What Is Personal Income?

Personal income refers to the total income an individual receives in a country within a year. The total amount of income an individual receives from various sources, including wages, rental income, dividends, and social benefits. It reflects the actual purchasing power level of the individual in the country and foreshadows changes in consumer demand for goods and services in the future. The personal income indicator is an effective indicator for predicting the individual's spending power, future consumer purchasing trends and assessing the economic situation.

personal income

Personal income (PI) refers to the sum of income received by individuals from various sources, including wages, rental income, dividends, and social benefits. This indicator is an effective indicator for predicting individual spending power, future consumer purchasing trends and assessing the economic situation. An increase in personal income represents an improvement in the economic situation or economic prosperity. Accordingly,

Personal income is expressed by PI, which refers to the sum of income of all individuals in a country from various sources within a year. Individuals within a country or region are actually residents of that country or region. The sum of the income of all individuals in a country or region is integrated with the income of all residents in that country or region, that is, the national income should be consistent. However, some factors in the actual economic operation have led to differences in the amount of personal income and national income. These factors are also important factors in the composition of personal income, including:

1. The existence of undistributed profits of the enterprise. The undistributed profit of an enterprise is the profit that should be allocated to the owner of the factors of production that the enterprise retains in the hands of the enterprise for the needs of future development.

2. The existence of corporate income tax. Corporate income tax is a tax paid to the government for the existence of profits, and payment to the government means that it cannot be distributed to individuals.

3. The existence of various social insurance premiums. Part of the income of the owner of the production factor must be given to the relevant agency in the form of social insurance taxes and fees, so it must be deducted.

4. The existence of transfer payments. In the real economy, individuals will also receive transfer payments issued by the government in the form of career relief and retirement benefits.

Therefore, the composition of personal income is actually the national income minus a part that should be paid to the individual as a factor of production without paying, plus the income that the individual actually receives that is not a factor of production.

In summary, the formula for personal income is:

PI (personal income) = NI (national income)-Undistributed profits of the company-Corporate income tax-Social insurance taxes and fees + transfer payments

5. Personal disposable income

Personal disposable income refers to the accumulation of personal disposable income in a country within a year. The balance of personal income minus personal income tax is personal disposable income, which can be divided into two parts: consumption and savings. The formula is expressed as:

DPI (Disposable Personal Income) = PI-Personal Income Tax = Consumption + Savings