Child poverty strategy: annual report, 2016

3. Pockets: Maximising Household Resources Of Families On Low Income

This chapter presents data for the indicators associated with the four intermediate outcomes highlighted below:

Figure 3.1: Logic model for 'Pockets' outcome

Table 3.1 summarises how the baseline figures published in the 2014 annual report compare to the most recent figures for each indicator (usually from 2015 or 2014 - more detail on the dates and sources of data for each indicator are provided in the Annex). The assessment of performance is based on the following ^[2] :

⬆ performance improving - a statistically significant change in the desired direction
⬇ performance worsening - a statistically significant change in the opposite direction
⬌ performance maintaining - no statistically significant change

Table 3.1: Summary of performance against the 'Pockets' indicators

Indicator	2014 report baseline	Most recent
Percentage of working people earning less than the Living Wage	18.6%	20.1%	⬌
Average private nursery costs in real terms	£100.07	£104.06	⬌
Percentage of poorest households (with children) that are not managing well financially	35%	25%	⬆
Percentage of poorest households (with children) where someone has a bank account	90%	95%	⬌
Employment rate of adults with dependent children	79.3%	81.8%	⬆
Underemployment rate of adults with dependent children	8.4%	6.8%	⬆
Earnings that go to the top 10% of earners, divided by the earnings of the bottom 10%	16.4	15.4	⬌
Percentage of adults with dependent children with low or no qualifications	9.2%	8.1%	⬆

The rest of this chapter considers each of the indicators in turn, looking at the longer-term trends and any additional data that helps put these into context. The baseline and most recent data points are highlighted in the charts.

Intermediate outcome 1: Maximised financial entitlements of families on low incomes

Indicator 1.1 Percentage of working people (aged 18+) earning less than the Living Wage

An important element of incomes is earnings. This indicator was chosen in recognition of the crucial role of good quality, paid employment as a route out of poverty, and reflects the Scottish Government's commitment to promoting the Living Wage.

In 2016, 20.1% of employees in Scotland earned less than the Living Wage, compared to the baseline of 18.6% in 2013 ^[3]

It should be noted that this indicator draws on hourly wages data, and low pay and poverty may persist for those earning the Living Wage or above, who work a low number of hours. This indicator should therefore be read in conjunction with the underemployment indicator ( Indicator 4.2).

⬌ Performance maintaining

Intermediate outcome 2: Reduced household spend of families on low incomes

Indicator 2.1 Average cost of 25 hours per week private nursery care for children aged two or over

Childcare is one of the most significant costs for parents that is not shared by other household types. High childcare costs are one of the key issues affecting parents on low incomes in particular, and form a major barrier to taking up employment or increasing hours worked for many parents.

In 2015 the average weekly cost of 25 hours private nursery care for children over two was £104.06, compared to an average cost of £100.07 in the baseline year (2013). These figures are adjusted to control for inflation over the time period ^[4] . Childcare costs rose substantially between 2007 and 2010, with a smaller overall increase between 2010 and 2015.

⬌ Performance maintaining

Intermediate outcome 3: Families on low incomes are managing finances appropriately and are accessing all financial entitlements

Indicator 3.1 Percentage of households (with children) in bottom three income deciles who are not managing well financially

This indicator measures the perceptions of those on low incomes about their ability to manage financially. In 2015, 25% of households (with children) in the bottom three income deciles (i.e. the households with the lowest 30% of incomes) reported not managing well financially, compared to 35% in the baseline year (2012). The percentage has fluctuated since 2007. It was highest in 2012 and has fallen since to its lowest in the most recent year.

In comparison, the proportion of households (with children) in the other seven income deciles who report not managing well financially has remained relatively stable since 2007, falling slightly in 2015.

⬆ Performance improving

Indicator 3.2 Percentage of households with children in bottom three income deciles where someone has a bank account

This indicator measures financial inclusion and access to basic financial services. Households without a bank account are unable to take advantage of features like direct debits, which can result in lower outgoings.

In 2015, 95% of households (with children) in the bottom three income deciles (i.e. the households with the lowest 30% of incomes) had access to a bank account, compared to 90% in the baseline year (2013). The percentage has increased consistently since 2007, with the exception of a slight drop in 2008.

Among households (with children) in the other seven income deciles, the percentage with access to a bank account remained relatively stable, meaning the gap between the two groups has closed in recent years.

⬌ Performance maintaining

Intermediate outcome 4: Parents are in good quality, sustained employment in line with skills and ambitions

Indicator 4.1 Employment rate of adults with dependent children

The employment rate of parents increased to 81.8% in 2014, compared to 79.3% in the baseline year (2012). Parental employment rates have been fairly stable since 2007.

⬆ Performance improving

Indicator 4.2 Underemployment rate of adults with dependent children

The underemployment rate is defined as the percentage of working people looking to increase their hours either in their current job, an additional job, or a different job. This is important, as a high employment rate may mask a situation where individuals are working but are not in employment that meets their needs.

In 2014, 6.8% of working parents were underemployed, compared to 8.4% in the baseline year (2012). Parental underemployment rose steadily between 2008 and 2011, and has been decreasing again in recent years.

⬆ Performance improving

Indicator 4.3 Earnings that go to the top 10% of earners, divided by the earnings of the bottom 10% (S90/S10)

Earnings inequality, as measured by the earnings that go to the top 10% of earners divided by the earnings of the bottom 10%, is a common measure of inequality, frequently used in international studies.

In 2016, the earnings of the top 10% of earners were 15.4 times the earnings of the bottom 10% of earners, compared to 16.4 times in the baseline year (2013). Earnings inequality rose slightly between 2007 and 2011, and has been decreasing in recent years ^[5] .

The trend of increasing inequality up to 2011 was largely due to an increasing share of earnings going to the top 10% of earners. In recent years, the fall in earnings inequality was largely due to decreases in the share of earnings going to the top 10% of earners.

⬌ Performance maintaining

Indicator 4.4 Percentage of adults with dependent children with low or no qualifications (SCQF level 4 or below)

This indicator measures whether individuals have the required skills to take up good quality employment. In 2014, 8.1% of parents had no or low qualifications, compared to 9.2% in the baseline year (2012). There has been a consistent decreasing trend in the percentage of parents with no or low qualifications between 2007 and 2014.

⬆ Performance improving