2.7 Income

The question of how properly to describe income is a common source of disagreement. The measurement of income is a complex business, but for statistical purposes it has nonetheless been necessary to reach agreement on a common set of definitions.

There are different kinds of income. The most common type of income is wage income. In 2006, over one-half of Finland's 2,455,000 households were wage earner households. Another major source of income is represented by pensions. In 2006, close on one-third of all households were pensioner households. The proportion of households living on entrepreneurial income was less than eight per cent. Unemployment and other benefitswere also an important kind of income. It was estimated that five per cent of all households were households of unemployed persons.

Households receiving income in 2006 (1 person = 100,000 households)

Source: OSF: Statistics Finland, Income Distribution Statistics, http://tilastokeskus.fi/til/tjt/index.html (2 Oct. 2008)

Wage income, entrepreneurial income and property incomeare described as factor income because they are all generated in productive labour. Property income includes rent and interest income on bank savings.

Wage earners do not get to keep all their income but have to pay a tax on what they earn. Tax revenue is used, for example, to fund payments to pensioners and various benefits and allowances, such as the child allowance. Taxes, pensions as well as other social security subsidies are called income transfers. When taxes and income transfers are deducted from factor income, we know the amount of disposable income.

Source: OSF: Statistics Finland, Total Statistics on Income Distribution

At the level of the whole society the sum of income transfers is usually zero, but among individual households some receive more and some pay more income transfers. In the above picture income transfers do not sum up to zero. In the longer term the situation evens out.

Wages are by far the biggest category of household income, accounting for over 75 per cent of households' average total income. The figure for entrepreneurial income is no more than six per cent and for property income 10 per cent. Income transfers account for just over one-third of total income.