Australian Bureau of Statistics
1287.0 - Standards for Income Variables, 2010
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 15/03/2010
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NAME OF THE VARIABLE
8. 'Equivalised household income' is derived by adjusting 'Total income 'using an equivalence scale. Note, equivalisation can be applied to any aggregate household income measure.
DISCUSSION OF CONCEPTUAL ISSUES
9. Equivalence scales have been devised to make adjustments to the actual incomes of households in a way that enables analysis of the relative wellbeing of households of different sizes and composition. For example, it would be expected that a household comprising two people would normally need more income than a lone person household if the two households are to enjoy the same standard of living.
10. One way of adjusting for this difference in household size might be simply to divide the income of the household by the number of people within the household so that all income is presented on a per capita basis. However, such a simple adjustment assumes that all individuals have the same resource needs if they are to enjoy the same standard of living and that there are no economies of scale derived from living together.
11. Various calibrations, or scales, have been devised to make adjustments to the actual incomes of households in a way that recognises differences in the needs of individuals within those households and the economies that flow from sharing resources. The scales differ in their detail and complexity but commonly recognise that the extra level of resources required by larger groups of people living together is not directly proportional to the number of people in the group. They also typically recognise that children have fewer needs than adults.
12. When household income is adjusted according to an equivalence scale, the equivalised income can be viewed as an indicator of the economic resources available to a standardised household. For a lone person household it is equal to household income. For a household comprising more than one person, it is an indicator of the household income that would need to be received by a lone person household to enjoy the same level of economic wellbeing as the household in question.
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