Household Income

Posted in Finance, Accounting and Economics Terms, Total Reads: 328
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Definition: Household Income

Household income is the combined income of all the people earning in a household. It includes income from

• Economic activity: Salaries and wages and profits of entrepreneurs who have self- owned businesses

• Property income: Rents and income from dividends (i.e. from shares)

• Personal remittances: Pensions after retirement, Government allowances to unemployed, family allowances and basic income support

• Social Transfers: Transactions like grants given In kind such as education, health and housing


Average household income is used as a indicator of standard of living. The net household income is the combined income of the household after tax payments and other mandatory payments. This means it gives the net disposable income which the household can actually use for consumption.


Advantages of calculating Household Income:

• The Government can observe everyone’s individual household income and separate those households which come under certain schemes such as those eligible for Nutrition Assistance, those for basic income support etc

• The distribution of wealth across the country can be observed and the average standard of living can be determined

• It can be studied in different groups such as age, region, race, religion etc so that their standard of living can be gauged

Inflation- adjusted household income can also be found which gives the real household income and the actual economic conditions of the households.

 

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