Importance When solving the problems of social and economic development, assessment and comparison of different household incomes are extremely important. Equivalence scales help make them comparable. The expert method of building equivalence scales enables to use different indicators to measure income (expenditures) of households. Objectives The accuracy of income comparison influences the adequacy of poverty assessment, degree of stratification of society, and, as a consequence, the choice of focal points of social policies of the State. Direct comparison of different household incomes (or expenditures) does not provide precise conclusions. Methods Usually, equivalence scales are represented as a set of dimensionless numbers. For a household taken as a base, the scale is equal to one. The values of equivalence scale for other households indicate how much their incomes should be higher or lower than the base so that their living standards are the same. Results We developed a new system of indicators for the equivalence scale to measure incomes of households with different number of people. The paper proves that income and living standards are related to labor productivity. We improved approaches to the classification of indicators assessing the life quality and the formation of consumer goods basket, using equivalence scales in measuring household income. Conclusions The expert method of equivalence scales enables to adequately measure the level of poverty and adapt the findings to a region, territory and social policy objectives. The offered tool can help implement socio-economic programs.
Keywords: living standards, average income, parity income, equivalence scale, subsistence wage
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