equivalised

Equivalised is an adjective used to describe data—most commonly income or expenditure—that has been adjusted by an equivalence scale to reflect differences in household size and composition. The purpose is to enable fair comparisons of living standards across households that vary in size, age structure, and dependency, by accounting for shared consumption and economies of scale.

Equivalence scales assign a weight to each household member, producing an equivalence factor. The most common scales are the modified OECD scale, where the first adult has a weight of 1.0, each additional adult 0.5, and each child 0.3; and the square-root scale, where the factor is the square root of the household size. Equivalised income is typically calculated by dividing total household income after taxes and transfers by this equivalence factor.

Example: A household with two adults and two children (four people) using the modified OECD scale would have an equivalence factor of 1.0 + 0.5 + 0.3 + 0.3 = 2.1. If the household’s income after transfers is 42,000, the equivalised income would be 42,000 divided by 2.1, roughly 20,000. Different scales yield different results, which is why the choice of scale matters for comparisons.

Uses of equivalised data include assessing poverty lines, comparing living standards across households or regions, and evaluating policy impacts on different family structures. While useful, equivalisation relies on assumptions about economies of scale and needs across household members, and critics note it may not capture all variations in consumption and welfare.

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