Reaalitulo

Reaalitulo is a term used in Finnish economic discourse to describe the purchasing power of income, i.e., the amount of goods and services that income can buy after adjusting for inflation. It corresponds to the English concept of real income and is commonly employed to compare living standards across different time periods.

Calculation of real income involves adjusting nominal income for changes in the price level. A typical approach is Real income_t = Nominal income_t ÷ PriceIndex_t × PriceIndex_base, or equivalently Real income_t = Nominal income_t × (PriceIndex_base / PriceIndex_t). The price index used (for example, the Consumer Price Index or a GDP deflator) is chosen to fit the context, and expressing real income in a base year’s prices allows comparisons over time.

Applications of reaaliitto include tracking changes in purchasing power, welfare, and living standards; comparing income trajectories across individuals or households; and informing wage negotiations and social benefit policies. Real income is often central to policy analysis and socioeconomic research in assessing how inflation affects households’ economic well-being.

Limitations should be noted: the measurement depends on the selected price index and base year, and price indices may not fully capture regional price variations or substitutions in consumer behavior. Real income does not reflect non-monetary factors such as changes in leisure, health, or the quality of goods and services, which can also influence overall well-being.

See also: real income, real wages, consumer price index, purchasing power.