Equivalised Income25 Aug 2013
Want To Know More About Your Equivalised Income?
If you’ve used the Where Do You Fit In App to see where your income lies in relation to others in Ireland, you will have come across the concept of Equivalised Income and you may have some questions about it.
Households come in all manner of sizes and compositions, which means that direct comparisons of household income may reveal little about how well off households actually are in comparison with each other. For instance, a household with one adult requires less income to achieve the same standard of living as a household with two adults and two children.
In order to make comparisons across different types of household, your household’s income is adjusted using equivalence scales that depend on the demographics of the household.
The Equivalised Scale used in Ireland assigns a value for each member of the household:
- The first adult is assigned a value of 1.
- Each subsequent adult and any children over the age of 14 are assigned a value of 0.66.
- And a child aged 13 or younger is assigned a value of 0.33.
To illustrate how this works in practice, suppose there is a household with a net household income of €50,000, comprised of two adults and two children under the age of 14.
- The equivalised size of this household is 2.32 (1 + 0.66 + 0.33 + 0.33).
- To calculate their equivalised income, we divide their actual household income by their equivalised size, which in this instance gives us a value of €21,552.
Looking at this another way, a single person with a net income of €21,552 enjoys a similar standard of living as the household described above.