||This article possibly contains original research. (May 2013)|
Household income is a measure of the combined incomes of all people sharing a particular household or place of residence. It includes every form of income, e.g., salaries and wages, retirement income, near cash government transfers like food stamps, and investment gains.
Average household income can be used as an indicator for the monetary well-being of a country's citizens. Mean or median net household income, after taxes and mandatory contributions, are good indicators of standard of living, because they include only disposable income and acknowledge people sharing accommodation benefit from pooling at least some of their living costs.
Average household incomes need not map directly to measures of an individual's earnings such as per capita income as numbers of people sharing households and numbers of income earners per household can vary significantly between regions and over time.
Internationally comparable data on household income are difficult to find. Definitions differ frequently, as does the treatment of taxes (i.e., gross versus net income). Fortunately, the Luxembourg Income Study (LIS) has recently added a publicly available database with comparable statistics on household incomes for several countries, as has the OECD. These are the sources used.
Below are presented the mean and median disposable household incomes, adjusted for differences in household size. Thus, the figures presented are per person (equivalized) and after all income taxes and mandatory social contributions are paid. All figures were converted using respective year purchasing power parities (PPP) for private consumption, which is recommended when comparing incomes internationally. The PPP conversion rates are taken directly from the OECD database. All incomes are in the prices when income was earned, and refer to year 2004, except for Australia (2003), UK (2004–2005), and Sweden (2005). The exact definition of income can be seen in the LIS website (variable DPI). Generally, it includes all cash income (e.g., earnings, pensions, interests, dividends, rental income, social transfers) and excludes most non-cash income (e.g., employer contributions to social insurances, governmental health care, education). Note that capital gains are excluded from the income definition.[clarification needed]
Caution should be made when comparing countries based on a strict ranking, since not all datasets are capturing income equally. For instance, income spent on private health insurance, which in 2004 was about $1300 per household in the US, is not subtracted. However, because PPP rates are used, the differences in prices for all other expenditres, include health and education are already taken into account by definition. When compared to national accounts data (adjusted for differences in definition), the datasets capture anywhere between 75 and 95% of the true[clarification needed] income. More specifically, countries where surveys are used range from around 70 to 85%, while register countries (e.g., the Netherlands, and the Scandinavian nations) are capturing on average more than 90%. The U.S. dataset captures only 75% of the disposable income aggregate as of 2004. Thus, a true ranking would see a different ranking, as countries with low coverage would move above those with high coverage.
National accounts adjustment
To keep the data accurate and up to date, incomes have been extrapolated to adjust for undercounting and time, to the year 2010. To adjust for undercounting, the original datasets are aggregated to the national level and then compared to the disposable household income National Accounts aggregate gathered from the OECD. The latter is more accurate because it captures all income and not just that which is reported to a survey or tax authorities. For instance, National Accounts data includes an adjustment for exhaustiveness in self-employment income and wages and salaries, i.e. income that is hidden from authorities. To this end, as both are part of GDI and GNI, Eurostat checks and audits member countries to make sure all components are exhaustive and include all the adjustments needed. Also, National Accounts data will include all social benefits, whether taxable or not, all income taxes paid, and (normally hard to estimate) interest and dividend income data. Data on social benefits in the National Accounts are measured directly from government authorities, meaning accuracy is guaranteed. The National Accounts data on which the comparison is made adjusts the disposable income variable (B6) to not include imputed rents, property income of pension and non-life insurance entities, insurance proceeds, and to subtract only mandatory taxes and social contributions.
Growth between 2004 and 2010 was calculated by taking 2004 income, subject to the overall definition agreed to on this page, and 2010 income, and then adjusting by changes in PPPs, number of households, and household size. The percentage change is then reported here. Therefore this method is an approximate extrapolation of 2010 income. It is not exact, because the growth is based on change in household income adjused for changes in household size using household weights, however, equivalised income is based using person weights. Given the slight differences in distribution between household income using both weights, one would expect small differences between the extrapolated figure and an "actual" figure derived using person weights, as household income using person and household weights are usually close together. In Australia, the two differ by less than 3%. Note that Poland and South Korea were excluded from this exercise due to lack of data.
Mean equivalized disposable household income (PPP) $
|Rank||Country||NCU||Currency in 2004||PPP rate 2004||Mean Income (PPP)|
|1||United States||32,195||United States Dollar||1||32,195|
|4||United Kingdom||16,685||British Pound||0.64||26,070|
Median equivalized disposable household income (PPP) $
Median household income divides households in a country or region into two equal segments with the first half of households earning less than the median household income and the other half earning more. It is considered by many statisticians to be a better indicator than the mean household income as it is not dramatically affected by unusually high or low values.". Alternative more up-to-date figures are available from the OECD (OECD better life Index).
|Rank||Country||NCU||Currency in 2004||PPP rate||Median Income (PPP)|
|1||United States||26,672||United States Dollar||1||26,672|
|7||United Kingdom||13,637||British Pound||0.637||21,408|
National accounts adjusted mean equivalized disposable household income (PPP) $
|Rank||Country||2004 Mean Income (PPP)||Growth (2004-2010)||2010 Mean Income (PPP)|
- "PPPs and exchange rates". From the drop down menu select PPPs for private consumption. OECD stat extracts. Retrieved 13 May 2011.
- "U.S. Census Bureau on the nature the median in determining wealth". Retrieved 2006-06-29.