Poverty and Income Inequality in Scotland 2010/11

Chapter 3: Income Inequality and the distribution of income

The tables and charts in this section provide information about income inequality, the distribution of income and the types of families which are most common at the top and bottom of the income distribution.

Deciles / decile points:

Deciles (or decile points) are the income values which divide the Scotland population, when ranked by income, into ten equal-sized groups. Therefore nine decile points are needed in order to form the ten groups. Decile is also often used as a shorthand term for decile group; for example 'the bottom decile' is used to describe the bottom ten per cent of the income distribution.

Decile groups:

These are groups of the population defined by the decile points. The lowest decile group is the ten per cent of the population with the lowest incomes. The second decile group contains individuals with incomes above the lowest decile point but below the second decile point.

The following chart and table present figures that relate to the Scottish Government's Solidarity Purpose Target which is "to increase overall income and the proportion of income earned by the three lowest income deciles as a group by 2017".

Chart 6 shows the proportion of total income received by the three lowest income deciles (the thirty per cent of the population with the lowest incomes), from 1998/99 to 2010/11. It also shows the proportion of total income received by the three highest income deciles. This is a measure of how equally income is distributed across the population.

Chart 6. Percentage of total equivalised income going to the bottom and three income deciles, 1998-99 - 2010/11

Source: HBAI dataset, DWP. Note: The sum of all parts may not equal the total due to rounding.

Main points:

• In 2010/11 the proportion of income received by those in the bottom 3 deciles increased slightly to 14%.
• Between 2009/10 and 2010/11 the proportion of income received by those in the top three income deciles fell from 54 per cent to 51 per cent
• The factors outlined in Section 2.1 above explain possible drivers behind this reduction in income inequality observed in 2010/11.
• Over the longer term it can be seen that there has been very little change in income inequality since 1998/99 with the proportion of income received by the bottom 3 deciles remaining at between 13 and 14 per cent.

3.1 Income thresholds

Most of the income figures in this publication are based on equivalised income. One consequence of the equivalisation process is that there are different poverty thresholds for households of different sizes and compositions. To help readers understand the figures in this publication, the following table presents some commonly used income thresholds, before equivalisation, for families of different sizes.

Table 1 - Income thresholds for different family types (income after tax and BHC)

	Single person with no children		Couple with no children		Single person with children aged 5 and 14		Couple with children aged 5 and 14
	weekly	annual	weekly	annual	weekly	annual	weekly	annual
UK median income (before housing costs)	281	14,600	419	21,800	502	26,200	641	33,400
Scottish median income (before housing costs)	279	14,500	416	21,700	499	26,000	636	33,200
60% of UK median income (before housing costs) - relative poverty threshold	168	8,800	251	13,100	301	15,700	384	20,000
60% of inflation adjusted 1998/99 GB median income (before housing costs) - absolute poverty threshold	147	7,700	220	11,500	264	13,800	337	17,600
Scottish 1st income decile	149	7,800	223	11,600	267	13,900	341	17,800
Scottish 2nd income decile	185	9,700	277	14,400	332	17,300	423	22,100
Scottish 3rd income decile	217	11,300	323	16,900	388	20,200	495	25,800
Scottish 4th income decile	248	12,900	370	19,300	443	23,100	565	29,500
Scottish 5th income decile	279	14,500	416	21,700	499	26,000	636	33,200
Scottish 6th income decile	319	16,600	476	24,800	571	29,800	728	38,000
Scottish 7th income decile	364	19,000	544	28,300	652	34,000	832	43,400
Scottish 8th income decile	425	22,100	634	33,000	760	39,700	969	50,600
Scottish 9th income decile	528	27,500	788	41,100	945	49,300	1205	62,800

 

Source: HBAI dataset, DWP. Note: To create ten decile groups only nine decile points are needed to split the population.

Main points:

• The relative poverty (BHC) threshold in 2010/11 is equivalent to £168 per week for a single person with no children; £251 for a couple with no children; or £384 per week for a couple with one young and one older child.
• A couple with no children with a combined income of over £33,000 (after tax) would be in the highest income 20 per cent of the population.

3.2 Trends in income distributions

Chart 7 shows how the median equivalised household income in Scotland has changed from 1998/99 to 2010/11.

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A6).

Main points:

• There has been a gradual increase in median equivalised weekly household income (BHC) in Scotland from £360 in 1998/99 to £439 in 2009/10 followed by a drop to £416 in 2010/11. All incomes are quoted in 2010/11 prices.
• The pattern is similar for median equivalised weekly household income (AHC) in Scotland, which was £304 in 1998/99 to £393 in 2009/10, followed by a drop to £370 in 2010/11.

Chart 8 shows how the weekly equivalised incomes have changed from 2006/07 to 2010/11 across the different income decile points.

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A7).

Main points:

• Between 2006/07 and 2009/10, equivalised weekly household income in Scotland has been broadly increasing in real terms across all the income decile points.
• In 2010/11, there was a drop in equivalised weekly household incomes in all but the bottom two income decile points. This is linked to the drop in average earnings.
• Households in the bottom two deciles receive a greater proportion of their income from benefits and a smaller proportion from earnings. Since benefits are uprated annually by inflation they have not seen the same drop in income as those households who are dependent on earnings.

Chart 9 below shows how the distribution of income across Scotland changed between 1998/99 and 2010/11. The shaded area shows the shape of the 2010/11 income distribution, the continuous orange line for 2009/10 and the black line for 1998/99. The 1998/99 and 2009/10 figures are adjusted for inflation and are in 2010/11 prices.

Chart 9: Equivalised weekly household income distribution (before housing costs): Scotland - 1998/99, 2009/10 and 2010/11

Source: HBAI dataset, DWP.

Main points:

• The median equivalised household income fell in real terms from £439 per week to £416 between 2009/10 and 2010/11.
• The relative poverty threshold is based on the median and therefore also fell. (The UK median (£419) is used to calculate the poverty threshold, which is £251 per week for a couple with no children).

Chart 10 below shows the composition of family types by equivalised income decile.

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A8).

Main points:

• There are higher proportions of single people with dependent children towards the lower end of the income distribution.
• Single people without dependent children make up almost 30 per cent of those in the lowest decile, and around 20 per cent in the other deciles.
• There are also more pensioners towards the lower end of the income distribution - the second, third and fifth income deciles contain the highest proportions.
• There are more couples without children towards the top end of the income distribution.

Chart 11 below shows the composition of the economic status of families by equivalised income decile.

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A9).

Notes: 1. The 'workless, other inactive category' would include, for example, non-working single parents, or those who cannot work due to long-term sickness or disability.

Main points:

• Families where no-one is working either through unemployment, retirement or economic inactivity (those who are neither in work, nor looking for work) are more common towards the bottom of the income distribution. 55 per cent of people in the bottom three income deciles are in families of these types compared to 10 per cent in the top three deciles.
• People in families where at least one adult is working full-time (including those who are self-employed) make up 85 per cent of those in the top three deciles. Such families make up 33 per cent of those in the bottom three deciles.