Gross Mixed Income

Gross Mixed Income (GMI) is the profit of the self-employed after they have paid for raw materials, overheads, and any workers they employ. For example, a General Practitioner receives income from consulting fees, and then might pay rent for consulting rooms, pay a cleaning contractor, pay an accountancy firm to keep their books, purchase medical supplies and employ a secretary. All costs like these have to be deducted from the General Practitioner’s income before arriving at their Gross Mixed Income.

Gross Mixed Income is like Gross Operating Surplus (GOS), but GOS is for companies and GMI is for the self-employed. The income of the self-employed is income of the Household Institutional Sector.

GMI is is called ‘Mixed’ income because it is a mixture of wages and dividends. The self-employed person's income includes a return for the labour they have contributed, and also a return to them as the owner of the enterprise, just as dividends are paid to the owners of corporations. 

The self-employed are either sole traders or those running a small partnership: they run businesses that are not corporations or like corporations. Even if they have not registered for tax as sole traders or partners, National Accounts still includes their activity. Large partnerships are more like corporations, and so for National Accounts they are treated as such (we call them quasi-corporations). Partners in large firms do not have Gross Mixed Income: they receive wages and dividends, depending on their role in the quasi-corporation.

GMI is not all profit for the self-employed to spend as they like. It does not take account of the wear and tear on the buildings and machinery used in production (see Consumption of Fixed Capital). When we have deducted Consumption of Fixed Capital we have Net Mixed Income. GMI is also before the self-employed person has paid any income taxes or interest on loans (Investment Income): these have to be paid out of GMI. On the other hand, if the entrepreneur has interest income from deposits or other investments, the Gross Mixed Income does not include this either.

So Gross Mixed Income can be calculated by subtraction like this:

• Total Output (similar to turnover)
• Minus total Intermediate Consumption (cost of goods and services).
• Minus Compensation of Employees

Gross Mixed Income can also be calculated by adjusting taxable or accounting profit. The following adjustments might be necessary to taxable profit:

• Add back interest paid (this is Investment Income, not Intermediate Consumption).
• Deduct interest and dividends received (this is Investment Income, not Output).
• Deduct any exchange gains or holding gains (this is not part of Output).
• Add back any holding losses or exchange losses (this is not Intermediate Consumption).
• Deduct any income on disposal of Fixed Assets (this is not Output, it is negative Fixed Capital Formation).
• Add back expenditure on fixed assets (this is not included in Intermediate Consumption, it is positive Fixed Capital Formation).
• Add back any bad debts written off (this is not Intermediate Consumption)
• Add back any capital allowances or allowances for depreciation (Consumption of Fixed Capital is calculated independently for National Accounts).

Gross Mixed Income, along with Gross Operating Surplus, Compensation of Employees, Taxes and Subsidies, is included when calculating Gross Domestic Product by the Income Method.

The Imputed Rent of owner-occupiers is usually included with the Gross Mixed Income of self-employed workers for the Household sector.

Read next: Taxes

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