Household disposable income represents the amount of money households have available for final consumption expenditure or savings after deducting income taxes. It is closer to the concept of income, as perceived by households, than national income or GDP. When comparing disposable income across countries, it is preferable to use “adjusted” disposable income because it takes into account the free provision of services provided by government (e.g., education and health). The magnitude of these free services may significantly affect the comparison of income levels across countries. The income representing the free provision of services by government is referred to as social transfers in kind.
In 2010, the largest gaps between adjusted disposable income and disposable income were in Denmark, Norway, Sweden and the Netherlands, followed by Finland and Luxembourg. The smallest gaps between the two measures were in Mexico, Korea, and Greece. Using either disposable income or adjusted disposable income can significantly affect the comparison of income levels across countries. While Denmark ranks 20th out of 28 OECD countries when looking at disposable income, it moves up in rank to 15th when looking at adjusted disposable income. On the other hand, Ireland ranks 15th when looking at disposable income, but moves down in rank to 18th for adjusted disposable income.