Equivalence incomes are used particularly for the computation by income distribution, income inequality and poverty. With the help of an equivalence scale the incomes are weighted after household size and composition. Reason for it is that the incomes of persons, who live in differently large households are comparable not with one another, there in larger households saving effects (Economies OF Scale) arises (e.g. by common use of dwelling or household appliances).

On the assumption that all incomes among all household members are divided evenly, the incomes of the entire household added and afterwards added after household size weights the individual household members.

The equivalence scales used for this computation use partial different weighting factors for adults and children. In Germany the weight receives 1.0, further persons of the household, who are older than 14 years, the weighting factor 0.5 and children up to 14 years the factor 0,3 according to Federal Statistical Office of the main income subscribers of the household.

Example: In a family of five family the married man does not obtain 5000 euro income, the wife works, two children is 6 and/or 8 years old, a further 15. The net equivalence income amounts to 5000/(1 + 0.5 + 0.5 + 0.3 + 0.3) = 1923 EUR.

Average net equivalence income

As (net) incomes here all income from more independent and as well as from fortunes is not considered to independent work plus rental value of used residential property less taxes and compulsory contributions to social security.

The average monthly net equivalence income designates the money available per head on average (including housing rents). However the statistic average does not become frequent, but the median uses. In the poverty and wealth report 2004/2005 for the 2003 following average monthly net equivalence incomes are called: Germany entirely: 1.564 "€; old Lands of the Federal Republic: 1.624 "€; new Lands of the Federal Republic: 1.335 "€.

Definition of the relative poverty border

In the European Union since 2001 the median of the net equivalence income is used for the definition of the relative poverty border. Persons with an available income of 60% or this amount are considered less than (relative) poor. In the poverty and wealth report 2004/2005 for the 2003 following poverty risk borders were determined: Germany entirely: 938 "€; old Lands of the Federal Republic: 974 "€; new Lands of the Federal Republic: 801 "€.

The use of a relative poverty border is partially criticized, because it would not change by an even improvement or degradation of the prosperity of all social classes.

See also

OECD scale

Articles in category "Equivalence income"

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Related Websites

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• Abstract: "Equivalent-Income Functions and Income-Dependent ...
  We show that, under certain conditions, equivalent-income functions and the associated income-dependent equivalence scales can be uniquely estimated from ...


• Equivalent-Income Functions and Income-Dependent Equivalence Scales
  Author(s): Donaldson, D. & Pendakur, K.. 1999 Abstract: This paper presents and investigates two classes of equivalent-income functions that are ...


• Equivalent-Income Functions and Income-Dependent Equivalence Scales*
  For example, the equivalent income of an adult couple with an income of ... equivalent-income functions have associated equivalence scales that depend on ...


• Shares of Income Received by Quintiles When Equivalent Income Is ...
  For the purpose of presenting a time series of average equivalent income that can be ... For additional information on the calculation of equivalent income, ...


• Using equivalent income of equivalent adults to rank income ...
  Downloadable ! Author(s): Udo Ebert. 1999 Abstract: The paper proposes the consistent and rigorous use of equivalence scales for households of different ...