Definitions

The low-income definition by the OECD takes 50 per cent of the median equivalent income as the low-income cut-off. The equivalent scale recommended by the OECD give first adult household member the weight of 1.0, the second adult member the weight of 0.7 and children the weight of 0.5. A four-person household (2 adult + 2 children) would thus need a household income 2.7 times more than a single person in order to have an income that is 'equivalent' to the singe person household.

The low-income definition currently being used by the EU takes 60 per cent of the median equivalent income as the low-income cut-off. In addition the equivalent scale used, the so-called "modified" OECD-scale, puts more emphasis on the economies of scale within larger households compared to the original OECD-scale. The EU-scale gives a weight of 1.0 to the first adult household member, 0.5 to the second adult household member and 0.3 to children. A four-person household would thus only need an income that was 2.1 larger than a singe person household in order to have an equivalent income.

The median income is the income of the person situated in the middle of the income distribution, after all income has been sorted by size. There will thus be as many persons with income less than the median as there are persons with income above the median.