Census learning centre
Aggregated and derived income concepts and income statistics

Release date: March 29, 2023

Catalogue number: 982000032021011

Hello and welcome to the “Aggregated and derived income concepts and income statistics” video!

This video explains the key concepts of different levels of aggregation of income data such as household and family income; income concepts derived from key income variables such as adjusted income and equivalence scale; and statistics used for income data such as median and average income, quartiles, quintiles, deciles and percentiles.

Subject
Income
Length
00:06:13
Cost
Free
Links

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Concept video: Aggregated and derived income concepts and income statistics - Transcription

(The Statistics Canada symbol and "Canada" wordmark appear on screen with the title: "Concept video: Aggregated and derived income concepts and income statistics.")

Welcome to the "Aggregated and derived income concepts and income statistics" video. In this video, we will talk about:

  • Income data at different levels of aggregation
  • Income concepts that are derived from key income variables
  • Statistics that are used to report on income data.

Though income data are obtained for individuals, it is often useful to look at the income situation of a family or household because income may be pooled and shared to pay for expenses, such as food and shelter.

Total income and after-tax income variables have been constructed at three different levels of aggregation:

  • Household
  • Economic family
  • Census family

This was done by summing the individual income of all members of a family or household.

For more details on household, economic and census family, click on the Census Dictionary link found in the Links section above.

When individuals live together, they can share resources and enjoy the benefits of economies of scale.

This means that the marginal increase in need decreases as the number of individuals sharing resources increases.

(An image of 3 households of 1, 2, and 3 people each appears on the screen. An arrow indicates increasing economies of scale as the number of members in a household increases.)

In other words, the greater the number of individuals in a household or family, the greater the cost savings.

To take economies of scale into account and to facilitate comparisons across families or households of different sizes, total income and after-tax income of families or households are divided by an adjustment factor known as the equivalence scale, which is the square root of the number of persons in the family or household.

(An image of 3 households appears on the screen. Household of 1 is located at the top of the image with household income of $40,000 written beneath. Household of 2 is located below with household income of $56,000 written beneath. Household of 4 is located at the bottom with household income of $80,000 written beneath.

  • To the right of household of 1 the following formula appears: $40, 000/ √1 = $40,000
  • To the right of household of 2 the following formula appears: $56, 600/ √2 = $40,000
  • To the right of household of 4 the following formula appears: $80, 000/ √4 = $40,000.)

These derived concepts are known as adjusted total income and adjusted after-tax income of families and households.

(An image of the adjusted income of approximately $40,000 for all 3 households appears on the screen.)

These adjusted incomes and the concept of equivalence are used in low-income and income inequality indicators.

For instance, the Gini index, as an inequality indicator, uses adjusted household income to measure how equally income is distributed within a population.

Next, we are going to talk about some common statistics used to report on income data.

(The words income, average, median, percentage, aggregate, sum, Gini index, decile, percentile, quartile, quintile, recipients, groups appear on the screen.)

Income statistics can be presented for persons, families or households, for different demographic and socioeconomic groups, and for various levels of geography.

(A word cloud with the following words: Groups, Sum, Gini index, Median, Aggregate, Quintile, Decile, Income, Percentage, Average, Percentile, Quartile, Recipients appears on the screen.)

Because of the quantitative nature of the income variables, it is possible to produce statistics on income beyond simple person counts.

Median income and average income are two statistics commonly computed on income variables to measure central tendency.

Median income is the amount that divides an income distribution into halves.

It is the income level at which half of the units have income above and half below.

(An image of 5 persons with incomes ranked lowest to highest appears on the screen: Person 1 - $10,000, Person 2 - $25,000, Person 3 - $35,000, Person 4 - $40,000, Person 5 - $95,000. The median income of $35,000 is highlighted.)

Average income is the sum of all income in a group divided by the number of units in that group.

(The total of the individual incomes is shown to be divided by 5 ( $10,000 + $25,000 + $35,000 + $40,000 + $95,000 = $205,000/5 ) to arrive at an average income of $41,000.)

The median is robust to extreme values in an income distribution, while the average takes into account the magnitude of all values in an income distribution.

As a precaution to ensure that individual characteristics are not revealed, the average income statistic is only available from the sampled population—that is, information from the census long-form questionnaire.

The median income statistic is available for 100% of the population covered by the census short-form census questionnaire.

Depending on the unit of analysis and the income concept of interest, the basis for which median and averages are calculated may differ.

(A table shows two columns on the screen. The left column presents the various units of analysis. The right column presents the various income concepts. The details for each column are presented below:

Unit of analysis

  • Persons

  • Families

  • Households

Income concepts

  • Total income

  • After-tax income

  • Components of income

    • Employment income

    • Investment income

    • Private retirement income

    • Old Age Security

    • EI benefits

    • Child benefits)

Typically, for total and after-tax income, median and average incomes are calculated for those with positive—or in some cases, negative—income at the individual level.

In addition to the individual level, median and average income are calculated for all units at all other levels of aggregation, such as families and households.

However, for the components of income, such as employment income, calculations are often only done for median and average incomes for units with income only.

(A bar graph titled "Employment income statistics for earners" shows total age, age in ten-year age groups (15 to 24 years, 25 to 34 years, 35 to 44 years, 45 to 54 years, 55 to 64 years) and 65 years and over on the X axis and median amount ($) and average amount ($) from 0 to 100,000 in increments of 20,000 on the Y axis.)

These units are referred to as income recipients.

“Earner or employment income recipient” is a term used specifically for people aged 15 and older with employment income.

The “presence of income” concept, which expresses the number of income recipients as a proportion of the population of interest, is particularly useful when exploring various components of income.

(A bar graph titled "Percentage with an employment income (%)" shows total age, age in ten-year age groups (15 to 24 years, 25 to 34 years, 35 to 44 years, 45 to 54 years, 55 to 64 years) and 65 years and over on the X axis and percentage from 0 to 100 in increments of 25 on the Y axis.)

Other derived statistics based on ranking in an income distribution can be used to classify the population into income groups.

Similar to the idea of the median,

  • quartiles are derived by dividing the population into 4 equal groups
  • quintiles are derived by dividing the population into 5 equal groups
  • deciles are derived by dividing the population into 10 equal groups and
  • percentiles are derived by dividing the population into 100 equal groups.

(An image provides an example of a Quartile, Quintile, Decile and percentile by dividing a population of 100 persons into equal groups of 25, 20,10 and 1 person(s) respectively.)

The total income decile group, for example, is derived from the ranking of total income of the population aged 15 years and older.

And the employment income decile group is derived from the ranking of the employment income of all employment income recipients.

Some inequality measures are derived from income percentiles.

The ratio of the 90th and the 10th percentile of the adjusted household after-tax income and economic family adjusted after-tax income decile groups are good examples of this.

(The words "Thank you for watching the 'Aggregated and derived income concepts and income statistics' video!" appear on screen.)

This concludes the "Aggregated and derived income concepts and income statistics" video.

(The census logo appears with a link, which is also available to view here: Census of Population. The International Standard Book Number (ISBN) 978-0-660-43289-2 appears underneath the link.)

For more detailed information regarding concepts, variables, methodology, historical comparability and other elements, please refer to Statistics Canada's census pages.

(The "Canada" wordmark appears.)

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