Chapter Five: Household Sector
This chapter examines the income and expenditure of households in Scotland.
Households
There are around 2.3 million households in Scotland 1. Table 5.1 shows the numbers of each type of family unit 2 and numbers of persons living in households of each type. In this breakdown, a family unit is defined as a single adult or couple together with any dependent children, so a household can contain more than one family unit. For example, a married couple and their 20-year-old son would be counted as separate "couple without dependent children" and "single without dependent children" units.
Table 5.1: Number of family units and persons in each family type, 2004/05
Family type | Families | Persons 1 |
|---|
Number
(000s) | Percentage of families | Number | Percentage of persons |
|---|
Pensioner couple 2 | 300 | 11 | 610 | 12 |
|---|
Single pensioner | 400 | 15 | 400 | 8 |
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Couple with dependent children 3 | 430 | 16 | 1600 | 32 |
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Couple without dependent children 3 | 490 | 18 | 980 | 20 |
|---|
Single with dependent children 3 | 170 | 6 | 450 | 9 |
|---|
Single without dependent children 3 | 950 | 35 | 950 | 19 |
|---|
All | 2740 | 100 | 4990 | 100 |
|---|
Source: Department for Work and Pensions, Households Below Average Income ( HBAI).
1 Persons in private households.
2 A pensioner couple is where one or more of the adults are state pension age and over
3 Children aged under 16, or unmarried 16-18 year olds in full-time non-advanced education
Over a third of family units consist of one person (of non-pensionable age) without dependent children while just under a fifth are non pensioner couples without dependents. Families consisting of couples with dependent children account for around 16% of all family units, but around one third of all persons living in households. Single parent families account for 6% of all family units, but 29% of all families with children.
Income
Charts 5.1 and 5.2 show the household income distribution in Scotland in 1996/97 and 2004/05 before and after housing costs. The general distribution for both years and for both before and after housing costs is skewed towards the lower incomes, with a long tail to the right containing a small number of households with very high incomes. However, compared with 1996/97, the distribution in 2004/05 contains a noticeably smaller peak at the lower end, with more households in higher income bands. The median weekly equivalised income in Scotland rose by £64 (before housing costs) and £74 (after housing costs) in real terms over the period from £285 to £349 (before housing costs) and £240 to £313 (after housing costs) (at 2004/05 prices).
Chart 5.1: Equivalised household income distribution (before housing costs), 1996/97 and 2004/05
Chart 5.2: Equivalised household income distribution (after housing costs), 1996/97 and 2004/05
Source: DWP Family Resources Survey, Households Below Average Income datasets (Equivalisation is the process of adjusting household income to account for variations in household size and composition)
Chart 5.3: Median equivalised net disposable household income for Scotland, 1996/97 and 2004/05
Source: DWP Family Resources Survey, Households Below Average Income datasets
Table 5.2: Total income and medians by income measure, Scotland 2004/05
Gross Income |
|---|
Median income per household (per week) | £414 |
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Total income for all households | £62,689 million |
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Total household income per capita | £12,573 |
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Net disposable income (before housing costs) |
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Median income per household (per week) | £332 |
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Total income for all households | £47,481 million |
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Total household income per capita | £9,523 |
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Net disposable income (after housing costs) |
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Median income per household (per week) | £286 |
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Total income for all households | £42,021 million |
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Total household income per capita | £8,428 |
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Source: DWP Family Resources Survey, Household Below Average Income datasets
Box 5.1: Income definitions used in this chapter 1 |
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Total income: Total income from all sources including from Tax Credits, before deductions of income tax and National Insurance. Net Income: Total income after deductions for income tax and National Insurance contributions. Net disposable income: Total income after deductions for income tax, National Insurance Contributions, council tax, pension contributions and maintenance payments. Equivalised net disposable income: 'Equivalised' Income is used to allow comparisons of living standards between different household types. Income is adjusted to take into account variations in the size and composition of the household. This adjustment reflects the fact that a family of several people requires a higher income than a single person in order for both households to enjoy a comparable standard of living. The key assumption is that all individuals in the household benefit equally from the combined (equivalised) income of the household. There are distinct equivalence scales used for income before housing costs ( BHC) and income after housing costs ( AHC). Before housing costs: Net disposable income, equivalised using the before housing costs equivalisation scale. Certain incomes in kind are included such as free school meals and TV licenses for over 75s. After housing costs: Net disposable income with income as for BHC but with rent/mortgage payments, water charges, structural insurance premiums, ground rent and service charges deducted. This is equivalised using the after housing costs equivalisation scale. Relative low income: Compares against the Great Britain median in the same year. Absolute low income: Compares against the Great Britain median in the baseline year, 1996/97, adjusted to remove the effects of inflation. Median: The income value which divides a population, when ranked by income, into two equal-sized groups. This measure is most commonly used to represent average income due to the highly skewed nature of the income distribution, which leads to the very high incomes of a few having a disproportionate impact on the mean. Mean: The total income/expenditure of all individuals or households in a population, divided by the number of individuals/households. In some situations it can be more appropriate to use the mean rather than the median. |
1. For further information on Income definitions and sources of income please see the 'Guide To Income Statistics', Scottish Economic Statistics 2004 ( http://www.scotland.gov.uk/library5/finance/ses04-00.asp )
Chart 5.4 shows for each quintile, the components of gross household income. In 2004/05, for households in the lowest quintile, 43% of income came from 'disability and other benefits', and 36% from 'retirement pensions and Minimum Income Guarantee'.
In contrast, in the highest quintile, 90% of the gross income came from earnings from 'employment, tax credits and income from being self employed', with a further 6% coming from investments and non-state pensions.
Chart 5.4: Components of gross household income by quintile, Scotland 2004/05
Source: DWP, Family Resources Survey
Chart 5.5: Savings and assets by equivalised net disposable household income quintile 1, Scotland 2004/05
1 Before Housing Costs
Source: DWP, Family Resources Survey, Households Below Average Income 2004/05
Chart 5.5 demonstrates for each quintile the level of savings and assets (excluding property). It can be seen for the lowest quintile, that just over 60% have no savings and just over 20% have savings but which are less than £3,000. In the highest quintile, around 15% have no savings, but, with a further 60% having savings of up to £19,999.
Low Income
Charts 5.6 and 5.7 give an indication of the change in individuals living in low income. Individuals are defined as living in low income if their equivalised net disposable household income is below 60% of the GB median. There are two low income measures that are used to measure progress over time: absolute low income and relative low income.
Chart 5.6: Individuals in absolute low income households, Scotland 1996/97-2004/05
Source: DWP, Households Below Average Income data
Individuals in absolute low income
Absolute low income is defined as individuals who are living in households whose equivalised income is below 60% of inflation adjusted GB median income in 1996/97. This measure shows whether those in the lowest income households are seeing their incomes rise in real terms.
The current low income estimates for 2004/05 show that the number of individuals in absolute low income households before housing costs fell from 1,010,000 in 1996/97 to 470,000 in 2004/05. This is a decrease of 53%. The number of individuals in low income households after housing costs was 1,230,000 in 1996/97, falling to 550,000 in 2004/05. This is a fall of 55%.
Chart 5.7: Individuals in relative low income households, Scotland 1996/97-2004/05
Source: DWP, Households Below Average Income data
Individuals in relative low income
Relative low income is defined as individuals who are living in households whose equivalised income is below 60% of GB median in the same year. This measure demonstrates whether those in the lowest income households are keeping pace with the growth of incomes in the economy as a whole.
The number of individuals in relative low income households before housing costs fell by 21%, from 1,010,000 in 1996/97 to 800,000 in 2004/05. After housing costs numbers fell by 26%, from 1,230,000 in 1996/97 to 910,000 in 2004/05.
For further information on the number of children, working age adults and pensioners in low income, and for further explanations on the methodology, please see the following publication: 'Scottish Households Below Average Income 2004/05'. This can be found at: www.scotland.gov.uk/stats/incomepoverty .
Overlap between income inequality and low income
Low income relates to households with incomes below a certain threshold (most commonly 60% of national ( GB) median), and concentrates on households at the bottom end of the distribution. Although incomes of all households are used to calculate the threshold, the measure is not unduly influenced by households at the very top of the income distribution, as the median is less susceptible to extreme values. Income inequality (as commonly measured using the GINI Coefficient), looks at the entire income distribution rather than simply those below a certain threshold. Therefore the distribution of households in the middle and upper parts of the income distribution have a greater role to play in determining the level of income inequality than the level of low income.
Chart 5.8: Gini Coefficient, Scotland 1996/97 - 2004/05
Source: DWP Family Resources Survey, Households Below Average Income datasets
Chart 5.8 demonstrates the level of income inequality in Scotland using the GINI Coefficient (based on equivalised disposable household income, before housing costs). This is a simple way of measuring income inequality over the entire household distribution using a single index. The higher the value of the index, the higher the level of inequality (see http://www.statistics.gov.uk/about/methodology_by_theme/gini/default.asp for further details on the methodology from the Office for National Statistics). From the chart, it can be seen that the level of income inequality in Scotland has remained fairly steady since 1996/97.
Benefits and Tax credits
Table 5.3 shows that 565.7 thousand people of working age (18% of the working age population) in Scotland were in receipt of one or more of a range of key benefits at February 2006. Within Scotland, Glasgow had the highest rate of recipients of key benefits at 27% of the working age population (also see map 5.1), closely followed by Inverclyde (25%). Aberdeenshire had the lowest rate at 10%. The largest group of claimants (312 thousand) were claiming Incapacity Benefits (either Incapacity Benefit or Severe Disablement Allowance). Table 5.4 shows the recipients of the main individual benefits in Scotland, together with the proportion of the population.
The introduction of tax credits in 2003 has extended state support to working people, in particular to those with children or in low-paid jobs. At April 2006, 412.2 thousand families were receiving the Child Tax Credit or Working Tax credit or both, compared to 369.4 thousand families in July 2003. Out of the total families in work with children, the number receiving both Child Tax Credit and Working Tax Credit has increased from 135.7 thousand families in July 2003 to 139.2 thousand families in April 2006. The number of families in work but without children and receiving Working Tax Credit has risen from 14.5 thousand in July 2003 to 40.6 thousand in April 2006.
Map 5.1: Percentage of working age population on key benefits, by Local Authority, Scotland, February 2006
