Disposable income rebounds

Disposable household incomes rose by 10.2% in the third quarter of 2022, reaching 37.7 billion euros, compared to 34.2 billion euros in the same period last year, according to data the Hellenic Statistical Authority (ELSTAT) released on Tuesday.

An increase in employment and wages, mainly of the minimum salary, a good tourism season, as well as the government’s support measures have contributed to this result. With disposable income increased by 10.2%, inflation was almost covered, Finance Minister Christos Staikouras pointed out.

However, the mitigation of inflationary pressures from the increase in disposable income does not affect all social groups equally. Studies show that inflation is felt much more in the lower income brackets, most of whose income goes toward consumption, compared to higher incomes. Therefore the increase in disposable income may not even be felt by the lowest income earners.

Indicatively, according to a recent study by the European Central Bank, the difference in real inflation between the lowest and the highest 20% income brackets increased to 1.9 percentage points in September 2022, compared to just 0.1 point a year ago, in a low inflation environment. Inflation in energy and food prices in particular hits lower incomes harder, as they are the ones who spend most of their money on food, electricity, natural gas and heating. Also, the study notes that while the corresponding top 20% income bracket saves 39.9% of their income, the bottom 20% has negative savings (of -6.4%) and therefore no cushion to defend against inflation.

In the same vein, the GSEE Economic Development Bulletin (November 2022), citing the Family Budgets survey, referred to the asymmetric effect of inflation and noted that while in incomes below €750 the loss of purchasing power (in September of 2022) was up to 40%, in the next income bracket (€751-1,100) it was 9-14%, and in the remaining income brackets it was lower than 11%, decreasing as income increased.