Scottish Government

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1. This paper presents the key results of the Scottish analysis of the 2003/04 Households Below Average Income ( HBAI) dataset which were published by The Department for Work and Pensions ( DWP) on the 30 ^th March 2005. It is a follow up to the Statistical Publication Notice of 30 March, 2005.

2. Most figures throughout the paper refer to the 60% median threshold as this is the current headline measure. Full definitions of the terms used are included in Annex B.

Headline Results (Figures shown in headline results refer to AHC measure)

• In 1996/97 - the baseline year against which progress is measured - an estimated 370,000 children (33%) were living in low income households. In absolute terms, this had fallen to 160,000 children (15%) by 2003/04. The equivalent number of children in relative low income households in 2003/04 was 260,000 (25%).
• In 1996/97, the number of children experiencing severe low income (below 50% median threshold) was 230,000 (21%). In absolute terms this had fallen to 70,000 children (7%) by 2003/04. The equivalent number of children in severe low income households in relative terms in 2003/04 was 180,000 (18%).
• In 1996-97, an estimated 600,000 working age adults (20%) were living in low income households. In absolute terms this had fallen to 380,000 working age adults (13%) by 2003/04. The equivalent number of working age adults in relative low income households in 2003/04 was 540,000 (18%).
• In 1996/97, an estimated 260,000 pensioners (30%) were living in low income households. In absolute terms this had fallen to 70,000 pensioners (8%) by 2003/04. The equivalent number of pensioners in relative low income households in 2003/04 was 160,000 (18%).
• In 1996/97, an estimated 1,230,000 individuals (25%) in total were living in low income households. In absolute terms this had fallen to 600,000 individuals (12%) by 2003/04. The equivalent number of individuals in relative low income households in 2003/04 was 960,000 (19%).
• There has been an increase of 24% (£58) in GB median income 'After Housing Costs', from £239 to £297 per week, in real terms, between 1996/97 and 2003/04. Consequently, the 60% low income threshold, which is used to derive the relative low income figures, has increased by £35 per week in real terms, from £144 to £178, for a couple with no children.
• Children in single-parent families are much more likely to live in low income households than those in families with two adults. However, the proportion of children in single-parent families in relative low income has fallen since 1996/97, from 60% to 47% in 2003/04.
• Children living in workless families ( i.e. families where no adult is working) are much more likely to live in low-income households than those with one or more adult in work. In 2003/04, 77% of children in workless families were living in relative low-income compared to 13% of those in working households. These proportions had fallen from 80% and 22% respectively in 1996/97.
• Working age adults with children are more likely to live in low income households than those without children. This is particularly true for single parents. However, the proportion of working age adults with children living in relative low income has fallen since 1996/97, from 54% to 44% for single parents and from 21% to 14% for couples with children. There is little difference in the proportion of working-age people in relative low income by gender.
• The rate of single pensioners living in relative low income fell notably between 1996/97 and 2003/04 (from 35% to 14%) compared to a fall from 26% to 22% for couple pensioners over the period. It should be noted that the difference in poverty figures for single and couple pensioners is very sensitive to the choice of equivalence scale used for equivalising the household's income; using the OECD scale (which will be used more from next year when the new child poverty measurement comes in), in 2003/04 there is a higher proportion of single pensioners than those from couples in poverty.

Incomes

3. Measures of mean income are subject to misinterpretation because they can be affected by a few people with very high incomes. Median income is generally accepted as the most appropriate measure of average income, as it is not affected by extreme values in this way. Table 1 shows median income in equivalised ¹ terms.

Table 1: Median income (£ per week)

4. Median weekly income after housing costs in Scotland rose by £69 in real terms from £237 in 1996/97 to £306 in 2003/04 whilst median income before housing costs rose by £59 over the period. Average income for Scotland was slightly higher than for GB as a whole in 2003/04 on an After Housing Costs basis.

5. As incomes are equivalised to calculate the low income thresholds, the monetary value of the threshold differs according to the household composition. Table 2 shows that for a couple with no children the headline low income threshold of 60% median income after housing costs was £178 per week (£9,300 a year). For a couple with two children (aged 5 and 11) the threshold equated to £262 a week (£13,600 a year) and for a single parent with two children (aged 5 and 11), £182 a week (£9,500 a year).

6. Table 3 shows changes in the monetary value of the 60% median low income threshold for some family types. Between 1996/97 and 2003/04 the value of the thresholds has increased, in real terms, by £34 for a couple without children, £51 for a couple with two children (aged 5 and 11), £19 for a single person and £35 for a single parent with two children (aged 5 and 11).

Table 2: Monetary Values of the 60% median Low Income thresholds - After Housing Costs ( AHC) and Before Housing Costs ( BHC), 2003/04

Table 3: Changes in the monetary value of the 60% median threshold (after housing costs)

Trends in low income measures

7. The following sections relate to the headline after housing cost measure only. (Further work will be undertaken to compare the measure for children with the before housing costs measure, in view of the move to the new child poverty measure in 2004/05).

8. Households reporting the lowest income may not have the lowest living standards. The bottom ten percent of the income distribution should not, therefore, be interpreted as having the bottom ten percent of living standards. This is particularly the case for lower thresholds; for this reason figures relating to 50% of median income should be treated with caution

9. As the HBAI is a sample survey, all figures are estimates and are therefore subject to sampling variation. Extreme caution should be exercised in the interpretation of small year-on-year fluctuations; identification of trends should be based on several years of data (figures for all years are included in Annex 1). As the Executive have funded a doubling of the Scottish sample from 2002/03, the Scottish figures from 2002/03 should be less prone to fluctuation within the key trends than those for previous years.

10. It is important when making assumptions about the low-income population, to take into account changes within the overall population over the same period - for example, the increase in the number of children living in single parent families. The difference between the proportions of a particular group in low-income over a period of time will reflect these changes whilst changes in the numbers will not.

Children

11. In both relative ² and absolute ³ terms, the number and proportion of children in low income households has shown a downward trend since 1996/97. In 2003/04 there were 260,000 children in relative low income households (25%) compared to 370,000 (33%) in 1996/97.

Chart 1: Proportion of children living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

Chart 2: Number of children living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

12. The proportion of children living in households in severe low-income (defined as below 50% on median income) and below a higher income threshold (below 70% median income) also fell in relative terms over the period.

13. Children in single-parent families are much more likely to live in low income households than those is families with two adults. However, the proportion of children in single-parent families in relative low income has fallen since 1996/97, from 60% to 47% in 2003/04.

14. Children living in workless families ( i.e. families where no adult is working) are much more likely to live in low-income households than those with one or more adult in work. In 2003/04, 77% of children in workless families were living in relative low-income compared to 13% of those in working households. These proportions had fallen from 80% and 22% respectively in 1996/97.

Table 4: Proportion and number of children in low income households, below 60% of GB Median Income After Housing Costs ( AHC), Scotland

Table 5: Proportion and number of children in households below 50%, 60% and 70% of the relevant year's GB median income, Scotland (relative measure) ( AHC)

Small percentage changes are unlikely to be significant

Table 6: Proportion and number of children in households below 60% of the median income thresholds of the relevant year, Scotland (relative measure) - couple/ single parent families ( AHC)

Small percentage changes are unlikely to be significant

Table 7: Proportion and number of children in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) - children in working/non-working households ( AHC)

Small percentage changes are unlikely to be significant

Working Age Adults

15. In 1996-97, an estimated 600,000 working age adults (20%) were living in low income households. In absolute terms this had fallen to 380,000 working age adults (13%) by 2003/04. The number of working age adults in relative low income households was 540,000 (18%) in 2003/04.

Chart 3: Proportion of working age adults living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

Chart 4: Number of working age adults living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

16. There has also been little change in the proportions of working-age adults living in severe low-income(defined as below 50% of median income) and below a higher income threshold (below 70% median income) in relative terms. 14% of working age adults were living in households below 50% of median and 23% in households below 70% of median income in 2003/04.

17. Working age adults with children are more likely to live in low income households than those without children. This is particularly true for single parents. However, the proportion of working age adults with children living in relative low income has fallen since 1996/97, from 54% to 44% for single parents and from 21% to 14% for couples with children.

18. There is little difference in the proportion of working-age people in relative low income by gender.

Table 8: Proportion and number of working age adults in low income households, below 60% of GB Median Income After Housing Costs ( AHC), Scotland

Table 9: Proportion and number of working age adults in households below 50%, 60% and 70% of the relevant year's GB median income, Scotland (relative measure) ( AHC)

Small percentage changes are unlikely to be significant

Table 10: Proportion and number of working age adults in households below 60% of the median income thresholds of the relevant year, Scotland (relative measure) ( AHC) - by family type

Small percentage changes are unlikely to be significant

Table 11: Proportion and number of working age adults in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) - by working/non-working households ( AHC) ⁴

Small percentage changes are unlikely to be significant

Table 12: Proportion and number of working age adults in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) ( AHC) - by gender

Small percentage changes are unlikely to be significant

Pensioners

19. In 1996/97, an estimated 260,000 pensioners (30%) were living in low income households. In absolute terms this had fallen to 70,000 pensioners (8%) by 2003/04. The equivalent number of pensioners in relative low income households in 2003/04 was 160,000 (18%).

Chart 5: Proportion of pensioners living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

Chart 6: Number of pensioners living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

20. The proportions of those pensioners living in households below a higher income threshold (below 70% median income) also fell in relative terms over the period, suggesting that pensioner households are moving further up the income distribution. There was no clear trend in the proportion in severe low-income (below 50% median income) which has remained around 10% for most years over the period 1996/7 to 2003/04.

21. The rate of single pensioners living in relative low income fell notably between 1996/97 and 2003/04 (from 35% to 14%) compared to a fall from 26% to 22% for couple pensioners over the period.

It should be noted that the difference in poverty figures for single and couple pensioners is very sensitive to the choice of equivalence scale used for equivalising the household's income; using the OECD scale (which will be used more from next year when the new child poverty measurement comes in), in 2003/04 there is a higher proportion of single pensioners than those from couples in poverty.

22. Analysis for 2003/04 suggests that male and female pensioners are equally likely to live in relatively low income households. Analysis for previous years has shown that there were (marginally) more women than men in relatively low income households.

Table 13: Proportion and number of pensioners in low income households, below 60% of GB Median Income After Housing Costs ( AHC), Scotland

Table 14: Proportion and number of pensioners in households below 50%, 60% and 70% of the relevant year's GB median income Scotland (relative measure) ( AHC)

Small percentage changes are unlikely to be significant

Table 15: Proportion and number of pensioners in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) ( AHC) - by family type

Small percentage changes are unlikely to be significant

Table 16: Proportion and number of pensioners in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) ( AHC) - by gender

Small percentage changes are unlikely to be significant

All Individuals

23. In 1996/97, an estimated 1,230,000 individuals (25%) in total were living in low income households. In absolute terms this had fallen to 600,000 individuals (12%) by 2003/04. The equivalent number of individuals in relative low income households in 2003/04 was 960,000 (19%).

Chart 7: Proportion of all individuals living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

Chart 8: Number of all individuals living in households with incomes below 60% GB median ( AHC), Scotland (Relative and Absolute measures)

Table 17: Proportion and number of all individuals in low income households, below 60% of GB Median Income after housing costs ( AHC), Scotland

OPS: OCEA
27th April 2005

Annex A

Tables above which give 1996/97 and 2003/04 only, repeated with all intervening years.

Notes:
1. The percentages show the proportion of the population that fall below the threshold in the year in question. Therefore, due to changing demographics, the same number of persons one year may represent a different proportion to the same number in a previous year.
2. Due to rounding, the breakdowns may not sum exactly to the relevant totals.

Children

Table A1: Proportion and number of children in households below 50%, 60% and 70% of the relevant year's GB median income, Scotland (relative measure) ( AHC)

Table A2: Proportion and number of children in households below 60% of the median income thresholds of the relevant year, Scotland (relative measure) ( AHC) - couple/ single parent families

Table A3: Proportion and number of children in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) - children in working/non-working households

Working Age Adults

Table A4: Proportion and number of working age adults in households below 50%, 60% and 70% of the relevant year's GB median income, Scotland (relative measure)

Table A5: Proportion and number of working age adults in households below 60% of the median income thresholds of the relevant year, Scotland (relative measure) ( AHC) - by family type

Table A6: Proportion and number of working age adults in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) ( AHC) - by working/non-working households

Table A7: Proportion and number of working age adults in households below 60% of median income threshold of the relevant year, Scotland (relative measure) ( AHC) - by gender

Pensioners

Table A8: Proportion and number of pensioners in households below 50%, 60% and 70% of the relevant year's GB median income Scotland (relative measure) ( AHC)

Table A9: Proportion and number of pensioners in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) - by family type

Table A10: Proportion and number of pensioners in households below 60% of the median income threshold of the relevant year, Scotland (relative measure) - by gender

Annex B- Definitions

a. Income Before Housing Costs ( BHC) includes the following main components:

• usual net earnings from employment;
• profit or loss from self-employment (losses are treated as negative income);
• all Social Security benefits (including Housing Benefit, Social Fund, maternity,
• funeral and community care grants but excluding Social Fund loans);
• income from occupational and private pensions;
• investment income;
• maintenance payments, if a person receives it directly;
• income from educational grants and scholarships (including, for students, top up
• loans and parental contributions);
• the cash value of certain forms of income in kind (free school meals, free welfare
• milk and free school milk).

b. Income After Housing Costs ( AHC) is derived by deducting a measure of housing costs from the above income measure.

c. Housing costs include:

• rent (gross of housing benefit);
• water rates and community water charges;
• mortgage interest payments (net of tax relief);
• structural insurance premiums (for owner occupiers);
• ground rent and service charges.

d. Net Income is gross income net of the following:

• income tax payments;
• National Insurance contributions;
• domestic rates/ council tax;
• contributions to occupational pension schemes (including AVCs to occupational
• pension schemes, and any contributions to personal pensions);
• all maintenance and child support payments, which are deducted from the income of
• the person making the payment;
• parental contributions to students living away from home.

e. Equivalised Income:

This is the income measure used in HBAI. Income is the total income of all members of the household, including dependents. This income measure takes into account variations in the size and composition of the households in which individuals live. This reflects the common sense notion that a household of five adults will need a higher income than a person living alone in order for them to enjoy a comparable standard of living. The process of adjusting income in this way is known as equivalisation and is needed in order to make sensible income comparisons between households. Income is divided by scales, which vary according to the number of adults and the number and age of dependants in the household.

f. Relative low-income:

Households with income below 60% of the relevant year's GB median equivalised income.

g. Low-income in absolute terms:

Households with income below the 1996/97 level of 60% of GB median equivalised income, uprated to the relevant years prices using RPI ratios.

1 Refer to Annex B for definition of equivalised income.
2 Income measured against the median in the same year.
3 Income measured against the median in 1996/97 (uprated to 2003/04 prices).
4 '-' indicates figures are negligible