1.3 EQUIVALISED HOUSEHOLD INCOME
EQUIVALISED HOUSEHOLD INCOME
A major determinant of economic wellbeing for most people is the level of income they and other family members 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, for example through the provision of free or cheap accommodation. This is particularly likely to be the case for children other than dependants and other relatives with low levels of income of their own. 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 the sharing of dwellings. Therefore household income measures are usually used for the analysis of people's economic wellbeing.
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. The income estimates are therefore 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 the sharing of dwellings. The resultant estimates are known as equivalised household income. Equivalised income is set to zero when the original, unequivalised income is negative, as it can be for own unincorporated business income or rental property income.
The concept of equivalised household income is applicable to both households and the persons comprising those households, that is, each person in a household has the same level of equivalised household income as the household itself. The difference between using households or persons as the unit of analysis is discussed in 1.10 'Household, income unit and person data'.
Published HES and SIH output includes estimates of equivalised disposable household income but not estimates of equivalised gross household income, although the latter can also be produced.
For more information on equivalised income see Appendix 2 'Equivalised household income'.
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