Poverty and Income Inequality in Scotland 2014-17

Median household income continues to increase slowly since last recession

Ch1. Median weekly household income

In 2014-17, median household income before housing costs was £485 per week, compared to £475 in 2013-16. Median income has increased steadily since the last recession and has reached its highest level since reporting began.

Median income after housing costs has followed the same trend to median income before household costs. Median income after housing costs was £432 per week in 2014-17, at its highest level since reporting began.

Median incomes are rising for all age groups: children, working-age adults and pensioners.

All incomes are quoted in 2016/17 prices.

Median weekly household income for children, working age adults and pensioners

Ch2. Before housing costs

Ch3. After housing costs

Household income increased more for higher incomes

Ch4. Weekly household income before housing costs for each decile point

This chart shows how weekly equivalised incomes before housing costs have changed from 2010-13 to 2014-17 across the different income decile points. Generally, the bottom deciles saw smaller increases compared to the top deciles, both in absolute as well as relative terms.

After housing costs data is available in the associated tables.

Deciles (or decile points) are the income values which divide the Scottish 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 percent of the income distribution.

Ch5. Distribution of weekly household income with income decile points, medians and relative poverty threshold

This chart shows the distribution of weekly income before housing costs across Scotland in 2014-17 with relative poverty threshold (£291), Scottish and UK median incomes (£485 and £486), and income decile groups.

The relative poverty threshold is based on the UK median equivalised household income.

Many people have household incomes near the poverty threshold. This means that small movements in the overall distribution can sometimes lead to sizeable movements in poverty rates.

Decile groups are groups of the population defined by the decile points. The lowest decile group is the ten percent 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.

Household income for different household types

Distribution of weekly household income with income decile points

Most of the income figures in this publication are based on equivalised income . This means that household income is adjusted to reflect different household sizes and compositions. There are different poverty thresholds for different household sizes. The table below presents some commonly used income thresholds, before equivalisation and after tax and transfers, for households of different sizes.

The incomes presented elsewhere in this report use the value for “Couple with no children” as the standard, and all other household types are adjusted to reflect their different household composition. After housing costs data is available in the associated tables.

T1. Income thresholds for different household types before housing costs 2014-17

	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)	325	17,000	486	25,300	583	30,400	743	38,700
Scottish median income (before housing costs)	325	16,900	485	25,300	582	30,300	742	38,700
60% of UK median income - relative poverty threshold	195	10,200	291	15,200	350	18,200	446	23,200
60% of inflation adjusted 2010/11 UK median income (before housing costs) - absolute poverty threshold	186	9,700	278	14,500	334	17,400	426	22,200
Scottish 1st income decile	166	8,600	247	12,900	297	15,500	378	19,700
Scottish 2nd income decile	210	10,900	313	16,300	376	19,600	479	25,000
Scottish 3rd income decile	246	12,800	367	19,200	441	23,000	562	29,300
Scottish 4th income decile	284	14,800	424	22,100	509	26,500	649	33,800
Scottish 5th income decile	325	16,900	485	25,300	582	30,300	742	38,700
Scottish 6th income decile	373	19,500	557	29,100	669	34,900	852	44,500
Scottish 7th income decile	428	22,300	638	33,300	766	39,900	976	50,900
Scottish 8th income decile	500	26,100	747	38,900	896	46,700	1,143	59,600
Scottish 9th income decile	619	32,300	923	48,100	1,108	57,800	1,413	73,700

Note: to split the population into ten decile groups only nine decile points are needed

The majority of household income comes from earnings or social security payments

Income sources as a percentage of gross income by decile

The chart below shows the different sources of gross income by decile, ranking the population by income and dividing into ten equal-sized groups. Income components are all considered before tax, this is therefore a different definition of household income from that used elsewhere in this report.

Higher income households receive a large proportion of income from earnings, and lower income households more of their income from social security payments.

Earnings account for around 40% of gross income for those in the first two deciles compared to over 80% for those in the top three deciles.

The proportion of household income from earnings exceeds that from social security payments for around 80% of the population (those above the 2 ^nd percentile point).

Ch6. Income sources for all individuals by decile 2014-17

Income sources look different for different household types. Here, we look at households with children, households that contain working-age adults only, and households that contain pensioners only.

On average, working-age adults receive the largest proportion of their income income from earnings, and pensioners the smallest.

Household income for children is made up of a higher proportion of social security payments compared to working-age adults’ income.

Ch7. Income sources by age group 2014-17

The majority of household income comes from earnings or social security payments

Ch8. Income sources for households with children 2014-17

Households with children receive the majority of their income from earnings. Social security payments generally make up a larger proportion of income for households with children compared to households with working-age adults only. This is because households with children are eligible for different social security payments.

Ch9. Income sources for households containing working-age adults only 2014-17

Households containing only working-age adults receive an even larger part of their income through earnings compared to households with children. On average, people in working-age adult households receive a a larger proportion of their household income from earnings than all other income sources combined.

Some working-age adults receive occupational pensions. The data suggests that these are early retirees.

Ch10. Income sources for households containing pensioners only 2014-17

Overall, pensioner households receive almost 80% of their income through occupational pensions and social security payments (including state pension).

Generally, pensioners in higher income quintiles receive a larger share of their income as an occupational pension.

In the highest income quintile, 15% of pensioners’ income comes from earnings.

The charts on this page divide each population into five income groups (quintiles) rather than ten (deciles) as shown on the previous page. This is to ensure that the estimates shown here are based on large enough samples in each quintile group to be reliable.

Income inequality rising after a decrease following the end of the recession

The two inequality measures shown below generally follow the same trend. However, rounding leads to small differences in the shape of each time series.

Ch11. Palma measure of inequality

This chart shows the ratio of total income received by the top ten percent of the population divided by the total income of the bottom forty percent of the population (expressed as a percentage) over time. This measure of how equally income is distributed across the population is known as the “Palma ratio” or “S90/S40 ratio”. Palma is used internationally to estimate the extent of inequality between those at the top of the income distribution and those at the bottom and is currently used in Scotland to monitor progress towards the Scottish Government’s Solidarity Purpose Target.

The top ten percent of the population had 24% more income in 2014-17 than the bottom forty percent combined. Comparing this to the two previous three-year periods might suggest an increasing trend of income inequality.

Ch12. Inequality of household income as measured by the Gini coefficient

The Gini coefficient is a measure of how equally income is distributed across the population. It takes a value between 0 and 100, with 0 representing perfect equality where every person has the same income. The larger the Gini coefficient, the more people towards the top of the income distribution have a greater share of overall income with a value of 100 representing the case where one individual has all the income. In practice, the proportion of overall income going to each individual increases gradually across the income distribution.

In 2014-17, the Gini coefficient for Scotland was 32, unchanged from 2013-16, but higher than in the previous three-year periods.