2.8 Consumption unit

Income is an important part of the material standard of living. Other components of standard of living include wealth, housing standards and accessible conveniences. The amount of income must always be compared against expenditure. The difference between income and expenditure is saving. Expenditure is either consumption or investments.

Consumption expenditure is also part of the material standard of living. Free services, for example, may compensate for a low level of income, and high housing costs in bigger towns and cities counter the influence of a high income level.

For an assessment of how far income covers expenditure, we need to bear in mind that the level of expenditure is dependent on how many people are spending the money. In this context statistics talk about households. Most often the household is a family.

In a large family expenditure needs per family member are smaller than in a small family: for example, both a large and a small family can make do with one cooker, one fridge and one washing machine. Indeed, for purposes of assessing household standard of living, we often use the term consumption unit instead of family member.

A simplified example: a single adult who lives alone is one consumption unit. If two persons over the age of 14 live together in the same household, they represent 1.5 consumption units; and each additional person over the age of 14 accounts for a further 0.5 consumption unit. If there are children under the age of 14 in the household, they account for 0.3 consumption unit each. In other words, a family of two adults and two children amount to a household of 2.1 consumption units, and their disposable income is compared against this figure.

The expenditure (€) of an average household in 2006 (1 coin = EUR 1,000)

Source: OSF: Statistics Finland, Households' Consumption 2008