Three streams, one household
Three income streams
National accounts have long tracked three categories of household income. Wages and salaries — earnings from work. Transfers — benefits received from the state, including pensions, healthcare coverage, unemployment support, and child benefits. Capital income — returns from owning assets, including dividends, interest, rental income, and business profits. These three streams make up nearly all household income.
The typical balance
In most developed economies, wages provide the largest single stream, usually 60 to 80 percent of household income. Transfers make up 15 to 25 percent, higher in countries with larger welfare states and lower in the United States. Capital income is the smallest share for most households — under 10 percent — but highly skewed: it dominates income for the wealthiest households while barely touching the rest.
Why the shares matter
The more a household depends on wages, the more exposed it is to automation. A household with significant capital income is partly insured: when automation reduces wage income, it often increases capital income (because the owners of the machines collect what the displaced workers no longer earn). A household with significant transfer income is partly insured in a different way: the state stabilises income directly.
The policy lever
Any post-labour policy framework reduces to a question about these three streams: how to sustain household income as wages shrink. The two directions — boost transfers, or broaden capital ownership — are the subject of Module 4. Neither is a free lunch, and both require deliberate design. But the household-income stack is where every proposal lands.
In your own household, roughly what share of income comes from each of the three streams below? Would it hurt most if one of them halved?