Methodological issues: socioeconomic status

Socioeconomic status (SES) is a construct which influences development, health, well-being and cognition of an individual or a family or a community. Existing methods of measuring SES have methodological limitations. The paper suggests remedial measures by (i) composite approach using arithmetic aggregation of indicator scores, transformed to follow normal distributions and by (ii) composite index approach using multiplicative aggregation of ratio of indicator scores at t-th time and base periods. Desired properties satisfied by each approach and application areas are addressed. Each method avoids scaling, selection of weights, major limitations of SES using summative scores and expresses SES by a continuous variable satisfying desirable properties including plotting of progress/decline of SES across time, statistical test of hypothesis, identification of critical indicators, etc. Method-2 is preferred based on theoretical advantages like satisfaction of time-reversal test, formation of chain indices, etc. Methodological novelties include: Computation of \(\:{r}_{tt\left(theoretical\right)}\:\) from a single administration offering benefits like finding true score variance of test; testing of hypothesis \(\:{H}_{0}:\,{r}_{tt\left(theoretical\right)}=1;\) Factorial validity and Cronbach’s alpha in terms of largest eigenvalue ( \(\:{\lambda}_{1})\) . Proposed methods with wide application areas help in improved measure of socioeconomic status along with better measures of reliability, validity are recommended.