Equivalisation

The equivalent income is the income that each member of a household if it would grow and would live alone, would allow the same ( equivalent ) standard of living, as it has it within the household community. For this purpose, the income of the entire household is added and then weighted due to an equivalence scale. The weighting is based on the number and age of people in the household community.

Use

The equivalent income is mainly used for the calculation of income distribution, income inequality and poverty. Using an equivalence scale weights the income by household size and composition. Reason for this is that the income of people who live in different sized households, are not comparable, since economies of scale occur in larger households (eg through sharing of housing and household appliances ).

The weighting can be done in different ways. The most relevant is the weighting of the OECD, which is mostly used for international comparisons: the new and old OECD scale.

Net equivalent income

The net income all income from self -employment and self-employment as well as maintenance and assets plus rental value of owner-occupied housing net of taxes and mandatory contributions to social insurance apply here. The monthly net equivalent income referred to in the above weighting per capita in a month fictitious amount of money available.

The net equivalent income of an individual citizen is generally not of interest, the overall welfare of the city, the province or the whole of Germany is instead viewed. There a welfare function is thus determined. Trivial and therefore often used welfare functions are the arithmetic mean and the median. These can both be taken for the years 1995 to 2010, the table. By using different inequality measures other welfare functions can be determined.

Definition of relative poverty line

In the EU, the median net equivalent income ( NÄE ) is since 2001 used to define the relative poverty line as follows: people apply with a disposable income of 60% or less of that amount at risk of poverty in relation to the population. In 2004, this applied in Germany 13 % of the population with a monthly NÄE of less than € 856 or € 10,274 per year. As a relatively poor people with a NÄE of 40 %, ie € 6,849 per year or € 571 per month, referred to, this applied in Germany in 2004 3.5% of the population. " A family with two children under the age of 14 with a net annual income of 21,575 euros as threatened by poverty, a single parent with two children from a net annual income of 16,438 euros. "

2005 were in the over 65 - year-old men in the West 14%, 6% at risk of poverty in the East. In the 16 - to 24 -year-olds and the 50 - to 64 - year olds in the new federal states is around 20%, in the former West Germany 10%, risk of poverty.

Criticism

There is no generally accepted definition of poverty. The use of a relative poverty line is criticized in part because they would not change by a uniform improvement or worsening of the income of all segments of the population, even if prices remained unchanged.

Opinions were divided as the (new) OECD scale most commonly used. In particular, the imputed significantly lower requirements for children (30 percent of single adults and 60 percent of an additional adult ) are treated as low criticized, especially in the social state practice (for example, in the job centers ) lower or no savings compared with an additional adult be assumed.