Poverty and Income Inequality in Scotland 2013/14

Chapter 3: Household characteristics and income distribution

3.1 Household composition

Key points:

• Lone parents saw the largest decrease in relative poverty BHC, decreasing by 12 percentage points to 16 per cent. As a result, single people, both pensioners and working age adults, now have a higher risk of relative poverty BHC than lone parents.
• The bottom four deciles all saw an increase in the percentage of households where all adults were in full-time employment and a decrease in households with adults in part-time employment only.
• The bottom decile saw the largest decrease in the percentage in part-time employment, from 18 per cent to 7 per cent. This was accompanied by an increase in those in full-time employment but also by those in households with no adults in employment.
• 62 per cent of those in the bottom decile are in households with no adults in employment, an increase of 3 percentages points on the previous year.
• However, families with someone in employment make up 46 per cent of those in the bottom three deciles, the same as in 2012/13.

Chart 13 – Risk of poverty BHC by household type – 2013/14

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A11).

Commentary:

Lone parents saw the largest decrease in relative poverty BHC, decreasing by 12 percentage points to 16 per cent in 2013/14. As a result, single people, both pensioners and working age adults, now have a higher risk of relative poverty BHC than lone parents.

There were a higher percentage of single adult households (both with and without children) towards the lower end of the income distribution. Single people without dependent children make up 30 per cent of those in the lowest decile, and around 20 per cent or less in the other deciles. Similarly, single parent households are concentrated in the lower income deciles, with more than half in the bottom three income deciles.

However there has been a decrease in the percentage of single parent families in the bottom two deciles with increases in deciles 3 and 4, accompanied by a decrease in the rate of relative poverty BHC for single parent families. This reflects the increase in the number of lone parent families in employment in 2013/14. 16 per cent of people in single parent families were in relative poverty BHC in 2013/14 compared to 28 per cent in 2012/13, a decrease of 12 percentage points. This is a decrease of 50 thousand people.

There were also more pensioners towards the lower end of the income distribution. This is particularly true for single pensioners with 15 per cent in the bottom decile compared to less than 4 per cent in each of the top 3 deciles. Relative poverty BHC for single pensioners increased to 21 per cent, a 1 percentage point increase.

In 2013/14, single pensioners are now the family type most likely to be in relative poverty BHC. In 2012/13, this was single parent families but with the decrease in poverty rates for this group, single pensioner poverty is now higher.

Single working age people without children were also over-represented in the bottom decile with 16 per cent having incomes in the bottom 10 per cent of the distribution. They were more evenly distributed across the rest of the distribution.

Couple households without children were the most likely to be at the top end of the income distribution, while those with children are evenly spread across all deciles. Couple households may be more able to increase household income than single person households. Households without children may be more able to work more hours and have greater flexibility in the labour market, as well as their income not being shared with direct dependants. Households without children are also able to move out of the welfare system quickly, at which point any increases in earnings do not trigger decreases in benefit income.

3.2 Household economic status

Chart 14 below shows the employment characteristics of households in each decile. Each bar represents the percentage of people in that decile living in each of the households types: at least one adult in full-time employment, part-time employment only, no adults in employment (whether due to unemployment, not actively seeking employment, or retirement).

Chart 14 – Economic status of household, composition of each decile in 2013/14

Source: HBAI dataset, DWP. These figures are also presented in Annex 1 (Table A13)

Commentary:

Households where no-one is working either through unemployment, retirement or economic inactivity (those who are neither in work, nor looking for work) were more common towards the bottom of the income distribution. Over half (54 per cent) of people in the bottom three income deciles were in households where no-one is in employment, compared to 11 per cent in the top three deciles.

Having an adult in the household in full-time employment (including those who are self-employed) greatly reduces the risk of poverty. In 2013/14, only 7 per cent of people living in a household with an adult in full-time employment were in relative poverty BHC, unchanged from the previous year. Relative poverty AHC for households with an adult in full-time employment increased to 9 per cent, an increase of 1 percentage point, but still represents a lower risk of poverty for those in full-time employment.

While employment remains the best route out of poverty, employment is no longer a protection against poverty. In 2013/14, 48 per cent of working age adults in relative poverty BHC were living in working households, as were 56 per cent of children. People in households where at least one adult is working full-time (including those who are self-employed) made up 83 per cent of those in the top three deciles. However, households where at least one adult is working full-time still made up 36 per cent of those in the bottom three deciles, an increase of 5 percentage points on the previous year. This may reflect that more people in the bottom 3 deciles are now working full-time and as such, the level of income for the bottom 3 deciles has increased compared to the median.

62 per cent of those in the bottom decile were in households with no adults in employment, an increase of 3 percentage points on the previous year. Unemployment continues to pose the highest risk of poverty with 61 per cent of those living in an unemployed household being in relative poverty BHC in 2013/14.

Households where adults are in part-time employment only are spread across the income distribution, although they were more likely to be in the bottom half of the distribution. The percentage of those in the bottom decile in part-time employment decreased to 7 per cent, a decrease of 11 percentage points, accompanied by a 7 percentage point increase in those working full-time.