Purchasing power growth does not reach the lowest income groups

Trends in real disposable income across income and population groups in Finland, including projections for 2026

Abstract

Household purchasing power is currently developing unevenly across income and population groups in Finland. This analysis examines changes in purchasing power over the periods 2023–2026 and 2025–2026. The estimates are produced using the SISU microsimulation model using a register-based sample representative of the Finnish population. Purchasing power is measured using equivalised disposable income, adjusted for household size and composition and deflated using income-quintile-specific price indices. Between 2025 and 2026, purchasing power declines in the three lowest income deciles. The decrease is 3.5 per cent in the lowest decile, 1.6 per cent in the second decile and 0.2 per cent in the third. In the highest income decile, purchasing power increases by 2.2 per cent. Over the full period from 2023 to 2026, purchasing power declines by 5.4 per cent in the lowest income decile and by 2.2 per cent in the second-lowest decile. It increases in all other income deciles. Growth reaches 10.8 per cent in the highest decile, producing a gap of more than 16 percentage points between the highest and lowest deciles. This gap mainly reflects differences in the development of nominal disposable cash income. Differences in price developments widen the gap by only about half a percentage point. The long-term comparison shows that the current divergence is substantial. A distinctive feature of the 2023–2026 period is that the purchasing power of the lowest income decile declines while that of the highest decile increases. Although differences in income growth were also large during the post-recession expansion of the late 1990s, the purchasing power of the lowest decile did not decline during that period. The subgroup analysis also reveals marked differences. Between 2023 and 2026, the purchasing power of people living in rented housing increases by 1.7 per cent, compared with approximately 7.5 per cent among those living in owner-occupied housing. Purchasing power increases by only about one per cent among single-parent households. Among people aged 65 or over, it increases by approximately seven per cent over the full period but declines by around 0.6 per cent between 2025 and 2026.

• ISSN: 2954-2618 (Online)
• ISBN: 978-952-209-245-8 (Online)
• JEL: D31, I38, C53
• Publication in PDF-format