Concepts and definitions
- Consumption unit
Income and consumption expenditure calculated per consumption unit can be used to compare households of different size and structure with each other. There are several different ways of calculating consumption units. Since 2002 the income distribution statistics have used the OECD's adjusted consumption unit scale where
- the first adult of the household receives the weight 1
- other over 13-year-olds receive the weight 0.5
- children receive the weight 0.3 (0 to 13-year-olds).
Until 2004 the Household Budget Survey utilised the original OECD scale previously also used in the income distribution statistics, which is formed as follows:
- the first adult of the household receives the weight 1
- other adults receive the weight 0.7
- children receive the weight 0.5.
Those aged 0 to 17 were defined as children.
The selected consumption unit scale has a significant effect on income levels and on placement of different population groups in the income distribution.
- Disposable money income
The household's disposable money income is a corresponding concept to the household's disposable income but it does not include imputed income items (e.g. imputed income received from an owner-occupied dwelling in own use). The concept includes benefits in kind related to employment relationships.
The household's disposable money income = household members' total wages and salaries + entrepreneurial income + property income (excl. imputed income items) + current transfers received - current transfers paid.
- Equivalent income
Equivalent income is an income concept by which incomes of households of different types are made comparable by taking account of shared consumption benefits.
Equivalent income = the household's disposable income divided by the number of consumption units in the household.
From 2002 the income distribution statistics have used the OECD's adjusted consumption unit scale recommended by Eurostat, the Statistical Office of the European Communities, where
- the first adult of the household receives the weight 1
- other over 13-year-olds receive the weight 0.5
- children receive the weight 0.3 (0 to 13-year-olds are defined as children)
The assumption is that income is evenly distributed inside the household between all household members in relation to the above-mentioned consumption need.
- Factor income
Factor income is monetary compensations received by households for participation in the production activity as wages and salaries, entrepreneurial income and property income.
- GINI co-efficient
The Gini co-efficient describes the unevenness of a variable (such as income or property distribution). It is a generally used indicator of inequality, where the extent of the dispersion of income is described with one numerical value.
The higher value the Gini coefficient gets, the more unequally is income distributed. The biggest possible value of the Gini coefficient is one. Then the highest earning income recipient receives all the income. The smallest Gini coefficient value is 0, when the income of all income recipients is equal.
- Gross income
The household's gross income is obtained when current transfers received by the household are added to the household's factor income (wages and salaries, entrepreneurial and property income), but paid current transfers (e.g. taxes and social security contributions) are not deducted.
- Long-term low-income
Long-term low-income earners are those who have belonged to low-income households in two years within the three previous years in addition to the statistical year (see the definition of low income). The definition is based on the recommendations of Eurostat, the Statistical Office of the European Communities.
- Low income
Low-income earners are considered those whose household's total disposable income per consumption unit (so-called equivalent income) is lower than 60 per cent of the equivalent median income of all households. The proportion of those below this income limit is called the low income rate. The euro-denominated limit for low income varies by year. The definition is based on the recommendations of Eurostat, the Statistical Office of the European Communities. There is no official definition for low income or poverty line in Finland.
- Mean income
The arithmetic mean income is received when the income of all income recipients is added up and divided by the number of observations. Mean income is more sensitive to extreme observations than median income.
- Median income
When income recipients are put in the order of size by income, median income is the income of the middle income recipient. An equal number of income recipients remain on both sides of the middle income recipient. Median income is not as sensitive to extreme observations as mean income.
- Property income
Property income includes rental, interest and dividend income derived from registers, taxable capital gains and pensions based on private insurance, and other property income derived from taxation data. Dividend income includes both untaxed and taxable dividend income, and interest on co-operative capital. In addition, property income in income distribution statistics includes interest income subject to withholding tax and tax-free interest income from abroad on which data are obtained with an interview, and which do not come under the scope of the definition used in total statistics on income distribution.
- Reference person
The household member with the highest gross income is selected as the reference person in total statistics on income distribution. Income is determined from register data.
- Wages and salaries
Wages and salaries include income paid to households or persons during the year in pay - either in money or benefits in kind. Their generating costs are deducted from wages and salaries, but not travel expenses. The concept of wages and salaries used in the income distribution statistics includes not only wages and salaries for regular working hours but also overtime compensations and income received from secondary jobs. Realised incentive stock options are also included in wages and salaries in the income concept of the income distribution statistics. Wages and salaries are derived from the tax register, except for part of wages and salaries earned abroad, which are obtained from the interview.
Official Statistics of Finland (OSF):
Total statistics on income distribution [e-publication].
Helsinki: Statistics Finland [referred: 13.2.2012].
Access method: http://www.tilastokeskus.fi/til/tjkt/kas_en.html.
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