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Economic microsimulation:

Pensioners and children benefit from the 2018 central government budget

Statistical news from Statistics Sweden 2018-01-31 9.30

The central government budget contains a wide range of changes that affect household finances. These changes mainly affect children and pensioners.

The effect of the changes in the central government budget that affect household finances have been calculated using the FASIT simulation model.

The 2018 central government budget contains several changes that affect household finances. Tax will be reduced for both pensioners and persons with sickness and activity compensation. At the same time, taxation of investment savings accounts will increase, which will lead to increased tax on capital.

In addition to tax changes, there are also changes in several transfer systems. For families with children, child allowance and housing allowance will be raised. Student grants will be raised for both upper secondary and university students. The ceiling for health insurance and the guarantee level for sickness and activity compensation will be raised. Furthermore, the housing supplement, the special housing supplement and old-age support will be increased.

A large proportion of the population, nearly 70 percent, will be affected by the changes, although to varying degrees. Most of the changes strengthen the economic standard, but there are also changes that weaken it.

Percentage share in which the economic standard improves, remains unchanged or deteriorates by age and gender, year 2018
 ImprovementUnchanged/
marg. change
Deterioration
 MajorMinor MinorMajor
Sex          
Both sexes 7.4 60.5 30.9 1.0 0.1
Women 10.7 53.2 34.7 1.2 0.1
Men 8.2 49.4 40.9 1.4 0.2
Age          
0-19 years 0.6 90.8 8.3 0.2 0.0
20-24 years 0.8 48.0 50.7 0.5 0.1
25-34 years 0.9 49.4 49.2 0.5 0.0
35-44 years 1.2 74.8 23.4 0.5 0.0
45-54 years 1.4 53.9 43.4 1.1 0.1
55-64 years 2.4 29.6 64.6 3.2 0.3
65-74 years 26.8 49.8 21.1 2.0 0.3
75 years and older 37.9 49.9 11.3 0.7 0.2

The changes will mainly affect children and pensioners. The vast majority of people under the age of 20, 91 percent, will experience improvement as a result of increased child allowance, student grants and housing allowance.

Reduced tax and increased housing supplement will lead to an improved economic standard among 82 percent of old-age pensioners. The economic standard will increase more on average for pensioners than for children.

These improvements will impact people in all income classes, but primarily those with low or medium income. The changes will lead to an improved standard for between 80 and 87 percent of the people in those income classes.

Only about one percent of the population will experience a slightly weakened standard, primarily due to increased tax on investment savings accounts. This will particularly affect individuals aged 45 to 74 with high incomes.

Definitions and explanations

Economic standard

The household’s disposable income is used to measure the economic standard. To enable comparisons between different household types, the income is divided using a weight, which is determined by the composition of the household. This income is used as a measure of economic standard.

Affected by the changes

If an individual’s economic standard changes by SEK 600 per year or more as a result of the 2018 central government budget, the individual is classified as being affected by the changes.

If the change is between SEK -600 and SEK 600 per year, it is classified as marginal/unchanged. If the change is between SEK 600 and SEK 3 600 per year, it is classified as a minor improvement/deterioration. If the change is more than SEK 3 600 per year, it is classified as a major improvement/deterioration.

FASIT

FASIT is a microsimulation model used for calculating the effects of changes in taxation, fee and transfer systems for individuals and households.

Publication

More information is available in the publication Effects on household finances in the 2018 central government budget.

Effects on household finances in the 2018 central government budget

Feel free to use the facts from this statistical news but remember to state Source: Statistics Sweden.

Statistical agency and producer

Statistics Sweden, Public Finance and Microsimulations Unit

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Annica Wallerå

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