DERIVATION PROCEDURES
18. 'Equivalised household income' is a derived variable. It is derived by calculating an equivalence factor according to the chosen equivalence scale, and then dividing household income by the equivalence factor.
19. The equivalence factor derived using the 'modified OECD' equivalence scale is built up by allocating points to each person in a household. Taking the first adult in the household as having a weight of 1 point, each additional person who is 15 years or older is allocated 0.5 points, and each child under the age of 15 is allocated 0.3 points. 'Equivalised household income' is derived by dividing household income by a factor equal to the sum of the equivalence points allocated to the household members. When household income is negative, 'Equivalised household income' is set to zero.
20. The 'Equivalised household income' of a lone person household is the same as its unequivalised or household income. That is, household income divided by an equivalence factor of 1 (single point allocated to single adult).
21. For all other types of household composition, 'Equivalised household income' is lower than household income, since income is adjusted to reflect household size and composition (except where the unequivalised income is negative). For example, if a household received household income of $2,100 per week and comprised two adults and two children then their 'Equivalised household income' would be $1,000 per week. This is calculated by dividing $2,100 by an equivalence factor of 2.1 (calculated by summing the points allocated to each person in the household, that is 1 point for the first adult plus 0.5 points for the second adult plus 0.3 points for each child).
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