Income

Most of the indicators of the income have been received on the basis of the data of Estonian Social Surveys. Social Survey is a personal survey the aim of which is to estimate the distribution of households and incomes, living conditions and social exclusion. Statistics Estonia conducts the Social Survey since 2004, in 2002–2003 pilot surveys were carried out.

Disposable (net) income is a sum of income from wage labour, benefits and losses from self-employment, property income, social transfers (old-age pension, child allowance, etc.), regular inter-household cash transfers received and receipts for tax adjustment of which inter-household cash transfers paid, taxes on wealth (mainly land tax) and repayments for tax adjustment have been subtracted. Annual net income has been used which means that income tax, social tax and other taxes have been subtracted from the income. The income of household members is summed up to find the total household income.

Equalised net income

To get the average income per household member it must be taken into account that a part of the income is spent on the whole household, but a part of it separately on each household member depending on his/her age. For example, the expenditures of a two-member household are smaller than the sum of expenditure if these members lived separately, because in one household it is possible to consume certain goods together (e.g. a car, furniture, household appliances, etc.) and some goods are cheaper when buying them in bigger amount.

To take into account this kind of saving effect of household, equivalence scales must be used while calculating the income per household member. Consequently, income is the equalised net income, which is the total household income divided by a sum of equivalence scales of all household members. Equivalence scale is a weight designated to a household member depending on his/her age to reflect the joint consumption of a household. The modified OECD equivalence scales recommended officially by Eurostat have been used. The equivalence scale for the first adult household member is 1.0, for each subsequent member 0.5 and for members aged 13 or younger 0.3. For example, equivalence scales for a household with two adults and two children are 1 + 0.5 + 0.3 + 0.3 = 2.1. Let us presume that the net income of this household is 12,000 euros a year. If not considering the saving effect of the household, and divide the income with the number of household members (i.e. to use the equivalence scales 1 : 1 : 1 : 1), the annual income of each household member 3,000 euros. But if to use equivalence scales, the income of a household member is (12,000 / 2.1) = 5,714 euros. Using this kind of equalised household model reduces the impact of differences in composition between households while determining the poverty rate of households.

As the methodology of social surveys is internationally harmonised and the survey is carried out in all European countries under the name EU-SILC, it is possible to compare the data internationally. Compared to other EU countries, the income of residents of Estonia is smaller.