Household Income Sharing, Joint Consumption and the Expenditure Patterns of Australian Retired Couples and Single People

What level of household income is required so that a household member will have the same level of consumption as when living alone? The answer to this question depends on the extent to which household income is directed towards the consumption needs of the particular person, together with the extent to which there is shared consumption of household goods. This paper proposes a framework which permits data and assumptions obtained from several sources to be used together to identify these different relationships. This framework is applied to estimate the intra-household distribution of income and the economies of sharing for Australian married couples over retirement age. The main conclusions of the paper are that income is shared relatively evenly (and the hypothesis of equal sharing cannot be rejected), and that on average couples require about one and half times the income of singles to reach the same living standard. This suggests that current Australian pension payments to singles are relatively too low.