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About the Budget
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About the Budget
Based on baskets of goods and services that are considered necessary for an acceptable standard of living, the reference budget presents ordinary consumer expenditure for different types of households. The budget can be adapted to households of different sizes as well as to different age and gender compositions. It covers both current expenses such as food, clothing, toiletries etc. and expenses related to less frequent purchases, such as furniture and electrical appliances
A reasonable standard of living
The reference budget presents the costs of maintaining a reasonable standard of living for the household of interest. A reasonable, or acceptable, standard of living assumes a consumption level that is generally accepted in Norwegian society. The level is intended to reflect the population’s perception of what a typical person or family should be able to consume if all adult household members participate in the workforce. It should neither reflect a luxury level nor be restricted to only cover basic needs. The consumption level allows for fulfilment of the public health and nutritional requirements and for satisfactory participation in the most common leisure activities.
The budget is an example
The reference budget is based on a detailed survey of goods and services and their costs. It exemplifies what researchers within the various consumption areas consider to be a reasonable level of consumption. This means that the budget does not reflect a statistical average. The goods that form the basis for the calculations are of normal, sound quality, with the emphasis on durability, accessible design and functionality. If relevant, safety aspects have also been taken into account. Furthermore, it is worth noting that the budget does not cover all expenses a person or a family might have, such as housing, holiday travel, gifts and health services other than an annual visit to the dentist.
The budget is a long-term budget
The reference budget is a supplementary budget for households that already have an acceptable standard of living. It is referred to as a long-term budget because it assumes that money is set aside monthly for more infrequent purchases of expensive and durable consumer goods. When the refrigerator, cooker or washing machine breaks down, money should be available to repair it or to buy a new one without affecting the consumption pattern.
This is how the economies of scale are calculated
The point of departure for the calculations in the budget is that the total amounts presented for the various family constellations are sufficient to meet the needs of individuals and families. Economies of scale, i.e. that several individuals make use of the same item, are naturally integrated into the household-specific expenses. With regard to individual-specific expenses, these are primarily costs related to goods and services meant to cover individual needs. However, this way of assessing costs may result in an overestimation of the expenses of families with many children. Economies of scale are therefore also calculated for individual-specific expenses for families comprising more than three individuals. For households with one adult, economies of scale are calculated for families comprising more than four individuals. The economies of scale for these types of households are calculated to be 20 per cent.
The reference budget is normally updated annually by adjusting the previous year’s prices based on changes in the consumer price index. The basis for the various baskets of goods and services is also updated at regular intervals. In the 2020 version of the budget, five consumption areas have been updated.
When updated, the range of products and services covered by the relevant basket is reassessed, both by professionals within each consumption area and through several rounds of focus groups. In the focus group sessions, the participants discuss, among other things, the assumptions and the specific product lists related to the relevant consumption area, and assess whether changes are needed.
Among other things, the purpose of these updates is to adjust the product range with regard to which goods and services are included, what lifespan the goods are expected to have and where they are purchased. The costs of the updated lists of products and services are obtained from selected stores and providers.
In 2020, we have updated the individual-specific consumption areas ‘Food and beverages’, ‘Clothes and shoes’ for children aged from 0 to 17 years, ‘Recreation and leisure activities’ for persons aged 10 years and older, as well as the household-specific consumption areas ‘Furniture’ and ‘Media use and leisure activities’. The 2020 version of the budget also includes costs for electric cars.
Criteria and assumptions
Individual-specific consumption areas include goods and services that are related to individual consumption needs, where the needs and expenses vary according to the age and gender of the household member.
Household-specific consumption areas include goods and services that can be used by more than one individual, such as furniture, kitchen appliances, telephones and newspapers. This is why the costs are relatively high for single-person households, but increase only marginally with an increasing number of household members.
The reference budget should mainly cover
- everyday current expenses as well as less frequent expenditures
- an acceptable level of consumption that should provide opportunities to participate in ordinary social activities
- expenses associated with normal household functions.
The budget does not presume extensive use of special offers and seasonal sales.
The reference budget does not include expenses for
- housing, electricity and other housing-related expenses (such as maintenance)
- tobacco and alcohol
- health services
- leisure pursuits that require costly equipment
- holiday travel
- celebrations of special occasions, gifts
- ‘clubbing’, night life.