At each wave Understanding Society collects the same detailed information on personal incomes. All individuals aged 16 or over are asked to report receipt of:
- Earnings from main and second jobs
- Social security benefits
- State and private benefits
- Private transfers and investment income
Derived from these reports of the individual income sources, and included in the publicly available datasets, are a number of variables corresponding to different income concepts. The concepts are constructed at either the individual or household level, net or gross of taxes, and with or without household level deductions where appropriate. Examples include: gross individual income, individual net earnings, gross household income and net household income.
Most analysis of living standards, income dynamics, poverty and low income tend to use net or disposable household income after taxes and other deductions i.e., the income that people have available for consumption or saving. Users interested in analysing net household income after taxes should refer to the subsection on household income estimates (and in particular the variable w_fihhmnnet3_dv). In deriving net incomes, UKHLS follows the approach used by the Department for Work Pensions (DWP) for their Households Below Average Income (HBAI) datasets. UKHLS household income variables are now used as the data source for official UK statistics on income dynamics by the DWP. This section also provides guidance on how to equivalise household income variables to take account of differences in household size and composition and guidance on how to make household incomes comparable across time using price indices.
Tips for analysts:
It’s important to know what income variables are available but also to know how they were constructed. A comprehensive guide to using the income data is discussed in our working paper Understanding Society and its income data which we recommend all income users consult.
