period 1994/5-2000/01 is published today. This National Statistics
First Release contains a digest of key results taken from this
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
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
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
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:
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.