Relative poverty across Scottish Local Authorities

Methodology

The Scottish Household Survey is a face-to-face household survey which contains questions about income as well as a variety of other topics. It has a sample size of around 30,000 households per two-year sweep which is sufficient to report at an LA level biennially. It is therefore a useful source for researchers interested in carrying out local authority level analysis and indeed, for many topics it is used for this purpose.

Until now however, the SHS has been of limited use for the study of income and poverty across Scotland. This is because there is a key limitation in the SHS income data from the point of view of poverty analysts: Detailed income information is only recorded for the Head of household and his or her spouse. This means that for larger households which contain other adults - those not in a relationship with the head of household - the survey under-reports complete household income. This is a problem because it means that some households will appear to have lower incomes than they actually do so that when poverty figures are calculated the wrong households will appear to be in poverty.

In 2008 Ipsos Mori carried out a feasibility study for the Scottish Government looking into this issue (the final report is available on the Scottish Government website at the following link: http://www.scotland.gov.uk/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/income-imputation-study6 ). This project recommended a process for imputing income values for these other adults using data from the Family Resources Survey - a UK wide survey which collects detailed income data about households. This is the survey used to produce the official poverty estimates for Scotland and the UK, however it does not have a Scottish sample size sufficient to produce LA-level estimates. The process recommended by Mori has been followed in the production of these figures. Further detail about the method is available at the following link ( http://www.scotland.gov.uk/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/income-imputation-study6), however it is described below briefly.

1. Identified variables recorded for FRS and SHS other adults.

The process began by examining the FRS and SHS and identifying variables which were available for adults other than the highest income householder or his/her partner (referred to as other adults) on both datasets and which were reasonable determinants of income. Because relatively few variables are recorded for SHSother adults these were economic status, age, gender, tenure, relationship to household head and a few others.

2. Regressions on FRS to determine which variables were best determinants of income

Using the FRS, where income is available for these other adults, the relationship between these variables (identified from the SHS) and income was examined. A regression model approach was used to determine which of these variables were the best determinants of income. Economic status was by far the most useful with the other variables adding little to the model.

3. Hierarchical hot-deck imputation based on these variables

A hierarchical hot-deck imputation was then carried out using these variables which treated the FRSother adult incomes as "donors" and the SHS other adults as "recipients". An example of how this process worked is that for an SHSother adult working full time, aged 20 - 29, in rented accommodation and who was unrelated to the head of household, the imputation programme would randomly select the income from an other adult matching these criteria from the FRS dataset and allocate it to the SHS adult. For further detail on this process see the Mori report ( http://www.scotland.gov.uk/Topics/Statistics/Browse/Social-Welfare/IncomePoverty/income-imputation-study6 ) and the ONS project report on the income and poverty statistics website.

4. Output dataset with complete households income

The final product of the imputation process is an SHS dataset with "complete" household income for all households. Relative poverty figures are then calculated from this dataset in the similar way to those produced from the FRS.

• The household incomes are equivalised. This is an adjustment made to household income to enable meaningful comparisons to be made between households of different sizes. It is based on the notion that larger households require a larger income than smaller households to achieve a comparable standard of living. The incomes for larger households are reduced and the incomes for households of 1 person are increased. For further information about equivalisation see box 2 "What is equivalised income?" earlier in the report.
• The median equivalised household income is then calculated and sixty percent of this is defined as the relative poverty threshold.

5. Estimates of variability

To produce the confidence intervals which are used in the report estimates of the amount of uncertainty around the figures were produced. These took into account the variability in the SHS survey data and that produced by the imputation process (the imputation process described above contains a random element and so increases the variability around the estimates). For more detail of this see the ONS project report.