Sociology 441: Stratification

Standard of living

There are two main strategies for adjusting for family or household size:

• Income to needs ratios. A family's needs are often estimated in comparison to how much income the Census calculates the family would need to escape poverty. For example, if the Joneses, a family of four, has an annual income of $30,000, and the Census calculates that a family of four needs an income of $15,000 to escape poverty (about the 1994 threshhold), then the Joneses have an income to needs ratio of 2.0. But the Smiths, also with an annual income of $30,000 but a family of just two adults, would have an income to needs ratio of about 3.0 (since a family of two adults needs only about $10,000 to be above the poverty line).

  This measure has the advantage that poverty levels are widely available over a long period of time. But almost nobody agrees now with how those poverty levels are calculated (See Citro and Michael 1995).

• Dividing income by some function of household size. These measures try to find a compromise between per capita income (which divides family incomes by the number of persons in the family) and family income (which, in effect, divides family income by 1.0). Per capita income doesn't make allowance for the fact that a family of four with $40,000 income will enjoy a better standard of living than four individuals living on $10,000 each. In a sense, per capita income over-adjusts for family size. On the other hand, family income doesn't adjust enough for family size.
  • The simplest of the formulae is to divide family income by the square root of the number of family members -- based on the idea that the square root of N (N**0.5) is geometrically midway between N (N**1.0) which is the divisor for per capita income and 1 (N**0.0) which is the divisor for family income.
  • The National Academy of Science panel (Citro and Michael 1995) recommends a more detailed adjustment. Every family member is assigned an adult equivalent (e.g., children are rated as a 0.5 adult equivalent); these adult equivalents are summed; and the sum is raised to the 0.7 power. If this seems overly complex, the panel claims that this formula comes closest to predicting independent measures of economic well-being.