1287.0 - Standards for Income Variables, 2010
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 15/03/2010
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80. This section provides information on the use and interpretation of income statistics. It covers statistical units, levels of aggregation and standard measures of income distribution.

STATISTICAL UNITS

81. Statistical units are the basic units for which information is sought and for which statistics are compiled. Income data may be collected and analysed in respect of the following statistical units: persons; income units; families; and households.

82. The operational definitions for household, family and income units are detailed below. For further information refer to the ABS standards for 'Family, Household and Income Units'.

(i) Household unit

The ABS operational definition of a 'household' is 'One or more persons, at least one of whom is at least 15 years of age, usually resident in the same private dwelling'.

Household income, rather than personal or income unit income, is generally the preferred measure for analysis of people's economic well-being as the major determinant of economic wellbeing for most people is the level of income they and other family members living in the same household receive.

While income is usually received by individuals, it is normally shared between partners in a couple relationship and with dependent children. To a lesser extent, it may be shared with other children, other relatives and possibly other people living in the same household. Even when there is no transfer of income between members of a household, nor provision of free or cheap accommodation, members are still likely to benefit from the economies of scale that arise from sharing a dwelling. Therefore household income measures are generally used for the analysis of people's economic wellbeing.

(ii) Family unit

The ABS operational definition of a 'Family' is 'Two or more persons, one of whom is at least 15 years of age, who are related by blood, marriage (registered or de facto), adoption, step or fostering, and who are usually resident in the same household. As the family is identified by the presence of a couple relationship, a lone parent-child relationship or other blood relationship some households will have more than one family.'

The family is not generally used as a statistical unit for income analysis.

(iii) Income unit

The ABS operational definition of an 'income unit' is 'A group of two or more persons who are usually resident in the same household and are related to each other through a couple relationship and/or parent/dependent child relationship; or A person not party to either such relationship.'

(iv) Person unit

The person level relates to individual members of a household.

LEVELS OF AGGREGATION

83. The components of income can be aggregated in a hierarchy to produce selected measures of income for particular analytical purposes. Gross and disposable income are the main income measures produced.

84. Total or gross income is the sum of income from all sources before income tax, the Medicare Levy or the Medicare Levy Surcharge are deducted. It is the most commonly used measure.

85. Disposable income is derived by deducting taxes on income (where this information is available or can be imputed) from gross income.

MEASURES OF INCOME DISTRIBUTION

Quantiles

86. The preferred output categories for income statistics divide the population into quantiles. Income quantiles are derived by ranking persons (or any other units) from the lowest to the highest on the basis of their income (including units with zero or negative incomes). When the population is divided into five equally sized groups, the quantiles are called quintiles. Thus the first quintile will comprise the first two deciles and the first 20 percentiles. In other words the 20% of persons (or other units) with the lowest incomes.

Equivalised income

87. The household level is generally the preferred statistical unit for income distribution analysis. However, larger households normally require a greater level of income to maintain the same material standard of living as smaller households, and the needs of adults are normally greater than the needs of children. It is therefore recommended for most purposes that household income estimates are adjusted by equivalence factors to standardise them for variations in household size and composition, while taking into account the economies of scale that arise from sharing a dwelling. The resulting estimates are known as 'Equivalised household income'. Equivalisation can be applied to any aggregate household income measure.

88.When 'Total household income' is adjusted according to an equivalence scale, it can be used for comparing the situation of households as well as comparing the situations of individuals.

89. Refer to the standard for Equivalised total household income for more information.

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