Selection of equalization scale and its effect on income-health gradient in the EU countries

Abstract

Abstract Background It has become customary to adjust income across different household types by using an equalization scale. When assessing inequalities in personal health using the equalized income entails, however, a number of assumptions that are rarely discussed in the socioeconomic health inequality studies. Earlier studies show, e.g. that rather small changes in equalization scale can produce different poverty and income inequality estimates. The aim of this study is to analyse the effect of selection of the scale on socioeconomic health inequalities. Methods For this we utilize the 2018 data of the Statistics on Income and Living Conditions (EU-SILC) for 32 European countries. Health is measured with a five choice question on self-perceived health to the household reference person. Household income is measured with the total disposable household (previous year) annual income. Two widely used equalization scales (OECD and OCED modified) are used to for calculating incomes per consumption unit, and then ranked into five income quintiles. A multidimensional frequency table is analyzed with nonparametric tests and log-linear modelling. Results Preliminary analyses from a smaller group of the countries indicate that the OECD modified scale produces more “flat” income-health gradient than the OECD scale. Also a smaller proportion of those reporting poor health are classified as having low income. The finding accounts probably for the fact that those living in a single household tend to report poorer health and lower personal income compared to respondents living in a bigger household. Conclusions Adjusting for income for the household size appears to affect more on larger households - who also report higher perceived health. Due to this effect, selecting an equivalence scale that imposes a bigger weight on additional household members, such as the OECD modified scale, produces less steep income-health gradient. Key messages Adjusting income for household size using standard scales affects the steepness of income-health gradient. Even relatively small changes in the modification scale may have large effects on the health gradient.