Poverty in Scotland: methodology

Household income definition

Gross/Total household income: Total income from all sources (such as earnings, benefits, investments etc.), before deductions of income tax and National Insurance.

Net household income: Gross / total income after deductions for income tax and National Insurance contributions.

Net disposable income before housing costs: Net household income (as above) but after deductions for council tax, pension contributions and maintenance payments.

Net disposable income after housing costs: Net disposable income before housing costs (as above) but after deductions for housing costs - i.e. rent / mortgage interest payments, structural insurance premiums, water charges, ground rent and service charges.

Equivalised net disposable household income: Equivalised income is household income which is adjusted by using an equivalence scale to take into account the size and composition of the household.

Absolute poverty: 60% of the UK equivalised net disposable household income (BHC and AHC) median in a base year, which has been adjusted to remove the effects of inflation. This measure shows whether those in the lowest income households are seeing their incomes rise in real terms.

Relative poverty: 60% of the UK equivalised net disposable household income (BHC and AHC) 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.

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 of all households in a population, divided by the number of households. In some situations it can be more appropriate to use the mean rather than the median.

Quintiles: Income quintile points are income values which divide the population when ranked by income into five equal-sized groups. Each fifth of the population sits within one of the five quintiles.

Gini coefficient: A widely-used summary measure of income inequality. It can range between zero and one hundred, where a value of zero would indicate total equality, with each household having an equal share of income, while higher values indicate greater inequality. A value of one hundred would mean total inequality.