What is the income of Estonian people? Do urban dwellers earn a higher income than the rural population? What is the average income per household member in Estonia?
Income is a much broader concept than wages. In addition to wages or salaries, it includes income from business and rental of land and other property, as well as regular payments from other households (e.g. alimony), property income, income tax refunds and social benefits, such as old-age pension, child allowance, etc.
In order to get an overview of the income of Estonian people, Statistics Estonia collects data on income recipients and the average monthly income by sex, age group, educational attainment, household and region. Based on the basic income indicators, we can calculate the annual disposable income of households after all state taxes and payments to other households. The harmonised methodology allows to compare data with international indicators.
The equivalised disposable income per household member is calculated taking into account that part of the income is spent jointly on the household and the rest is spent separately on each household member depending on his or her age. For example, two people living together, sharing costs and forming a common household usually spend less per household member than if they lived alone. In a common household, costs can be shared, for example, for the purchase and use of cars, furniture, household appliances, etc. Some goods, such as food and household goods, are often cheaper when bought in larger quantities.
Modified consumption or equivalence scales developed by OECD are used to calculate the equivalised disposable income of a household member: a value of 1 is assigned to the first adult in the household, 0.5 to the second adult and 0.3 to all those under 14 years of age. The use of the equalised household model reduces the impact of differences in household composition when determining households’ poverty. This allows a better assessment of the actual economic well-being of our households.