Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

HOUSEHOLDS BELOW AVERAGE INCOME STATISTICS

  • Comment
The Households Below Average Income statistical report (HBAI) for the ...
The Households Below Average Income statistical report (HBAI) for the

period 1994/5-2000/01 is published today. This National Statistics

First Release contains a digest of key results taken from this

publication.

INCOME GROWTH AND 'ABSOLUTE STYLE' LOW-INCOME INDICATORS

There was significant income growth, in real terms, at the lower end

of the income distribution between 1996/7 and 2000/1 and,

consequently, between 1994/5 and 2000/01. Between 1996/7 and 2000/01,

the median income of the bottom 20 per cent of the population grew by

10 per cent in real terms for income Before Housing Costs, and 14 per

cent for income After Housing Costs.

As a result, the proportion of the population below low- income

thresholds that are fixed in real terms ('absolute' low-income

thresholds) fell significantly over this period. This was

particularly evident in the figures for children, which showed a

pronounced fall in later years. From 1996/7 to 2000/01:

There was a fall of 1.3 million in the number of children below

60 per cent of 1996/7 median income held constant in real terms on

a Before Housing Costs basis (1.4 million After Housing Costs).

There was a fall of 1.2 million in the number of working-age

adults below 60 per cent of 1996/7 median income Before Housing

Costs (1.5 million After Housing Costs).

There was a fall of 0.5 million in the number of pensioners

below 60 per cent of 1996/7 median income Before Housing Costs (1.1

million After Housing Costs). From 1996/7 to 2000/01, the income

growth observed at the lower end of the income distribution was

accompanied by similar growth across the income distribution as a

whole.

RELATIVE LOW-INCOME INDICATORS

Changes in 'relative' low-income indicators depend on how changing

incomes at the lower end of the distribution compare with income

growth for the rest of the population. 'Relative' low-income counts

fall if income growth at the lower end outstrips overall income

growth. From 1996/7, reductions for 'relative' low-income indicators

are on a smaller scale to those seen for the 'absolute' indicators

discussed previously, as a large part of the significant income

growth at the bottom of the distribution was absorbed in 'keeping up'

with the population as a whole.

Whole Population - Overall, from 1994/5 to 2000/01, the percentage of

the population living in low-income households, as defined by

fractions of contemporary mean or median, showed no large or

consistent change. However there is evidence to suggest the figures

rose slightly in the early part of the period and then fell away. In

2000/01, there were 9.7 million people living in households with

below 60 per cent of median net disposable household income Before

Housing Costs, 12.9 million After Housing Costs. This represents a

fall from 1996/7 of some 700,000 on a Before Housing Costs basis, and

1 million After Housing Costs.

Children - In 2000/01, there were 2.7 million children living in

households with below 60 per cent of median household income on a

Before Housing Costs basis, 3.9 million After Housing Costs. Whilst

there has been little overall change between 1994/5 and 2000/01, this

represents a fall of around half a million children since 1996/7; and

400,000 children Before Housing Costs (300,000 After Housing Costs)

since 1998/9, the base year for the Government's Public Service

Agreement (PSA) target on child poverty.

Working-age adults - In 2000/01, on a Before Housing Costs basis,

there were 4.9 million working-age adults living in households with

below 60 per cent of median household income, 6.6 million After

Housing Costs. This figure has shown little change over the period

1994/5-2000/01.

Pensioners - In 2000/01, there were 2 million pensioners living in

households with below 60 per cent of median household income on a

Before Housing Costs basis, 2.3 million After Housing Costs. From

1994/5 to 2000/01, there was little consistent overall change in the

percentage of pensioners living in low-income households. However,

there is evidence to suggest that figures for most thresholds rose

slightly in the earlier part of the period before falling away again

in later years. This applied equally from 1996/7-2000/01, with the

only difference being that the 60 and 70 per cent median measures

After Housing Costs showed a clear fall, of around 200,000.

GROUPS WITH AN ABOVE AVERAGE RISK OF LOW INCOME IN 2000/01

Looking at the distribution including the self-employed, in 2000/01,

17 per cent of the population lived in households with below 60 per

cent of median income Before Housing Costs, 23 per cent on an After

Housing Costs basis. The following groups had an above average risk

of low income:

Workless families - individuals in non-retired workless families were

much more likely to live in low-income households than those with one

or more adults in full-time work, with just under half of the former

living in households with below 60 per cent of median income Before

Housing Costs, and just under two-thirds on an After Housing Costs

basis.

Families with children - 21 per cent of children lived in households

with below 60 per cent of median income Before Housing Costs, 31 per

cent After Housing Costs. Children in lone-parent families (34 per

cent lived in households with below 60 per cent median income Before

Housing Costs, 55 per cent After Housing Costs), large families, with

a mother aged thirty or under, or where the youngest child was aged

under five were particularly at risk of low incomes.

Pensioners - on a Before Housing Costs basis, just over one in five

pensioners lived in households with below 60 per cent of median

income, just under one in four After Housing Costs. Single female

pensioners had a higher risk of living in low-income families than

single male pensioners. Pensioners living in families not in receipt

of a personal or occupational pension had a much greater risk of low

incomes than those families with one or more pensioners in receipt.

Ethnic minorities - households headed by a member of an ethnic

minority community were more likely to have low incomes. This was

particularly the case for households headed by someone of

Pakistani/Bangladeshi ethnic origins, with 59 per cent of this group

living in households with below 60 per cent of median income Before

Housing Costs, 68 per cent on an After Housing Costs basis.

Disabled - individuals in families containing one or more disabled

people were more likely to live in low-income households than those

in families with no disabled person, with around one in four of the

former group living in households with below 60 per cent of median

income, around three in ten After Housing Costs.

Local Authority or Housing Association tenants - individuals in this

group were more likely to live in low-income households than other

tenure types, with around a third living in households with below 60

per cent of median income Before Housing Costs, and just over half on

an After Housing Costs basis.

No educational qualifications - individuals living in working-age

families in which the adults had no educational qualification were

much more at risk of low income than those with a qualification. On a

Before Housing Costs basis, one in four working-age adults without

qualifications lived in households with below 60 per cent of median

income, one in three After Housing Costs.

North East and London - individuals living in the North East and, on

an After Housing Costs basis only, London had the highest risk of low

income. On a Before Housing Costs basis, 23 per cent of individuals

in the North East lived in households with below 60 per cent of

median income, 28 per cent After Housing Costs. Whilst only 17 per

cent of individuals in London lived in households with below 60 per

cent of median income Before Housing Costs, the corresponding figure

After Housing Costs was 28 per cent. In contrast, individuals living

in the South East (with 10 per cent living in households with below

60 per cent of median income Before Housing Costs, 16 per cent After

Housing Costs) and Eastern Regions (12 per cent with less than 60 per

cent median income Before Housing Costs, 17 per cent After Housing

Costs) were least likely to live in low-income households.

THE INCOME DISTRIBUTION IN 2000/01 - ACTUAL MONEY VALUES

In order 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 in a process known as

equivalisation. This adjustment reflects the common sense notion

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. Therefore, the majority of monetary amounts

presented in HBAI are on this equivalised basis and do not reflect

actual money amounts for any family type other than a couple with no

children (the benchmark used for equivalisation).

Table 1 shows the cash equivalent household incomes, corresponding to

various income levels in the overall HBAI 2000/01 Before Housing

Costs income distribution for several different family types:

Notes

1. The Households Below Average Income statistical report (HBAI) for

the period 1994/5-2000/01 is published today. The report, the

thirteenth in the HBAI series, uses household disposable incomes,

adjusted for household size and composition, as a proxy for material

living standards. It principally gives information on the income

distribution in Great Britain from the financial years 1994/5 to

2000/01 using cross-sectional data from the DWP Family Resources

Survey (FRS). The report also draws upon data from the British

Household Panel Survey (BHPS), run by the University of Essex, which

unlike the Family Resources Survey, tracks the same individuals over

time to give a picture of income mobility. The latest BHPS data

available relates to 1999, as was published in the last HBAI report.

Data for 2000 will become available later in the year and results

will be published by DWP separately.

2. In order 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 in a process

known as equivalisation. This adjustment reflects the common sense

notion 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. A key assumption made in HBAI is that all

individuals in the household benefit equally from the combined

(equivalised) income of the household.

3. HBAI employs two measures of (net equivalised household) income:

Before Housing Costs (BHC) and After Housing Costs (AHC). Each

measure has imperfections as a guide to differences in, and changes

in, living standards, but the two are complementary. Housing costs

are made up of: rent (gross of housing benefit); water rates and

community water charges; mortgage interest payments (net of tax

relief); structural insurance premiums (for owner occupiers); and

ground rent and services charges.

4. The income definition used in the main analysis in HBAI, derived

from the Family Resources Survey (FRS) is as follows: net earnings;

profit or loss from self-employment after income tax and NI; all

social security benefits and tax credits, including Social Fund

grants; occupational and private pension income; investment income;

maintenance payments; top-up loans and parental contributions for

students, educational grants and payments; the cash value of certain

forms of income in kind such as luncheon vouchers, free meals/food

from employers, free coal and coke and free milk (where data

available). HBAI income is net of: income tax payments; NI

contributions; contributions to occupational and personal pension

schemes; council tax; maintenance and child support payments made;

and parental contributions to students living away from home.

5. Information from the DWP survey, the Family Resources Survey, was

introduced into the HBAI series after a review of methodology in

1996. The Family Resources Survey does not collect information on

individuals living in institutions, e.g. nursing homes, barracks or

jails; and homeless people living rough or in bed and breakfast

accommodation. Consequently HBAI does not cover these individuals.

Survey data are grossed to national totals and an adjustment is made

using the Inland Revenue's Survey of Personal Incomes (SPI) to ensure

very high income cases are correctly represented in HBAI.

6. HBAI is the only official statistical series that allows

consistent comparisons of disposable income over time, for different

parts of the income distribution. The income measures used have

been up-rated using the information derived from the Retail Prices

Index (RPI) to enable one year's data to be compared with another.

This edition focuses on results that cover the period since 1994/5.

Some results are presented from the Family Expenditure Survey which

look at the period between 1979 and the mid 1990s. Following a

consultation exercise with outside academics and other Government

departments, results from the two survey sources are presented

together, using agreed methodologies to provide a longer time series.

7. In previous years, analysis comparing household expenditure

levels using the Family Expenditure Survey (a survey run for the

Office for National Statistics which captures household expenditure)

indicated that the standard of living of people in the bottom decile

is no worse than that of people in the second decile; and the

expenditure levels of zero or negative income cases place nearly half

of them in the top half of the expenditure distribution. Many of

these latter households were self-employed. Selected results have

been presented excluding the self-employed and main tables are

provided including and excluding the self-employed. Even so, there

remain a number of non-self-employed cases of very low incomes

recording relatively high expenditures. For these reasons, results

for the bottom end of the income distribution should not be

interpreted as relating unambiguously to the bottom end of a

distribution of living standards.

8. The Government's annual report on poverty and social exclusion,

'Opportunity for All', gives details of policies and indicators

related to poverty and social exclusion. These include indicators

based on percentages of individuals below income thresholds. One of

these indicators, the incidence of relative low income for children,

is also a Sustainable Development Indicator.

9. As part of the National Statistics Quality Review of Income

Statistics, the Department for Work and Pensions (DWP) has launched a

review of the Households Below Average Income (HBAI) and Pensioners'

Incomes (PI) statistical reports. The purpose of the review is to

establish whether the HBAI and PI series continue tomeet the needs

of their users and, where they do not, how best to meet them. It will

consider the definitions and methodology used and the timeliness and

accessibility of them. Recommendations and conclusions arising from

these issues will be published in a report.

  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.