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Concepts and definitions

Consumption expenditure per household

The average number of persons in a household has a fundamental effect on the expenditure averages per household of different population groups. The expenditure of families with children per household is larger than in small households (e.g. one-person households and elderly households).

Consumption unit

Income and consumption expenditure calculated per consumption unit can be used to compare households of different sizes and structures with each other. There are several different ways of calculating consumption units. From 2002, the income distribution statistics and the Household Budget Survey have used the OECD's adjusted consumption unit scale recommended by Eurostat, the Statistical Office of the European Communities, where

• the first adult of the household receives the weight 1
• other over 13-year-olds receive the weight 0.5
• children receive the weight 0.3 (0 to 13-year-olds).

The selected consumption unit scale has a significant effect on income levels and on placement of different population groups in the income distribution.

Disposable income

Before the statistical reference year 2011, the income distribution statistics primarily utilised the concept of disposable income. In the income distribution statistics and in the Household Budget Survey, households' disposable income included all salaries and wages, entrepreneurial income and property income (including imputed rent from owner-occupied dwellings and taxable sales profits from property), benefits in kind and current transfers received, from which sum, current transfers paid were deducted.

The formation of disposable income can be described as follows:

+ Wages and salaries

+ Entrepreneurial income

+ Property income (incl. imputed rent from owner-occupied dwellings and sales profits)

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= Factor income

+ Current transfers received (incl. imputed rent from a rental dwelling from another household)

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= Gross income

– Current transfers paid

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= Disposable income

When social current transfers in kind are added to income, adjusted disposable income is obtained. This concept is not formed in the income distribution statistics.

The imputed rent of owner-occupiers was regarded as factor income (property income) and imputed rent for a dwelling rented from another household as current transfers received in the income distribution statistics. Imputed rent is still formed in the income distribution statistics but from the statistical reference year 2011, it is treated as a separate income item (see "Imputed rent"). Similarly, taxable realised capital gains or sales profits are treated as a memorandum item according to international recommendations.

Wages and salaries include income paid for households as pay - either in money or benefit in kind. Income from incentive stock options is included in the income concept in benefits in kind and thus in wages and salaries.

Entrepreneurial income includes income from agriculture and forestry, business activity and business group and copyright fees. Entrepreneurial income in agriculture also contains various subsidies and compensations such as agricultural subsidies, European Union agricultural aid and compensation for harvest losses.

Property income is rental, interest and dividend income received by households, imputed net rent from an owner-occupied dwelling, taxable capital gain and pensions based on private insurance and other income.

Current transfers received comprise earnings-related pensions and national pensions and other social security benefits, social assistance and other current transfers received.

Current transfers paid comprise direct taxes and social security contributions. In addition, current transfers paid comprise compulsory pension and unemployment insurance premiums and in the income distribution statistics also child maintenance support paid.

The key income distribution statistics concept, disposable income, is arrived at when current transfers paid are deducted from gross income. The concept of disposable income in the Household Budget Survey is based on register data, and does not, differing from the income distribution statistics, include wages and salaries subject withholding tax and tax-free interest income and current transfers between several households (e.g. child maintenance support).

Durability classification

The consumption expenditure groups of the Classification of Individual Consumption According to Purpose (COICOP) are divided in accordance with the principles of the system of national accounts into services (S), nondurable goods (ND), durable goods (D) and semi-durable goods (SD).

The difference between nondurable goods and durable goods is based on whether the goods can be used only once, or repeatedly or continuously during a period of over one year. Durable goods, such as cars, fridges, washing machines and televisions, also have a relatively high purchase price. Semi-durable goods differ from durable goods in that their expected service life, although over one year, is often considerably shorter and their purchase price lower.

Statistics Finland's COICOP handbook can be browsed on the Internet at www.tilastokeskus.fi/tk/tt/luokitukset/popup/coicop.pdf (Handbooks / Statistics Finland, 41).

Final consumption expenditure

Final consumption expenditure of households includes all goods and services acquired by the household from Finland and abroad for its private consumption during the survey period, including own and received gardening and collected products and imputed housing expenditure. In addition, included are goods and services received from other households and current transfers comparable to consumption. Repayment of housing and consumption loans is not included in consumption expenditure. Consumption expenditure does not either contain direct taxes, investments (e.g. purchase of a dwelling), expenditure of business activities and products bought for other households. The consumption concept does not include benefits gained from households' use of public welfare services (e.g. health care and education).

Households' final consumption expenditure is formed as follows:

+ purchases of consumption goods and services

+ own products (agricultural, gardening and collected products)

+ imputed dwelling income from an owner-occupied dwelling and a dwelling provided as a benefit in kind

+ goods and services received

+ current transfers comparable to consumption (e.g. church tax and labour union membership fees and interest on consumption loans)

= total consumption expenditure

The classification of consumption used in the Household Budget Survey is based on Eurostat's COICOP-HSB consumption classification (Classification of Individual Consumption by Purpose).

The COICOP handbook can be browsed on the Internet at www.tilastokeskus.fi/tk/tt/luokitukset/popup/coicop.pdf (Handbooks / Statistics Finland, 41).

Household

A household is formed of all those persons who live together and have meals together or otherwise use their income together. The concept of household is only used in interview surveys.

Excluded from the household population are those living permanently abroad and the institutional population (such as long-term residents of old-age homes, care institutions, prisons or hospitals).

The corresponding register-based information is household-dwelling unit. A household-dwelling unit is formed of persons living permanently in the same dwelling or address. More than one household may belong to the same household-dwelling unit. The concept of household-dwelling unit is used in register-based statistics in place of the household concept.

Household's reference person

The person with the highest personal income is chosen as the household's reference person. Reference person is defined according to interview data. Income is mainly the criterion determining the reference person, but in some cases (e.g. entrepreneur households) the activity of the whole household is taken into account.

A considerable part of household-specific classifying data is formed on the basis of the reference person's data.

Housing consumption

In the Household Budget Survey housing consumption is calculated by the so-called gross rent principle. There an imputed rent is determined for households living in their own dwelling or in a dwelling provided as a benefit in kind based on the market rent of a comparable rented dwelling, and the actual rent paid for those living in a rented dwelling. In determining the gross rent of one's own dwelling use has been made of Statistics Finland's rent inquiry data and household interview data concerning the number of rooms in the dwelling, year of construction, heating mode and location.

In addition to gross rent, housing expenditure includes water charges and some other payments such as chimney-sweeping and refuse collection, maintenance repairs made by the tenant and heating costs not included in the rent. Expenditure of free-time residences is also included in housing expenditure.

Own products

In the Household Budget Survey household consumption includes natural products produced and received by the household, such as agricultural, gardening and collected products (berries, mushrooms, fish, etc.). In the questionnaire households are asked about the used amounts of own products, after which they are priced at producer prices.

Socio-economic group

In the Household Budget Survey and income distribution survey a socio-economic group is formed for household members on the basis of the person's activity in the last 12 months. For determining the socio-economic group, persons are first divided into economically active and inactive. As a rule, all those who have participated in the production activity for at least six months during the survey year are counted as economically active. Economically active are further divided into self-employed and wage and salary earners on the basis of information reported in the interview. Self-employed are also such persons who have been taxed as employees in taxation (typically entrepreneurs working as employees in their own company). Economically inactive are grouped into students, pensioners, unemployed and others. Unemployed are persons who have been unemployed for at least six months during the year.

The socio-economic group of the household is determined by the household's reference person.

The classification is based on the Statistics Finland's classification standard of socio-economic groups from 1989. There account is taken of the person's occupation, status in occupation, nature of work and stage in life (Classification of Socio-economic Group 1989. Helsinki. Statistics Finland, Handbooks, 17).