Comparing the value of social benefits

Comparing statistics on social benefits and calculated data for hypothetical households becomes challenging due to the existence of various currencies in the Nordic countries. To overcome this hurdle, we rely on purchasing power parities (PPP/Euro) provided by Eurostat. These parities enable us to accurately compare the value of social benefits across different currencies.

The problem of comparing benefits

The Nordic countries either have their own currency or use the Euro. While most of the Nordic currencies have similar values, the Icelandic Crown is an exception. Additionally, Finland uses the Euro as its currency, which complicates comparing the value of social benefits across the Nordic countries.

In terms of statistics, each country reports social benefits and expenditure in their national currency. The group for Social benefits also calculates life situations in national currency. Therefore, it is always possible to find data for each country in the correct currency.

However, when comparing social benefits, expenditure, and calculations across countries, it is important to use the same standard of measurement. To achieve this, we recalculate all data presented in national currency into purchasing power standards (PPS).

Purchasing power parities

We utilize a factor known as purchasing power parity (PPP) to convert data from national currency to PPS. Purchasing power parities represent the currency-conversion factor that corresponds to the purchasing power of individual currencies when measured against the standard Euro. Consequently, the unit of purchasing power parities is PPP/Euro.

The PPP-factor comes into play when computing a value expressed in purchasing power standards (PPS). In essence, a specific amount, converted using the PPP/Euro factor, will be able to purchase an equivalent quantity of goods and services in all countries. PPS calculations are employed to compare social benefits, social expenditure, and compensation rates for various life situations.

The PPP/Euro data is presented as an indicator, with the Euro's value in 2020 serving as the baseline. For these calculations, the Purchasing power parities (EU27 2020=1) are employed, with the Gross Domestic Product (GDP) serving as the analytical category. Eurostat frequently updates the provided data, collecting new datasets whenever new statistics or calculations on life situations are conducted.

Purchasing power parities (PPP/Euro) for the Nordic countries

Eurostat report the PPP/Euro factors in the Eurostat database. In the database all Nordic countries are present, except for Faroe Islands, Greenland and Åland. Because there is no independent PPP/Euro reported for these three countries the Danish PPP is used for Faroe Islands, and Greenland and the Finnish PPP is used for Åland where this recalculation applies.

Relevant link

Here is a link to the Eurostat database on purchasing power parities.