Primary Income in Counties and Regions

While the key statistics of Household Disposable Income and Regional GVA are the focus of much of the analysis of the CSO County Incomes and Regional GDP[1]  it is interesting to look at Primary Incomes and in particular the relationship between Primary Income and Household Disposable Income.

Irish Counties’ Primary Income

Primary income is made up of income from employment, rent of dwellings and net interest and dividends. This is mainly income from productive sources. Adding social transfers to primary income and subtracting off income taxes and social insurance contributions gives disposable income.

In Irish counties with higher employment rates and lower dependency ratios, primary income is usually greater than or similar to the household disposable income, indicating a relatively lower inflow of social transfer and a relatively higher tax outflow.  However, the relationship between the primary income and disposable income also depends on the demographics of each county as disposable income includes social transfers and so is affected by the numbers of pensionable age, children and those in receipt of other benefits.

In the counties of Dublin, Kildare, Meath, Wicklow, and Cork primary income exceeded disposable income in 2012 (Figure 1). These are the counties with the highest employment rates.  In contrast, in the counties of Donegal, Carlow, Wexford and Longford, primary income made up less than 85% of disposable income. In another eight counties primary income made up less than 90% of disposable income.

Figure 1: Primary income as a percentage of household disposable income

primary income counties

Source: CSO County Incomes and Regional GDP 2012, Table 1

In the Western region, Clare and Galway (both 96%) had the highest levels of primary income as a percentage of disposable income, while in Leitrim and Mayo (both 86%) and Donegal (78%) had the lowest.  Roscommon, which is a relatively poor county (household disposable income per capita was €16,827, second lowest in the Western Region and with a high dependency ratio) has, along with Sligo the third highest rate of primary income (90%) as a proportion of household disposable income in the Western Region.

Primary income in selected European regions

In contrast to the majority of the counties in Ireland, the disposable income per inhabitant in most European regions[2] is lower than the corresponding figure of primary income per inhabitant. This is particularly true for regions with the highest earners as tax and social security contributions usually increase as a function of income. A comparison between regional household disposable income and primary income shows the levelling role state intervention can play with the convergence of disposable income per inhabitant between ‘rich’ and ‘poor’ regions. As noted above, social transfers include old age pension and child benefit payments and so are strongly associated with the demographic characteristics of the regions. Poorer regions tend to have higher dependency ratios, with a higher proportion of older age and child populations while wealthier regions have a relatively higher proportion of people of working age.

It is interesting to look at the differences between regional GDP and disposable income and the levels of income from primary sources (Figure 2). In four  selected regions (Brittany, SW Scotland, Galicia and Nordjylland) income from primary sources is greater than household disposable income, indicating a relative movement of taxes and social transfers out of that region. It should be remembered that in many regions taxes are used to fund services provided without charge or at low charges and, while the benefits of these are not captured in income data, they do result in lower spending requirements for certain services in the different regions.

The regions compared were selected as having similarities with our own Western Region, being maritime and agricultural regions, relatively remote from the main cities or centres of power, and located in temperate climates. These characteristics mean the regions are often similar in terms of their rurality, environmental quality and relatively high quality of life, but there are of course observable differences in their incomes and GVA. While the similarities are interesting , the differences in other factors (geographical area, population size and density, urbanisation among others) all make a difference to the regions, as do their government policies and structures and regional policies, which can mean direct comparison is not always meaningful. None the less looking at regions in a similar situation to our own can provide us with insights and models which can increase our understanding of our region.

Figure 2: Regional GDP, Disposable Income per Household and Income from Primary Sources

Eur regions pri and other inc

Source: Eurostat, various tables,tgs00005, tgs 00026, tgs 00036, http://ec.europa.eu/eurostat/web/regions/data/main-tables

The most significant difference is in Nordjylland in Denmark where disposable income is 13,500pps [3] and income from primary sources was 16,600 pps showing the relatively higher tax rates in Denmark and outflows from the region.

Brittany has the highest disposable income and the highest income from primary sources, indicating an active economy with strong employment. In contrast West Wales has the lowest GVA, disposable income and income from primary sources, although the BMW has only marginally higher income from primary sources (13,100pps). In Cornwall, the BMW and West Wales and Valleys disposable income is higher than primary income indicating a higher level of social transfers into those regions.

In Europe at NUTS 2 level 51 regions (of 272) had higher levels of disposable income per inhabitant than primary income. In Ireland at NUTS 2 level in the Southern and Eastern region primary income is higher than household disposable income (102%), while it is the reverse in the BMW (89%).

Transfers to households significantly reduce the difference between the highest and lowest disposable incomes as compared to primary income, but household income levels are, of course, ultimately dependent on the economic activity and output of each country and region.

[1]CSO, 2015, County Incomes and Regional GDP, 2012 http://www.cso.ie/en/releasesandpublications/er/cirgdp/countyincomesandregionalgdp2012/#.VbiyGfn7NOQ

[2] Eurostat, 2015, http://ec.europa.eu/eurostat/statistics-explained/index.php/GDP_at_regional_level

[3] The pps (purchasing power standard) is an artificial currency that takes into account differences in national price levels. The unit allows meaningful volume comparisons of economic indicators in different countries

 

Helen McHenry