Appendix: Adult-Equivalence Scales
This appendix shows the distribution of adult-equivalents across income bands within the distribution of household incomes. The adult equivalence scale used in the analysis in this paper was explained in sub-section 4.3, and is summarised by equation (13). Differences in household composition between higher and lower income households can give rise to differences in inequality measures when these are estimated with or without the use of an adult equivalence scale. For example, if lower income households tend systematically to have lower adult equivalents - because they have fewer adults and/or more children (who both receive a lower weight in the scale) - their adult-equivalent incomes will appear higher than they appear to be when measured without an adult-equivalence adjustment.
Figure 10 below shows adult-equivalents, averaged within ($1000) household income bands, estimated from 2006-07 HES data. These are calculated using the ‘Jensen scale’ described in sub-section 4.3. This reveals that lower income households do indeed tend to have lower adult-equivalents. As a result some of the inequality observed in per-adult household incomes can be expected to be reduced when inequality indices based on adult-equivalent incomes are used.
- Figure 10 – Adult-Equivalents
