Growing up in Scotland: the circumstances of persistently poor children

Appendix 1: Technical terms and procedures

Income equivalisation

There are a number of equivalisation methods and the one used in this report is the modified OECD equivalence scale. The modified OECD scale is most often presented with a single adult as the reference point but the HBAI series follows the UK convention of taking an adult couple household as the reference point and we do the same here. To equivalise income using banded income, we apply the equivalisation calculation to the mid-point of each band. That is, we assign participants the income that falls at the mid-point of the band that they have indicated their income falls into; and equivalise on the basis of that mid-point. Clearly there is no mid-point of the top unbounded category (£56,000 and above), so here we used a value of £60,000.

In HBAI two separate versions of the modified OECD scales are used, one for income Before Housing Costs ( BHC) and one for income After Housing Costs ( AHC). The BHC scale is used in this study and the values of the scales are shown in the table below.

The construction of household equivalence values from these scales is straightforward. An adult couple is the reference point, with an equivalence value of 1.0. Each child aged under 14 is given a weight of 0.2 and each child aged 14 years and over is given a weight of 0.33 (as is any additional adult). For example, the equivalence value for a family containing two parents, a GUS target child and a 14-year-old child would be 1.53 from the sum of the scale values:

1.0 + 0.2 + 0.33 = 1.53

This implies that this family needs 53 per cent more income than a childless couple to have the same standard of living. For further information on the equivalisation process, see DWP (2009b).

Income imputation procedure

The longitudinal poverty status is imputed for households with missing income information in one of the four sweeps. First, the GUS children which can be assigned to a longitudinal poverty category based solely on the three sweeps for which we have income information are categorised. If a GUS family was income poor in all three sweeps their imputed longitudinal poverty status is 'persistently poor'. Families who had missing income information on one sweep, were income poor in one sweep and not poor in two sweeps are assigned the 'temporary poor' longitudinal poverty status.

Secondly, the families who were not poor in the three sweeps for which we have income information are considered. These families could therefore have a longitudinal poverty status of 'not poor' or 'temporary poor' depending on their income in the income non-response sweep. Here we use their household work status to assign GUS children to the appropriate longitudinal poverty category. If the family work status category had remained the same in all four sweeps (or at least 3 consecutive sweeps, one of which was the sweep for which we are missing income information), or if the parent(s) moved from being out of work to working 16 or more hours, the families are assigned the 'not poor' category. The longitudinal poverty status is set to 'temporary poor' for families who had been in work in the sweeps for which we have income information but the parent, or both parents in the case of couple families, were either not working or working less than 16 hours in the sweep with missing income information.

Lastly, the longitudinal poverty status is imputed for families missing income information for one sweep, poor in two sweeps and not poor in one sweep. These families could therefore be either temporary poor or persistently poor. The longitudinal poverty status is set to 'persistently poor' for families with the same family work type status in three consecutive sweeps in which they were income poor in two sweeps and had missing income information in the third. Likewise, the family is considered persistently poor if they had the same family work type status in any three sweeps, they were poor in two sweeps and had missing income on the third, and were not poor in the fourth sweep and had a different family work status in that sweep. Finally, the longitudinal poverty status is set to 'temporary poor' for families if they had one family work type in two sweeps in which they were poor and another family work type in the other two sweeps in one of which they were not poor and in the other they had missing income information.

Families for whom the longitudinal poverty status can not be imputed based on the available information are excluded from the analysis. Examples include families with missing information on the family work type variable for the sweep with no income information.

Defining the Average Work Intensity measure ( AWI)

Given the link between work and poverty, we create a measure of Average Work Intensity ( AWI). This is based on the average use of household workforce, i.e. the ratio of people in employment to the total number of adults available to work. For simplicity, the total number of adults in the households has been defined as 1 adult in the case of a single-parent family and as 2 adults in the case of a couple family.

For each household, we calculated a Work Ratio ( WR) at each sweep of the survey, by calculating the proportion of adults in employment relative to the total number of adults in the household. We also distinguished between part-time (<16 hrs a week) and full-time (16+ hrs a week) employment, by giving the part-time work a weight equalling half of the full-time work. So, for example:

WR=100%:

• if both adults in a couple family worked full-time;
• if the adult in a single-parent family worked full-time;

WR=75%

• if one adult in a couple family worked full-time and the other worked part-time;

WR=50%:

• if one adult in a couple family worked full-time and the other did not work;
• if both adults in a couple family worked part-time;
• if the adult in a single-parent family worked part-time; etc.

These values were then aggregated and averaged over the four-year period to represent a typical use of the household workforce, i.e. the Average Work Intensity ( AWI). For example,

AWI=100%:

• if both adults in a couple family worked full time at all four sweeps of the survey;
• if the adult in a single-parent family worked full time at all four sweeps of the survey

AWI=50%

• if one adult in a couple family worked full-time at all four sweeps of the survey and the other did not work at any of the four sweeps;
• if both adults in a couple family worked full time at two of the four sweeps of the survey and they did not work at the remaining two sweeps;
• if the adult in a single-parent family worked part-time at all four sweeps of the survey;
• if the adult in a single-parent family worked full-time at two of the four sweeps of the survey and did not work at the remaining two sweeps, etc.

Understanding odds ratios

To understand an odds ratio we first need to describe the meaning of odds. The definition of odds is similar but significantly different to that of probability. This is best explained in the form of an example. If 200 individuals out of a population of 1000 experienced persistent poverty, the probability (p) of experiencing persistent poverty is 200/1000, thus p=0.2. The probability of not experiencing persistent poverty is therefore 1-p = 0.8. The odds of experiencing persistent poverty are calculated as the quotient of these two mutually exclusive events. So, the odds in favour of experiencing persistent poverty to not experiencing persistent poverty, is therefore 0.2/0.8=0.25. Suppose that 150 out of 300 people living in social rented housing experience persistent poverty compared to 50 out of 150 who live in owner occupied housing. The odds of a person living in social rented housing of experiencing persistent poverty are 0.5/0.5=1.0. The odds of a person living in owner occupied housing of experiencing persistent poverty is 0.3333/0.6666=0.5. The odds ratio of experiencing persistent poverty is the ratio of these odds, 1.0/0.5=2.0. Thus the odds of experiencing persistent poverty are twice as high among people who live in social rented housing (compared to people who live in owner occupied housing - the 'reference category').