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Indicators of progress: Definitions, data, baseline and trends information

Milestone 2: Reducing the proportion of our children living in low income households

Indicators

This milestone is measured by two main indicators - relative low income and absolute low income. A third indicator 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 ⁶ for producing headline indicators of people in low-income households is households with income below 60% of the GB median net equivalised income ⁷. 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 set out in tables 2c to 2f.

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 the article "Measures of Low Income Amongst Scottish Households".

Availability of data

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, which surveys around 2,200 Scottish households each year. The size of the Scottish sample is being doubled as from survey year 2002/03, a measure which will help to reduce the level of sampling variation in the data.

Information is only available at Scotland level. Owing to the current sample size further information on children living in low income households cannot be made available at sub-Scotland level, or by age or by ethnicity.

In addition, as low income is measured in relation to household income. The gender of a child will have no bearing on the likelihood of them being in low income households. The production of any information by gender of the child is therefore not appropriate.

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.

Reports for previous years have only contained figures for the proportion and not the number of children in low income households - this was as a result of methodological problems with the HBAI data. DWP have now revised their methodology and we are able to provide estimates of numbers of children in low income households as well as proportions. As a result of the change in methodology, some of the figures for proportions in Tables 2c to 2f differ slightly from those published in the last report. These differences are, however, very small and do not alter any of the general trends. As part of an ongoing programme to improve data quality, there will be a further revision to this data series when full results of the 2001 Census become available.

Children in relatively low income households

Using the headline measure of children in households with income below 60% of the median GB household income after housing costs, the 2000/01 figure shows a small rise on the level of 1999/00. It is important to note that these figures are subject to sampling variation and therefore small year on year changes should be treated with caution.

There has been a decrease in the headline measure between 1996/97 and 1997/98 although, despite some minor fluctuations, it has remained fairly stable since then. Overall, the trend since 1996/97 is downwards.

Considering the additional measures presented in Tables 2c and 2d, the main conclusions are that, since 1996/97, all of the indicators except one (below 60% mean after housing costs) have fallen. Since 1999/00, 6 of the 10 indicators have increased, with 3 staying the same and 1 going down. However, most of these changes were small and within the bounds of sampling variation.

Chart 2a : Proportion of children living in relatively low income households

Source: Households Below Average Income : Department for Work and Pensions

Note : Defined as children in households with income below 60% GB median after housing costs

Children in absolute low income households

Looking at the headline absolute measure of children in households with income below 60% of the median GB household income after housing costs, the figures for 2000/01 show a decrease from 1999/00 which is a continuation of the fall since the baseline year of 1996/97. In 1996/97 the figure was 34%; this compares to the latest figure of 21%.

Considering the additional measures presented in Tables 2e and 2f, it is clear that across the board, the proportion of children living in households below the given thresholds has fallen since 1996/97. In addition, for 9 of the 10 measures, there has been a fall between 1999/00 and 2000/01.

Chart 2b : Proportion of children living in absolute low income households

Source: Households Below Average Income : Department for Work and Pensions

Note : Defined as children in households with income below 60% GB median after housing costs

Broad conclusions

When considering the information it is important to consider trends over time and to look at the range of measures that describe the income distribution. The broad conclusion is that the proportion of our children living in relatively low income households has decreased since the baseline year of 1996/97 but has remained fairly constant since 1997/98. In absolute terms, the proportion of children in low income households has fallen significantly since 1996/97, reflecting the fact that both mean and median incomes have risen since then.

Background data

Table 2c: Proportion and number of children 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)

Source: Households Below Average Income : Department for Work and Pensions

Table 2d : Proportion and number of children 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)

Source: Households Below Average Income: Department for Work and Pensions

Table 2e : Proportion and number of children 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)

Source: Households Below Average Income : Department for Work and Pensions

Table 2f: Proportion and number of children 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)

Source: Households Below Average Income: Department for Work and Pensions

Persistent low incomes

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 2g illustrates the situation for children in households in Scotland which were interviewed in both 1999 and 2000, 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 2c to 2f. The BHPS figures are included to provide an indication of movements in and out of income poverty.

The broad conclusions from this analysis are:

• Fifty-five per cent of children were in households which remained outwith income poverty in both 1999 and 2000, while 18 per cent lived in households which were in income poverty in both years.
• The income poverty status of around a quarter of children changed over the course of a one year period.

Table 2g : Children in Low Income Households in 1999 and 2000

Source: British Household Panel Survey

Notes: Low income households are defined using the 60% median before housing costs measure.

Footnotes

6 Recommendation of the Statistical Programme Committee, November 1998.

7 For a detailed description of the methodology used to calculate these figures please refer to the following website: http://www.dss.gov.uk/asd/hbai/hbai2001/contents.html

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