the closer it gets to 100, the greater is inequality of income.