economics, program evaluation

Measuring SES series: Income, need, and living wages

January 05, 2021 | Pieta Blakely

A couple of weeks ago, I wrote a post on socio-economic status (SES). SES is usually understood to be a combination of three things: income, education, and occupation.

There are multiple reasons why we might ask such as establishing need, making sure that we are reaching the population that needs our services, or making sure that we are reaching disadvantaged families. But asking about personal or household income can feel sensitive and we are often worried that our questions will come off as invasive or unnecessary and that respondents will refuse to answer or not respond to any of our questions.

So if we do need to ask, what is the best way to go about it?

cashier at market

For most purposes, we are going to ask about household income. We assume that the income in the household contributes to everyone in the household having access to certain resources. 

Most survey writers will want to set this up as a multiple-choice question. This makes it easier for respondents to answer.

It's very common to see an income question like this:

What was your household income last year?

      • Less than 20,000
      • $20,000 to less than $40,000
      • $40,000 to less than $60,000
      • $60,000 to less than $80,000
      • $80,000 and more
      • Don't know
      • Refused

This question doesn't provide a lot of precision. One problem is that it has a chopped off high category (we call that right-censored). Everyone who earns more than $80,000 is in one bucket. When you graph your responses, they will look like this (made up data):

family incomeI’m exaggerating a little, but you’ve probably seen charts like this. It gives the impression that there is a disproportionate number of high earners in your sample because that range is much wider than the others.

This might not matter if you’re only worried about capturing data on the most vulnerable members of the community. But it also doesn't give you a lot of nuanced information about need or access to resources. You may want to consider adding more categories on the higher end than you typically see.

For the lower-income respondents, it doesn't provide enough data for useful interpretation. While everyone agrees that households that are earning less than $20,000 probably won't be able to meet all their needs, we might not be sure how to interpret the $60,000-$80,000 category. That's enough in some regions of the country, or for a small family, but in some cases, it's not enough for financial security. So we might want to ask a few more questions to get at need more specifically.

Poverty

If you're focused on seeing how many of your families are living in conditions of poverty, one approach is to create lines above and below the federal poverty level or the low-income level. But defining lower-income or poverty status is tough. That’s because there’s no single bar or definition of low-income or poor. The federal definition of poverty is based on the number of people in the household, so it might take a large number of invasive questions and then some calculations to understand if a person or family meets the definition.

Additionally, the federal definition of poverty doesn't correspond to much in the real world. Poverty levels are generally so low that we know there are many more individuals and families that need assistance than will meet the definition of poverty. The category of low-income is meant to address that limitation. Low income is simply than 150% of the poverty level, so it's more generous, but not easier to calculate.

Living wage

Neither of these takes into account the cost of living in different areas of the country. Since cost of living and median income tend to go hand-in-hand, one way to address that is to compare your respondents' income with the area median income for your region. Using those categories on your data collection tool will let you calculate how your participants' incomes compare to what's typical in the region and can be useful in estimating their relative buying power and access to resources. So you could use the above question, using various percentages of your LMI as the answer ranges.

Your question might be more about economic well-being -- can our families afford the things that they need? The MIT Living Wage Calculator accounts for household size, number of adults working, and metro region and provides a wage at which the family should be self-sufficient. So one way to use this would be to ask about household composition and wages and then use the living wage calculator do determine if that is a living wage or not. Another way, might be to use your most typical family structure, look up their living wage, and the use that number as benchmark. If your program aims to assist people to obtain family-supporting wages, then this level of calculation is probably worth the trouble.

Need

But what if we just want to show that there is need in our community? How can we get at this issue without asking so many questions? Another way to capture income is by proxy – something else that correlates well with being low-income, or a program for which someone would already have provided a lot of data. For example, nutritional assistance. You could ask a question like “in the past year, has your family qualified for nutritional assistance.” Since a family needs to earn less than 130% of the federal poverty level (among other things) to qualify, that would be a good indicator that the family was low-income. 

Finally, what you might really be asking is about financial pressure or scarcity, and then some concrete examples might be more helpful. You could ask something like this (taken from here):

In the last 12 months have any of the following happened because your household was short of money?

      • Could not pay gas, electricity or telephone bills?
      • Could not pay the mortgage or rent payments?
      • Were unable to pay for school requirements or extras?

You might want to add additional answer choices that are common financial stressors in your area, or that your program particularly helps with such as food scarcity or clothing scarcity.

So, I hope I've given you a lot of ideas for tailoring your question for your specific program and respondents. The takeaway is that this a question you will want to be very thoughtful about. Ask just enough to get the information you really need in the form that you can use it.

 

Tags: economics, program evaluation