Scottish Government

Social Justice
a Scotland where everyone matters
Indicators of Progress 2003

Milestone 14: Reducing the proportion of working age people with low incomes

This milestone uses two measures - relative low income and absolute low income. A third measure on persistent low income is also being developed and some preliminary results are included at the end of this section.

Relative and absolute low income can be measured using a number of different thresholds. The accepted GB and European Standard for producing headline indicators of people in low-income households is households with income below 60% of the GB median net equivalised income. It is also important to consider additional indicators based on a range of thresholds of mean and median income to gain a fuller picture. A full range of indicators is shown in tables 14f to 14i.

Relative low income compares income against the mean or median in the same year. Absolute low income compares income against the mean or median level in 1996/97 in real terms - uprated using the Retail Prices Index. Figures include the self-employed. Relative and absolute thresholds are discussed in more detail in Annex A "Measures of Low income Amongst Scottish Households".

(a) Working age people in relatively low income households

Using the headline measure of working age people in households with income below 60% of the median GB household income after housing costs, there has been little change in the proportion of working age people in low income households; 20 per cent in 1996/97, 19 per cent in 2001/02. This reflects the fact that median incomes have risen substantially in this period. Looking across the board at the additional relative measures presented in Tables 14f and 14g, the proportions of working age people living in households below the given thresholds have remained fairly constant since 1996/97.

Chart 14a: Proportion of working age people living in relatively low income households, 1994/95 - 2001-02

Source: Households Below Average Income: Department for Work and Pensions
Note: Defined as working age people in households with income below 60% GB median after housing costs.

The 19 per cent of working age adults living in relative low income households in 2001/02 equates to an estimated 570,000 adults. Around 40 per cent of these adults were living in families with dependent children. The data also suggests that of all working age adults with children, just under a quarter were in income poverty.

Further, of the 570,000 working age adults in relative low income poverty, around half were living in households/families where none of the adults were in work. Also, of all working age adults living in workless households/families, just under two thirds were living in low income poverty.

(b) Working age people in absolute low income households

Using the absolute headline measure of working age people in households with income below 60% of the median GB household income after housing costs, there has been a substantial fall since 1996/97 from 20 per cent to 13 per cent.

All the measures of absolute low income households presented in Tables 14h and 14i show that the proportions of working age people living in absolute low income households have fallen since 1996/97.

Chart 14b: Proportion of working age people living in absolute low income households, 1994/95 - 2001-02

Source: Households Below Average Income: Department for Work and Pensions
Note: Defined as working age people in households with income below 60% GB median after housing costs.

Gender Analysis

Charts 14c and 14d show the proportion of working age people in income poverty by gender. The analysis for 2001/02 suggests that there is little difference between the proportions of men and women living in low income households. However, looking back over the previous few years, the analysis shows that women may have been more likely than men to live in low income households.

It should be noted that it is the income levels of the household and not the individual which classes an individual as living in income poverty. For example, in a household with 3 adults, either all 3 adults will be in income poverty or none of them will be. These results are therefore influenced by single adult households or households where all adults are of the same sex. The main purpose of charts 14c and 14d is to give an indication of the differences between men and women. They are not designed to accurately measure changes over time - the information is based on smaller sample sizes and this may well account for much of the year-on-year fluctuations in the figures.

Chart 14c: Percentage of working age people living in relatively low income households, breakdown by gender, 1994/95 - 2001-02

Source: Households Below Average Income: Department for Work and Pensions
Note: Defined as working age people in households with income below 60% GB median after housing costs.

Chart 14d: Percentage of working age people living in absolute low income households, breakdown by gender

Source: Households Below Average Income: Department for Work and Pensions
Note: Defined as working age people in households with income below 60% GB median after housing costs.

(c) Persistent Low Income

Data on the proportion of persons remaining in poverty over a period of time has been obtained from the British Household Panel Survey (BHPS). This annual survey is longitudinal and therefore enables comparison to be made between a person's or household's income position at different points in time. Although the BHPS has been running since 1991, it was only in 1999 that the Scottish sample was boosted to enable more robust Scottish estimates to be produced.

Information published by the Department for Work and Pensions on persistent low incomes gives the proportion who have been in low income households in at least 3 of the previous 4 years. It is our intention, once 4 years worth of boosted Scottish data is available, to replicate this information for Scotland.

Table 14e illustrates the situation for working age adults in households in Scotland which were interviewed in the three years 1999, 2000 and 2001, based on the relative household income before housing costs for that year. Please note that, as this information comes from a separate source, the results are not directly comparable with those produced from the HBAI analysis in tables 14f to 14i. The BHPS figures are included to provide an indication of movements in and out of income poverty.

The broad conclusions from this analysis are:

• Seventy-four per cent of working age adults were in households which remained outwith income poverty in all of the three years 1999, 2000 and 2001, while 3 per cent lived in households which were in income poverty in all three years.
• Eight per cent of working age adults lived in households which were in income poverty in at least two out of the last three years.

Table 14e: Working Age Adults in Low Income Households in 1999, 2000 and 2001

Background data

Table 14f: Proportion and number of working age people living in households below 50% and 60% of the mean income thresholds in Scotland over the period 1994/95 to 2000/01 relative to the relevant year's GB mean income (Relative measure)

Table 14g: Proportion and number of working age people living in households below 50%, 60% and 70% of the median income thresholds in Scotland over the period 1994/95 to 2000/01 relative to the relevant year's GB median income (Relative measure)

Table 14h: Proportion and number of working age people living in households below 50% and 60% of the mean income thresholds in Scotland over the period 1994/95 to 2000/01 relative to the 1996/97 GB mean incomes in real terms (Absolute measure)

Table 14i: Proportion and number of working age people living in households below 50%, 60% and 70% of the median income thresholds in Scotland over the period 1994/95 to 2000/01 relative to the 1996/97 GB median incomes in real terms (Absolute measure)

Availability of data and references

Data are obtained from the Households Below Average Income (HBAI) analysis. This analysis is based on the Family Resources Survey, run by the Department for Work and Pensions (DWP), which surveys around 2,200 Scottish households each year. Through Scottish Executive funding, the size of the Scottish sample is being doubled as from survey year 2002/03, a step which will help to reduce the level of sampling variation in the data.

Information is available at Scotland level and can be split by gender. Owing to the current sample size further information on working age people with low incomes cannot be made available at sub-Scotland level, or by age or by ethnicity.

The HBAI analysis uses equivalisation factors to take account of variations in the size and composition of the households in which individuals live. As the equivalisation scale used in HBAI does not take account of the additional costs associated with having a disabled person in the household, any breakdown by disability could be misleading.

Due to a minor change in the DWP methodology for deriving working-age adult and pensioner results, there have been minor revisions to previous years' data in last year's report for these groups (asterisks denote the changes). The figures in this report define working age adults as all those adults below state retirement age. This is in contrast to previous publications in which working age adults were defined as all adults living in families where the head of the family was under state pension age (which would include some pensioners living in households headed by non-pensioners, and would exclude some working age adults living in households headed by a pensioner). Some figures for previous years have, therefore, changed slightly from those published in previous reports.

For a detailed description of the methodology used to calculate these figures please refer to:

Department for Work and Pensions: Households Below Average Income
http://www.dwp.gov.uk/asd/hbai/hbai2001/contents.asp

HOUSEHOLDS BELOW AVERAGE INCOME (HBAI) ANALYSIS 2001/02 - FIGURES FOR SCOTLAND USING THE RANGE OF LOW INCOME THRESHOLDS, 1994/95 - 2001/02
www.scotland.gov.uk/library4/FCSD/OCEA/00016688.aspx

Low Income Dynamics 1991 to 2001
http://www.dwp.gov.uk/asd/hbai.asp.