Comparing Incomes when Needs Differ: Equivalisation for the extra costs of disability in the UK, by Asghar Zaidi and Tania Burchadt

Centre for Analysis of Social Exclusion, London School of Economics, CASEpaper no. 64, 2003, xi + 35 pp., pb.

Income level does not translate in a linear fashion into standard of living. Public goods contribute to standard of living, and differences in household size and composition affect standard of living too. In relation to this latter factor, in social policy research incomes are generally ‘equivalised’, i.e., adjusted for household size: so that, for instance, income is multiplied by a number between 0 and 1 for a household with more than one person because economies of scale are assumed and the assumption is backed up by the data.

This paper deals with the additional costs related to disability, and the researchers discover that for a disabled person to obtain the same standard of living as someone not disabled a higher income is required, and that the more severe the disability the higher the increase in income needs to be in order to maintain the same standard of living. So to equivalise incomes they need to be multiplied by a number greater than 1. This suggests that if incomes for people with disabilities are much the same as those for people without disabilities then more people with disabilities will be in poverty – and the authors find that, with the poverty level set at 60% of median income, 61% of people with disabilities are in poverty as against 25% to 28% (depending on method) of the population as a whole.