How should payment tolerance be properly measured?

From what I have researched, the common understanding of disposable income is income minus fixed living expenses. However, in this subreddit, the accounting definition tends to intervene, narrowing it down to income minus taxes. Yet among economists in Japan and elsewhere — and in everyday understanding more broadly — disposable income means income minus fixed living expenses.

The very reason we need the concept of disposable income is to measure how much financial strain a payment imposes, to assess degrees of poverty, and for similar purposes. Fixed expenses and habitual expenditures play a decisive role in such assessments. Yet Real DPI, the PCE deflator, and MPC all fail to account for fixed expenses or regional cost differences. As they currently stand, none of these tools are fit for measuring payment tolerance.

One may choose whether to live in a large house or a small one, but one cannot choose to sleep outdoors indefinitely. The same applies to food, clothing, and other necessities. Any meaningful measure of disposable income — understood as the income remaining after unavoidable obligations, which can then generate new consumption — cannot ignore the non-luxury portion of fixed expenses.

The term discretionary income exists for this purpose, yet no standardized calculation method has taken hold. Conceptually the formula is income minus non-luxury fixed expenses, but determining those fixed expenses is where the difficulty lies. In other words, what is needed is a reliable method for calculating the minimum amount required to sustain life in each region.

Public records already provide absolute poverty lines by region. Does falling below that income threshold not mean, by definition, that one cannot cover even the non-luxury portion of fixed expenses? Conversely, could we not say that the actual fixed expenses paid by households living just above the absolute poverty line in a given region represent a reasonable approximation of non-luxury fixed expenses for that area?

If so, the following approach may be worth considering: collect statistically sufficient data by region, categorized by household composition and other relevant variables, establish a regional benchmark from that data, and use it to calculate discretionary income. If this proves to be a sound indicator, it would benefit everyone if the Federal Reserve were to collect and publish it on a monthly basis.

Note: Relative poverty or other measures might serve equally well in place of absolute poverty — however, whichever measure is adopted must be applied consistently across all regions and time periods.

That said, the poverty-related figures published under the Federal Poverty Level were derived through methodology too crude to serve reliably here.

As a separate observation: in Japan there existed a religious organization known as the Unification Church, whose doctrine held — as one example — that a believer earning $200,000 per month should donate $300,000 per month to its founder. Within that organization, income level carried no meaningful weight as a measure of financial capacity. This example illustrates that income alone tells us nothing reliable about a person’s actual financial situation.

Finally, I acknowledge and apologize for having used the generative AI Claude to translate this text from Japanese into English.​​​​​​​​​​​​​​​​