Institutional Sector Accounts Non-Financial and Financial 2022

Household Disposable Income

Total Disposable Income (B.6g+D.8) of households and non-profits grew by 7.1% (€9.4bn) in 2022. However, inflation meant that effectively the cost of living grew at the same rate, leaving the standard of living the same (the Consumer Price index shows a change of 8.2% over the 12-month period to the end of 2022). 

Here we look at the changes in composition of disposable income at current prices. Figure 1.1 shows the components (columns) and the change in Disposable Income itself (line). The graph illustrates the difference compared to the previous year, rather than the absolute amount of each item. In most years, the biggest contributor to the change is wages and salaries paid to employees. This has been going up in each of the eleven years shown. There has been a corresponding but smaller increase in the taxes paid on this income (D.5) which reduces the Gross Disposable Income. In 2020, net social benefits overtook wages as the biggest contributor to the change in incomes as government provided support for those not in work because of the COVID-19 pandemic. Over 2021 and 2022 those supports declined, and this is shown in the negative 'D6 net' item over those two years. We can also see that net investment income is a growing contributor to household incomes, as interest rates started to rise and households had less debt and more deposits. 

Changes in Disposable Income

A Census of Population was conducted in 2022 and it showed a population of 5,149,139, an increase of 8% since the last Census in 2016. Comparing the two Census years allows us to look at the longer term change in Household Total Disposable Income, either side of the pandemic. The number of households increased over the six years 2016-2022 by 8% to 1,841,152. In the same period, TDI at current prices went from €99.0bn to €141.7bn, a change of 43%. However, when we take into account that the income was split among a higher number of households, it grew by less, 32%, from €58,152 per household to €76,959. If we also adjust for inflation, and take into account that the same goods and services cost more in 2022 than they did in 2016, household income grew 12%, a more modest but still significant amount. 

At the time of the 2016 census, the number in employment was 2,158 thousand, approximately 1.25 people per household. In Quarter 2 of 2022 (when the Census took place), there were 2,555 thousand employed, or 1.39 per household. Hence the number of workers per household increased by 11%. Household income is not entirely made up of earnings of workers, as we saw, but compensation of employees is a large part of it. Much of the increase in disposable income was due to more workers. When we adjust for both price inflation and the number in work, Total Disposable Income per worker grew by around 1%.

Income of Employees

Figure 1.3 shows the changes in Compensation of Employees (CoE) in more detail. The Figure illustrates the sectors from which wages came in each year. As well as wages, CoE encompasses benefit-in-kind and other labour costs. Like Figure 1.1, the change since the previous year is shown, not the total paid. The trend is driven by Non-Financial Corporations (NFCs, S.11), both foreign and domestic. During the pandemic, domestic corporations had a lower pay bill than before or after, while foreign corporations continued to add to their labour inputs. In 2022, most of the increase in pay to workers came from foreign-controlled Non-Financial Corporations. Over the last decade, foreign multi-nationals have grown their presence here, and this is visible in the share of CoE they pay. In 2013, 21% of CoE was paid by foreign-controlled NFCs. By 2022 this had risen to 30%. This is more than the Government (S.13) sector (24%) but less than domestic NFCs (S.11b, 35%). If we add in foreign-controlled Financial Corporations (S.12a) to the foreign-controlled NFCs, in the latest year 36% of pay to workers came from branches and subsidiaries of overseas corporations. Clearly household income, as well as tax receipts by government, are very significantly affected by foreign multi-nationals' activities in Ireland. 

Household Saving Rate

The household saving rate, which measures the proportion of income that is not used in current consumption, was 12.4% in 2022. Figure 1.4 below shows the saving rate over the past 12 years, alongside the saving rate for the EU as a whole. While Ireland's saving ratio was below the ratio for the EU as a whole for most of the time, in 2020 and 2021, Ireland's ratio was above the overall EU's: this was because incomes in Ireland rose faster than the rest during the pandemic, and also because spending was curbed more in Ireland than in the EU generally. In 2022, Ireland's saving rate declined as consumption picked up again after restricitions were lifted. It was again slightly below the EU aggregate in its rate of saving in the latest year. It remains to be seen if this is part of a trend back towards its long term mean, or if some of the saving habits developed during COVID-19 will stick.  

Household Debt to Income Ratio

The balance sheet position in relation to household and NPISH debt (Liabilities - (AF.4) Loans) increased slightly in 2022 to €129.2bn from €128.8bn. This is well below its peak of €202.7bn in 2008. In the early part of the series up to 2008, debt increased to fund investment in housing and this declined as the value of new houses purchases decreased between 2008 and 2013. While new dwelling purchases have been increasing in the years since then, they are still some way off their peak in 2006. 

Figure 1.5 charts the movement in income and debt for the period 2001 to 2022. The debt to income ratio is a key indicator of the sustainability of household debt. As central banks have raised their interest rates in response to inflation, this is passed on to borrowers and seen in monthly mortgage payments. A lower debt to income ratio means that higher interest rates are a more manageable burden for households: the loan liabilities are less and so the interest is lower, or the disposable income is higher and so there is more money available to make mortgage payments. 

While debt rose slightly in 2022, incomes rose by far more, and this led to a decline in the debt-to-income ratio to 91.2%. This is the lowest the ratio has been in the 22-year series. 

 

Use of Household and NPISH Saving

Gross household and NPISH saving (B.8g) was €17.6bn in 2022. The line in Figure 1.6 illustrates the Gross Saving over the last twelve years and it is clear that the level of saving is returning to normal after the pandemic years.

The columns in Figure 1.6 illustrate how that saving was used. Saving adds to wealth in the form of real assets, such as houses, and financial assets such as deposits. Saving is also used to reduce liabilities, such as loans. It is important to make the distinction between balance sheet measures and transactions. Figure 1.5 above illustrated the balance sheet position of the outstanding stock of loans to households. Figure 1.6 below shows the transactions in loans, i.e. increases (+) or decreases (-) in each year.

Back in 2011, households withdrew more deposits than they made but over all years since then, assets of deposits in banks have increased. Over the period up to 2019, households invested more in real assets (Fixed Capital Formation) than they put on deposit. Since the COVID-19 years 2020 and 2021, deposits overtook real assets as a store of value for households. In 2022 fixed capital investment was again close to the deposit level as investment in housing increased and deposits slowed down. Households also put €2.7bn aside as investment in insurance and pension funds.