THE ECONOMIC STATUS AND HEALTH STATUS PROJECT.

• Author: Carson, Suzie

Abstract

The increasing use of the Household Economic Survey for policy purposes raises issues about the assumptions that are used for transforming the unit records into aggregates that underpin the social policy analysis. This paper reports upon a Health Research Council-funded project to investigate the relationship between personal health status and economic status (especially location in the household distribution, but also in relation to other measures).

The project uses unit records of the Household Economic Survey for 1994/5 -- 1996/7 years when personal health status was recorded, using both objective and subjective measures. The paper explores some of the processing issues that the analysis is addressing.

INTRODUCTION(1)

Statistics New Zealand's Household Economic Survey (HES) is increasingly being used for purposes of social policy analysis, most notably for evaluating household distribution questions, including change in distribution over time. The transformation of the unit records into aggregates depends on certain assumptions that have developed over the last quarter of a century. Some of these assumptions have implications for social policy analysis that are discussed in this paper. Furthermore, the importance of the aggregate data for policy purposes requires there to be an evaluation of these assumptions. This is one of the tasks of a project funded by the Health Research Council (HRC) to evaluate the relationship between health status and economic status.

In the past research has been limited by access to the database, which has been either at a high level of aggregation or processed based on predetermined assumptions without much opportunity to interact with the data to improve the estimates(2). As a result, a number of problems with the method have hardly been addressed. A research grant from the HRC is funding extensive use of the Statistics New Zealand Data Laboratory (SNZDL) giving the researchers direct access to HES data(3). This offers the opportunity to deal with some of the past assumptions.

THE STANDARD MODE(4)

The HES collects a variety of information on household status and economic activity, including household composition and before-tax market-plus-benefit incomes. Each record contains both household-wide information (such as household spending and housing status), and individual information on each member of the household such as personal characteristics and income received (which can be aggregated to provide household characteristics). Access to the SNZDL means that the project will be able to work with both sets of records.

The processing occurs as follows:

1. The after-tax (or disposable) income for each household can be calculated by applying known tax and abatement rates to individual records, and aggregating;

2. Household needs vary with household composition, including the number of people in the household and their ages. Aggregate household income is scaled to reflect this composition. Rather than use a simple per capita measure, a household equivalence index allows for economies of scale and the lower relative needs of children; and

3. The resulting ratio is called "household equivalent income" (HEI). The households are ranked in order of their HEI, and either divided into quantiles or partitioned by a poverty line (or lines).

   The resulting estimates have been widely used. They are the primary database for the debate on whether poverty has increased or decreased, and for the current discussion on income shares, which acknowledges that while the top decile has experienced a rise in its standard of living over the last 15 years, the bottom eight deciles have not (see Easton 1999).

   SOME STATISTICAL ISSUES

   Various conceptual issues complicate the standard model, including the question of the extent to which income can be considered a measure of welfare. There is also a debate about the correct poverty...