Introduction to applied methods for life situation calculations

The term “life situation” in the following context describe events in life that affect individuals or households, which entail changes to status and income e.g., childbirth, unemployment or retirement. The effects of these events with respect of changes in income is what applied methods of life situation calculations is all about.

Calculations are country specific and comparable

The calculations used for the life situations are designed to make country specific data as comparable as possible across the Nordic countries.

The calculations reflect the income levels for people receiving benefits in case of a social event, compared with the level of regular labour market income in the Nordic countries. That is, the level of income as compensation due to a social event as a percentage of the level of income prior to the social event.

For example, how much one earns after becoming unemployed, compared to how much one earned while in employment. On this basis, compensation rates are calculated for different life situations and according to varying income levels from work before the social event.

Comparing different income levels

To measure different levels of income across countries, the standard OECD concept of Average Worker (AW) is used. Definition of AW is the average income for a full-time waged worker in the private sector. Four different percentages of AW are the basis for calculating compensation: 50, 75, 100, and 125 per cent of AW.

A table or figure indicating AW 100 per cent means the income prior to the social event was 100 per cent of AW. As a standard in the calculations, it is however 75 per cent of AW that is used, as it is a better representation of the wage income of a common wage worker, as it closer exemplify the median income wage. That is, the middle of the wage income distribution in the different Nordic countries.

The purpose of life situation calculations is to examine the dissimilarities among all the similarities, as the Nordic countries are defined by an elaborate social safety net and a universalistic welfare state.

The Nordic social protection systems can as such be seen as variations of the same model, and therefore there is much to be learned from comparing the countries.