Scottish Economic Statistics 2007

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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 and numbers of persons living in households of each type. In this breakdown, a family unit 2 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, 2005/06

Family type

Families

Persons 1

Number
(000s)

Percentage
of families

Number
(000s)

Percentage
of persons

Pensioner couple 2

300

11

600

12

Single pensioner

420

15

420

8

Couple with dependent children 3

440

16

1630

33

Couple without dependent children 3

500

18

1000

20

Single with dependent children 3

160

6

410

8

Single without dependent children 3

950

34

950

19

All

2760

100

5000

100

Source: DWP, Family Resources Survey, Households Below Average Income datasets.
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

Just 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 27% of all families with children.

Chart 5.1: Equivalised household income distribution (before housing costs), 1998/99 and 2005/06

image of Chart 5.1: Equivalised household income distribution (before housing costs), 1998/99 and 2005/06

Chart 5.2: Equivalised household income distribution (after housing costs), 1998/99 and 2005/06

image of Chart 5.2: Equivalised household income distribution (after housing costs), 1998/99 and 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets

Charts 5.1 and 5.2 show the household income distribution in Scotland in 1998/99 and 2005/06 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 1998/99, the distribution in 2005/06 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 £51 (before housing costs) and £63 (after housing costs) in real terms over the period from £307 to £359 (before housing costs) and £253 to £317 (after housing costs) (at 2005/06 prices).

Chart 5.3: Median equivalised net disposable household income for Scotland, 1994/95 to 2005/06

image of Chart 5.3: Median equivalised net disposable household income for Scotland, 1994/95 to 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets.
All years adjusted to 2005/06 prices.

Table 5.2: Total income and medians by income measure, 2005/06

Gross income

Median income per household (per week)

£421

Total income for all households

£66,583 million

Total household income per capita

£12,805

Net disposable income (before housing costs)

Median income per household (per week)

£342

Total income for all households

£50,638 million

Total household income per capita

£9,738

Net disposable income (after housing costs)

Median income per household (per week)

£302

Total income for all households

£44,681 million

Total household income per capita

£8,593

Source: DWP, Family Resources Survey, Households Below Average Income datasets

Box 5.1: Income definitions used in this chapter 1

Total gross 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 UK median in the same year.

Absolute low income: Compares against the GB median in the baseline year, 1998/99, 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.

Use of GB and UK medians: Since 2002/03 the Family Resources Survey has included Northern Ireland. As a result all relative low income figures from 2002/03 will be calculated using the UK median. Absolute measures utilise a base year prior to the inclusion of Northern Ireland and will therefore continue to use the GB median as the basis for the low income threshold. In practice the change from GB to UK median makes very little impact on the figures; in 2005/06 the estimated UK median income for a couple with no children is £1 less than the GB estimate for the same year.

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: Components of gross household income by quintile, Scotland 2005/06

image of Chart 5.4: Components of gross household income by quintile, Scotland 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets
Income is before Housing Costs

Chart 5.5: Savings and assets by equivalised net disposable household income quintile, Scotland 2005/06

image of Chart 5.5: Savings and assets by equivalised net disposable household income quintile, Scotland 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets
Income is before Housing Costs

Chart 5.4 shows for each quintile, the components of gross household income. In 2005/06, for households in the lowest quintile, 39% of income came from 'disability and other benefits' (down from 43% in the previous year), and 37% 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 7% coming from investments and non-state pensions.

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 16% have no savings, but 59% have 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 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 1994/95 to 2005/06

image of Chart 5.6: Individuals in absolute low income households, Scotland 1994/95 to 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets

Chart 5.7: Individuals in relative low income households, Scotland 1994/95 to 2005/06

image of Chart 5.7: Individuals in relative low income households, Scotland 1994/95 to 2005/06

Source: DWP, Family Resources Survey, Households Below Average Income datasets

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 1998/99. This measure shows whether those in the lowest income households are seeing their incomes rise in real terms.

The current low income estimates for 2005/06 show that the number of individuals in absolute low income households before housing costs fell from 980,000 in 1998/99 to 550,000 in 2005/06. This is a decrease of 43%. The number of individuals in low income households after housing costs was 1,130,000 in 1998/99, falling to 600,000 in 2005/06. This is a fall of 47%.

Individuals in relative low income

Relative low income is defined as individuals who are living in households whose equivalised income is below 60% of UK 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 11%, from 980,000 in 1998/99 to 880,000 in 2005/06. After housing costs numbers fell by 13%, from 1,130,000 in 1998/99 to 990,000 in 2005/06.

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 2005/06' (Revised). This can be found at: www.scotland.gov.uk/stats/incomepoverty. Article A1 of this publication discusses the relationship between low income and household income inequality.