Despite a decrease in income from wages and salaries in 2020, household gross disposable income is estimated to have increased by 7.1% from 2019 to 2020. Disposable income per capita amounted to close to 4.2 million ISK in 2020 and is estimated to have increased by 5.4% from the previous year. The purchasing power of household disposable income per capita increased by 2.5% during the same period. Measurements of household disposable income in 2020 show a significant effect of the Covid-19 pandemic and the various measures taken to mitigate the economic and societal effects of the outbreak.
This is the first time Statistics Iceland publishes preliminary figures on disposable income of the household sector in accordance with the methodology of national accounts. Previously, the first results have been published around 15 months after the end of the reference period. Statistics Iceland will continue to publish revised figures when final information is available, e.g. tax returns from corporations and individuals.
| Household disposable income 2017-2020 | ||||
| Million ISK | 2017 | 2018 | 2019 | 2020 |
| 1. Income | 2,365,043 | 2,552,526 | 2,690,213 | 2,771,828 |
| D.1 Compensation of employees, receivable | 1,427,418 | 1,560,825 | 1,623,736 | 1,598,030 |
| D.4 Property income | 171,518 | 157,841 | 166,910 | 170,119 |
| - D.41 there of interest | 53,388 | 55,610 | 58,962 | 65,873 |
| D.62 Social benefits other than social transfers in kind | 307,648 | 337,878 | 386,481 | 492,271 |
| Other income1 | 458,459 | 495,983 | 513,086 | 511,408 |
| 2. Expenditure | 1,141,128 | 1,211,024 | 1,261,439 | 1,241,464 |
| D.4 Property expenditure | 89,929 | 89,662 | 94,336 | 93,383 |
| - D.41 there of interest | 87,730 | 87,045 | 91,893 | 91,089 |
| D.5 Current taxes on income, wealth, etc. | 400,036 | 433,739 | 459,738 | 454,594 |
| D.61 Net social contributions | 415,837 | 435,092 | 449,406 | 447,159 |
| Other expenditure2 | 235,326 | 252,531 | 257,958 | 246,329 |
| B.6G Disposable Income (1. - 2.) | 1,223,915 | 1,341,502 | 1,428,774 | 1,530,364 |
| Disposable income per capita (in thousand ISK) | 3,564 | 3,803 | 3,963 | 4,176 |
| Relative change in purchasing power of disposable income per capita (%) | 6.2% | 3.9% | 1.1% | 2.5% |
| 1Other income include output (P.1) and other current transfers (D.7) receivable. | ||||
| 2Other expenditure include intermediate consumption (P.2), compensation of employees (D.1) payable, taxes on production and imports (D.2) and other ccurrent transfers (D.7) payable. | ||||
Social benefits other than social transfers in kind increased by 27%
Total income of the household sector increased by 3% in 2020, from the previous year. The largest increase was in social benefits other than social transfers in kind which is estimated to have increased by more than 105 billion ISK from 2019, an increase of 27%. Thereof, the increase in general unemployment benefits amounted to 30 billion ISK in addition to the payment of partial unemployment benefits which is estimated to have amounted to 23.5 billion ISK during the year. The increase in social benefits is as well affected by other measures taken to mitigate the economic effects of the outbreak, such as additional child support supplement.
A significant increase in retirement and pension income was measured in 2020 which is largely due to a temporary permission to withdraw voluntary pension savings (third-pillar pension savings). The households’ withdrawal is estimated to have amounted to over 20 billion ISK in 2020.
The share of social benefits other than social transfers in kind measured at close to 18% of household total income in 2020, compared with 14% in 2019.
The household sector net social contributions decreased by 1% in 2020 compared with the previous year, which can largely be explained by increased unemployment as well as government measures that allowed employers to temporarily defer social contributions.
Decrease in household income from wages and salaries
Initial estimates suggest that household income from wages and salaries decreased by 2% over the period 2019 and 2020, while taxes on salaries decreased by 1% over the same period. This decrease was due to an increased unemployment rate, but previously published figures show that the number of employed persons decreased by 4% over the reference period. The effect of salary increased due to recent collective wage agreements as well as indirect effects of government and institutional measures in response to the Covid-19 pandemic which are present in these initial estimates.
The share of wages and salaries in household total income measured at 58% in 2020, the lowest since 2014.
Property income increased by 2% over the reference period, primarily due to a substantial increase in deposits, but household interest income increased by 12%. However, household interest expenses decreased by 1% over the same period.
Methodology and data sources
Previously published figures have been revised. Non-financial sector accounts utilise figures and indicators found in the expenditure approach, production approach and public finance statistics.
Household disposable income is defined according to the European system of accounts (ESA 2010) as the sum of compensation of employees (D.1) receivable, property income (D.4), social benefits other than social transfers in kind (D.62) and other income which include output (P.1) and other current transfers (D.7), subtracted by property expenditure (D.4), taxes on income (D.5), net social contributions (D.61) and other expenditure which includes intermediate consumption (P.2), compensation of employees (D.1) payable, taxes on production and imports (D.2) and other current transfers (D.7) payable.
Estimating preliminary figures for household disposable income, six key factors are considered:
- Compensation of employees receivable.
- Taxes on income.
- Social benefits other than social transfers in kind.
- Net social contributions.
- Property- income and expenditure.
Data sources used for estimation procedures include PAYE (Pay As You Earn) tax register, preliminary accounts from Iceland Revenue and Customs, the Financial Management Authority and financial statements from local municipalities as well as data collected from the Ministry of Finance and Economic Affairs and the Central Bank of Iceland. Further information on the methodology of the non-financial sector accounts are in a Statistical Series from 2014.