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Social Justice
a Scotland where everyone matters
Indicators of Progress 2003

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

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

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. 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. 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 Annex A "Measures of Low Income Amongst Scottish Households".

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. In absolute terms, the proportion of children in low income households has halved since 1996/97. These reflect the fact that median incomes have risen substantially since then.

(a) 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, in 2001/02 some 30 per cent of children were living in relatively low income households. Since 1996/97 there has been a 4 percentage points decrease in this indicator. 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.

Chart 2a: Proportion of children living in relatively low income households, 1994/95 - 2001-02

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

Since 1996/97, all of the low income indicators in Tables 2d and 2e have fallen, and it is particularly interesting to note the fall in the proportions of children below the 50% of the median GB household income after housing costs which is a measure of depth of poverty.

To put this indicator into context, for a couple with 2 children the cash value of the 60 per cent median threshold for 2001/02 after housing costs was 242 per week, and 168 for a single parent with 2 children.

The 30 per cent of children living in relative low income households in 2001/02 equates to an estimated 320,000 children. Around half of these children were living in lone parent families. The data also suggests that of all children living in lone parent families in 2001/02 around half were in relative low income poverty. Further, of the 320,000 children in relative low income poverty, roughly half were living in households/families where none of the adults were in work. Also, of all children living in workless households/families, around three quarters were living in relative low income poverty.

Looking at the relative and absolute measures there are higher proportions of children in low income after housing costs compared to before housing costs. This suggests that housing costs make up a higher proportion of income for those on low income.

(b) 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 proportion of children living in absolute low income has halved since 1996/97. In 1996/97, 34 per cent of children lived in households with income below 60% of the median GB household income after housing costs; up-rating that threshold using the Retail Prices Index gives the latest figure of 16 per cent.

Chart 2b: Proportion of children living in absolute low income households, 1994/95 - 2001-02

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

Considering the additional measures presented in Tables 2f and 2g, it is clear that across the board, the proportion of children living in households below the given thresholds has fallen since 1996/97.

(c) Persistent Low Income

Data on the proportion of persons remaining in poverty over a period of time have 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 2c illustrates the situation for children 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 2d to 2g. The BHPS figures are included to provide an indication of movements in and out of income poverty.

The broad conclusions from this analysis are:

• Sixty-one per cent of children were in households which remained outwith income poverty in all of the three years 1999, 2000 and 2001, while 10 per cent lived in households which were in income poverty in all three years.
• Eighteen per cent of children lived in households which were in income poverty in at least two out of the last three years.

Table 2c: Children in Low Income Households in 1999, 2000 and 2001

Background data

Table 2d: 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)

Table 2e: 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)

Table 2f: 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)

Table 2g: 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)

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, 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 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.

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.

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.

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