An important question in social survey research is how to measure latent variables. Latent variables are those variables, which cannot be observed or measured directly. Some examples are – job satisfaction, leadership quality, work environment in a company, etc. Such variables are measured through certain indicators (which are called indicator items, or simply items. Indicator items are selected on the basis of theoretical grounds, prior research evidence, and if these are not available, or are not well founded, through factor analysis. The indicator items measuring a latent variable should satisfy at least the following criteria;
These conditions are necessary, since all the items of a latent variable are expected to measure uniquely that latent variable and no other latent variable.
After having selected the indicator items, the next step in data analysis is to construct a single measure – score or index of the selected items.