Article with the surprising claim that the median income in Germany is lower than that in most US states, when PPP adjusted – https://mises.org/blog/if-sweden-and-germany-became-us-states-they-would-be-among-poorest-states
Conclusion: I would say the weak points that bear more looking at are whether the household adjustment (the square root mentioned above) is significant, and also whether if there are net transfer payments that it’s really not an expense, but rather a form of savings, in which case it would be inaccurate to subtract net savings from the disposable income.
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The original data linked to is http://stats.oecd.org/Index.aspx?DataSetCode=IDD where the income number that was used was the “median disposable income”, which was in 2012,
- 20857 EUR for Germany
- 30355 USD for the USA
The “Purchasing Power Parities for GDP and related indicators table” has National currency per US dollar as
- 0.786 EUR for Germany
- 1.000 USD for USA (by definition)
The exchange rate for the EUR, as obtained from (http://www.x-rates.com/average/?from=USD&to=EUR&amount=1&year=2012) was between 0.755436 and 0.813635, so not significantly different.
Dividing by PPP, then, we get
- 26536 for Germany
- 30355 for the USA
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The definitions are in http://www.oecd.org/els/soc/IDD-ToR.pdf
The income unit is an individual, and there is this adjustment they make for household size which divides the income by the square root of the household size, instead of just dividing by household size. This has the effect of adjusting incomes up when households are larger. This is for the purposes of accounting for economies of scale.
The components of disposable income are
E: employee income, including wages and salaries, cash bonuses and gratuities, commissions and tips, directors’ fees, profit sharing bonuses and other forms of profit-related pay, shares offered as part of employee remuneration, free and subsidised goods and services from an employer, severance and termination pay.1 Sick pay paid by social security should also be included.
KI: capital and property income, including income from financial assets (net of expenses), income from non-financial assets (net of expenses) and royalties. Regular receipts from voluntary individual private pension plans and life insurance schemes should also be included in this income component.
SEI: income from self-employment, including profits and losses from unincorporated enterprises, as well as goods produced for own consumption (net of the costs of inputs). [The inclusion of this latter variable aims to adjust the OECD income concept to the realities of middle-income countries (such as Brazil, South Africa and others), where subsistence agriculture represents a significant income source for people at the bottom of the distribution. Countries that do not collect information on this income item should indicate so in the metadata sheet of the OECD questionnaire].
TRR: current transfers received, including transfers from social security (including accident and disability benefits, old-age cash benefits, unemployment benefits, maternity allowances, child and/or family allowances, all income-tested and means-tested benefits that are part of social assistance), transfers from employment related social insurance, as well as cash transfers from both non-profit institutions and other households
TRP: current transfers paid, including direct taxes on income and wealth, social security contributions paid by households, contributions to employment-related social insurance, current transfers paid to both other households and non-profit institutions. [Values for transfers paid should be reported in the OECD questionnaire with a negative sign].
which certainly looks like social welfare has been accounted for.
Conclusion: I would say the weak points that bear more looking at are whether the household adjustment (the square root mentioned above) is significant, and also whether if there are net transfer payments that it’s really not an expense, but rather a form of savings, in which case it would be inaccurate to subtract net savings from the disposable income.