United Kingdom
Persistent low income
Key points
- 15% of the population - around 9 million people - experience low income at least two years in three.
- The proportions of people experiencing low income in at least two years out of three has fallen in recent years.
- Most households (85%) who spend at least some time on low income move in and out of low income, with only a minority (15%) persistently on low income. One implication of this is that around a third of the population spend at least some time on low income.
Graph 1: Over time
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Graph 2: Number of transitions
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Why this indicator was originally chosen
The duration of time spent on a very low income can have a considerable effect on the deprivation of a person or family. Some people move in and out of low income whilst others remain persistently in low income.
This indicator considers individuals' experience of low income over three-year periods and shows how many are on low income in all three years, or in any two. As well as those continuously on low income, this indicator begins to measure the extent of those intermittently on low income, experiencing what is usually referred to as 'income churning' - repeated movements into and out of low income.
Since it is based not on monitoring people continuously but only once a year, the indicator under-estimates the numbers who are 'churning'. It is also important to note that, while many individuals do alter their position in the income distribution from year to year, most changes are small. Hills J, Income and Wealth: the Latest evidence, Joseph Rowntree Foundation, 1998. Income 'churning' is generally not about moving from low income in one period to rather high income in the next, but of income changes of perhaps just a few pounds a week. Churning has a number of causes. The most common reasons for changes in household income are rises or losses of earnings by household members, though this is not always the head of household, but also spouses and even children. Changes in receipt of state benefits also account for a part of the picture. Longer term moves into or out of low income are often caused by changes in the composition of a household, for example children leaving home or being born. For women and children, marital separation and divorce often cause considerable falls in income, whilst for husbands real income tends to change much less.
Definitions and data sources
The first graph shows the number of people on low income in at least two years out of three. The bars are split to show those on low income in all three years, those in two consecutive years only, and those in the first and the third year only.
The second graph looks at transitions in and out of low income. For the latest four-year period, it classifies individuals who have experienced at least one year of low income in that period according to the number of times they switch into or out of low income.
Income is net disposable income before deducting housing costs, equivalised (adjusted) for the size of the household. Persons are considered to have low income in a given year if their household income in that year was less than 60% of the median before deducting housing costs.
The data source for both graphs is the British Household Panel Survey (BHPS) and relates to Great Britain.
Overall adequacy of the indicator: limited. BHPS is a much smaller survey than the Family Resources Survey and suffers from a loss of members over time. The data is also not directly comparable with the low income data in other indicators.
External links
See the 2006 Joseph Rowntree report entitled The persistence of poverty across generations.
Relevant 2007 Public Service Agreements
Overall aim: Halve the number of children in poverty by 2010-11, on the way to eradicating child poverty by 2020.
Lead department
HM Treasury.
Official national targets
Reduce by a half the number of children living in relative low-income by 2010/11.
Other indicators of progress
Number of children in absolute low-income households.
Number of children in relative low-income households and in material deprivation.
Previous 2004 targets
Halve the number of children in relative low-income households between 1998/99 and 2010/11, on the way to eradicating child poverty by 2020, including:
- reducing the proportion of children in workless households by 5% between spring 2005 and spring 2008; and
- increasing the proportion of parents with care on Income Support and income-based Jobseeker's Allowance who receive maintenance for their children by 65% by March 2008.
By 2008, be paying Pension Credit to at least 3.2 million pensioner households. While maintaining a focus on the most disadvantaged by ensuring that at least 2.2 million of these households are in receipt of the Guarantee Credit.
Relevant government policies
- National minimum wage
- Tax credits and their predecessors
- Increases in child benefit
- Pension credit and its predecessors
- Second state pension
The numbers
Graph 1
| Years | All 3 years | 2 consecutive years | 2 non-consecutive years |
|---|---|---|---|
| 1992 - 1994 | 8% | 7% | 3% |
| 1993 - 1995 | 9% | 7% | 2% |
| 1994 - 1996 | 9% | 7% | 2% |
| 1995 - 1997 | 9% | 6% | 2% |
| 1996 - 1998 | 9% | 6% | 2% |
| 1997 - 1999 | 10% | 6% | 2% |
| 1998 - 2000 | 10% | 6% | 2% |
| 1999 - 2001 | 10% | 6% | 2% |
| 2000 - 2002 | 9% | 6% | 2% |
| 2001 - 2003 | 8% | 6% | 3% |
| 2002 - 2004 | 6% | 7% | 2% |
| 2003 - 2005 | 7% | 6% | 2% |
Graph 2
| Number of transitions in and out of low income over a four year period | Percent |
|---|---|
| Continual low income (no changes) | 15% |
| One transition | 46% |
| Two transitions | 32% |
| Three transitions | 7% |
| Total | 100% |