MEASURING INCOME AND POVERTY AT A NATIONAL
LEVEL
Sian RasdaleSocial Justice Analysis, Scottish Government
Purpose Target 5: SOLIDARITYTo increase overall income and the
proportion of income earned by the three lowest income deciles as a group by 2017
Decrease the proportion of individuals living in private households with an equivalised
income of less than 60% of the UK median before housing costs
National Indicator 14: POVERTY
Source of data: Family Resources Survey
• The FRS was established in 1994/95• Owned by DWP• Contracted to ONS• Provides detailed information about:
– Household composition– Income from all sources – employment, benefits, tax
credits, savings, assets, investments, pensions– Tenure and housing costs– Occupation and employment
• All householders are interviewed where possible
Source of data: Family Resources Survey
• Stratified clustered probability sample drawn from the Postcode Address File
• Covered GB until 2001/02, now includes NI
• UK sample size ~ 28,000• Scotland sample size ~ 4,500 households• Scottish Government funds a boost since
2001/02
Source of data: HBAI
• The Households Below Average Income (HBAI) datasets are derived from the FRS
• HBAI not restricted to households below average income!
• HBAI arranged at benefit unit level
• HBAI contains equivalised income
Equivalisation
Reason for equivalising: Two people living together need more, but not twice as
much, income as one person living alone, to achieve a comparable standard of living
Equivalisation adjusts household income according to the size and composition of the household
Every-one in the household is allocated the same equivalised income, including children
Extra needs of disabled people are not considered
Equivalisation
Household net income BHC = £100 pw
Couple without children
£100 / (0.67 + 0.33) = £100
Couple with one child under 14
£100 / (0.67 + 0.33 + 0.20) = £83
Single adult with one child under 14
£100 / (0.67 + 0.20) = £115
ModifiedOECD
scaled tocoupleWithoutChildren
First adult 0.67
Spouse 0.33
Other second adult 0.33
Third adult 0.33
Subsequent adults 0.33
Children aged under 14 0.20
Children aged 14+ 0.33
Before and After Housing Costs
• BHC because some people choose prioritise nice housing
• AHC because some housing is expensive but not particularly nice
• Overall, more people are in poverty AHC• The exception is pensioners, because they are
more likely to have paid off their mortgages• BHC is the internationally recognised measure
of poverty
Relative and Absolute
• Relative – the poverty threshold is 60% of the median in the same year– 2005/06 threshold was £217 per week
• Absolute – the poverty threshold is 60% of the median in 1998/99, adjusted for inflation– 2005/06 threshold was £188 per week
Strengths & Weaknesses of the FRS & HBAI
STRENGTHS• Robust• Reliable• Internationally
comparable• Internationally
accepted• National Statistics
WEAKNESSES• Representative only of
people in private households• Time lag• Equivalisation not perfect• May not match individuals
experiences• No consideration of benefits-
in-kind
How poverty is calculated1. Calculate the median equivalised net
income for the UK
£362 in 2005/062. Calculate 60% of that – the poverty
threshold
£362 X 0.6 = £2173. Any-one in the dataset with an
equivalised income of less than the threshold is poor
Income distribution with poverty
Person 1 £10Person 2 £55Person 3 £60 Person 4 £70 Person 5 £362 (The Median)
Person 6 £500Person 7 £600Person 8 £1,000,000Person 9 £1,000,000,000
Person 1 £250Person 2 £250Person 3 £250 Person 4 £250 Person 5 £362 (The Median)
Person 6 £500Person 7 £600Person 8 £1,000,000Person 9 £1,000,000,000
Income distribution with no poverty but the same median
and poverty threshold
These 4 people have an income less than £362 X 0.6 = £217
No-one has an income less than £217
These 4 people have an income less than £362 X 0.6 = £217
How Child Poverty is calculated1. Absolute poverty
Equivalised income <60% 1998/99 median
2. Relative poverty Equivalised income <60% same year median
3. Combined low income and material deprivation
Equivalised income <70% same year median AND material deprivation score >=25
Child poverty Tier 3• 10 child MD questions
– “Does your child go swimming at least once a month?”
• 11 adult MD questions– “Do you have household contents insurance?”
• All answers are “Yes” / “No - can’t afford it” / “No – don’t want it”
• “No – can’t afford it” answers are weighted by prevalence
• Translated to 0-100 scale
How Solidarity is calculated1. Rank all the Scottish data by equivalised annual income and split
into 10 evenly sized group – the deciles
2. Sum all the income values
£109,520m in 2005/06
3. Sum the income of the lowest three deciles
£15,240
4. Calculate the percentage of income received by the lowest 3 deciles
14%
Where to find the statisticshttp://www.scotland.gov.uk/Topics/Statistics/Browse/Social-Welfare/incomepoverty
Publications• Scottish
Households Below Average Income 2006/07 published yesterday
• Scottish Economic Statistics – later this year
Main Analyses
Published on the Income and Poverty website shortly after the SHBAI is published
Includes:– Details of the income distribution– Trends in median income– Sources of income– Additional analysis of poverty– And more!
• Click on the charts to download the data
Scotland Performs
http://www.scotland.gov.uk/About/scotPerforms
• Longitudinal survey of children in Scotland• Following 8,000 children annually, until age 5 • FRS Material Deprivation questions have been added to
Sweep 4• Currently in the field• Sweep 4 results available in 2010
http://www.growingupinscotland.org.uk
Sinéad Power – 0131 244 0322
Wealth and Assets Survey• Longitudinal survey of private households across GB• 1,400 households in Scotland South of the Caledonian Canal• Covers:
– Housing wealth, mortgages & equity; pensions; inheritance, trusts– Household goods, collectables, vehicles– Economic status, work history, income (earnings, benefits, etc)– Savings and debt– Major items of expenditure– Attitudes to debt; attitudes to risk; financial expectations; budgeting– Health, ethnicity, religion, household composition
• Will provide estimates of total wealth held by households in Scotland• Sweep 1 data will be available Spring 2009
Experimental data from the first half of Sweep 1 are available here:http://www.statistics.gov.uk/STATBASE/Product.asp?vlnk=15074
UK Household Longitudinal Study (UKHLS)
• Longitudinal survey of adults in private households across GB
• 4,000 respondents in Scotland• Incorporating of the British Household Panel Survey
sample • Should provide Persistent Poverty estimates for Scotland• Fieldwork starting soon• Results hopefully available in about 18 months
http://www.iser.essex.ac.uk/ukhls/
• Is there anything crucial being missed at a National Level?
• Should we continue to monitor ‘absolute’ poverty?• Is the OECD equivalisation scale working?• Are you interested in the Wealth and Assets
Survey / the UK-HLS? How would you like the results to be disseminated?
• Should we estimate the value of benefits in kind?• Have you ever used the Income and Poverty
website? How could it be improved?
Discussion Points