Household income is basically an average economic standard which is applied to one household or at least aggregated across a number of similar households. A standard key measurement of household income would be the median household income, where half of all households receive income over that average and half under. Other measures may also be taken into account which are not so directly tied to income: the amount of time spent each week by the average household member, hours worked at different jobs, and so on. When a standard is determined, then, it is used to help society determine the health of its economy. The standard is also used in defining eligibility for public services. Below, you will find information about the various ways in which household income can be measured.
The very simplest way of measuring household income is based on the per capita income of a given area. This can be useful, but only if incomes are normally distributed by region. For instance, incomes in the north may be higher because more people there earn more money, while incomes in the south may be lower because of the cost of living there.
In order to get a more accurate measurement, household income can be compared with another kind of measure called the gross family income of an area. The difference between household and gross family income is basically the difference between what a family can spend on things like housing and what they would be able to save if they had the same income. This type of calculation is a bit more complicated since it requires a more precise calculation of where the bulk of household income will come from. This means it can take longer to arrive at an accurate calculation of household income.
Another common way of measuring household income comes from the data collected by the Internal Revenue Service (IRS). The IRS divides households into four basic categories: Covered, partially covered, uninsured, and self-employed. Covered households pay the highest taxes according to the tax tables used by the government. The tax figures for these households include both income and expenses, while the self-employed include individuals only, and their income and expenses are only the ones included in the covered income group.
A third way of measuring household income inequality is based on statistical analysis of census data. This means the computation of the Gini index value, which is used to compare the level of income of households within a country or region to the national average. The index is updated every year and the adjustments made are based on statistical studies that the World Wide Web can easily provide. Based on past census data, there is a relatively good statistical evidence that income inequality is present in most countries. In fact, income inequality is actually exacerbated by high levels of poverty and educational disparity.
One last way of measuring household income inequality is through the business enterprise. The measurement of this is based on the size of the household enterprise and the nature of its income. An example of this is the gross value of household production multiplied by the number of working adults in a household. This is one measure of the size of a household’s business and is the standard of the way people compare the performance of households in their environment. Another way to gauge the size of household business is by analyzing the number of businesses owned by the household compared with the number of workers employed in a typical business cycle.
Many people would think that household income inequality are the same thing. Actually, there are differences between the two concepts. While the concept of household income incorporates both the gross income of the household and its deduction from the gross income of other people, the concept of median household income takes into account the incomes of the people in each of the household. That is, it focuses on the income of the actual person who lives in the household. If there are two people living in the household, the person with the higher gross income receives all the credit, while the person with the lower one gets none.
When trying to understand the real difference between household income and median household incomes, it is useful to look at the location of residence. Those who live in an area with high average salaries tend to be more successful economically. Conversely, those who live in an area with lower wages tend to have less success. This may seem strange, but the location of residence actually has a profound impact on how people view their finances. Thus, it would be better to focus your attention on the location of residence rather than the income level itself.
