poverty and income inequality in edinburgh september 2015
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Poverty and Income Inequality in Edinburgh
September 2015
Summary findings
Scotland– 940,000 individuals living in poverty in 2013/14– Poverty rates remain relatively unchanged in the last year– Some evidence of improvement in incomes, but not felt across all household types
Edinburgh– Poverty rates remain close to the Scottish average– Poverty rates generally follow the Scottish trend over time– Continued evidence of severe local income inequality within the city
Outlook– Low inflation, continued slow employment and earnings growth– Tax and benefit changes reduce income for poor working households– Overall poverty rates likely to remain steady
Defining and measuring poverty
Low income households
“Individuals are said to be in relative low income if they live in a household with an equivalised income below 60% of average (median) income of the year in question.”
Department for Work and Pensions
Couple with no children
Single with no children
Couple with two children
Single with two children
0
100
200
300
400
500
600
700
£386
£259
£591
£464
£232
£155
£355
£278
Median Income Poverty Threshold
Hou
seol
d in
com
e in
Sco
tlan
d 2
013/
14
pric
es (a
fter
hou
sing
cos
ts)
Scottish Government
940,000 people in Scotland live in poverty
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
0%
5%
10%
15%
20%
25%
30%Before housing costs After housing costs
% H
ouse
hold
s on
low
inco
mes 24%
19% 18%
Scottish Government
Changing poverty rates in Scotland
Children Working age adults Pensioners All households0%
5%
10%
15%
20%
25%22% 21%
11%
19%
22%
19%
12%
18%
2012/13 2013/14
% H
ouse
hold
s on
low
inco
mes
(aft
er h
ousin
g co
sts)
Scottish Government
Slow income growth
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
£200
£250
£300
£350
£400
£450
£500
£320
£442
£411
Med
ian
Hou
seho
ld In
com
e, S
cotl
and,
£ p
er w
eek(
AH
C), 2
013/
14 p
rice
s
Median household income rose by 2.2% in 2013/14...
• Improved employment rates• Increase in no. hours worked• Slow wage growth• Increase in personal tax allowances• Slow income growth in all deciles
... incomes remain well below pre-recession levels...• Median incomes remain 6% below
2009/10 level in real terms
Scottish Government
Slow income growth
Median household income rose by 2.2% in 2013/14...
• Improved employment rates• Increase in no. hours worked• Slow wage growth, particularly for
lower deciles• Increase in personal tax allowances• Slow income growth in all deciles..• ...but not all Household types
... incomes remain well below pre-recession levels...• Median incomes remain 6% below
2009/10 level in real terms
Children Working age adults
Pensioners£250
£300
£350
£400
£450
£500
£350
£418£400
£348
£439
£392
2012/13 2013/14
Med
ian
equi
valis
ed w
eekl
y ho
useh
old
inco
me,
by
hous
ehol
d ty
pe, 2
013/
17
pric
es
Scottish Government
Poverty and material deprivation in Scotland
2010/11 2011/12 2012/13 2013/140%
2%
4%
6%
8%
10%
12%
14%
16%
13%
11%12%
14%
% of Children experiencing low income and material deprivation in Scotland
(after housing costs)
2010/11 2011/12 2012/13 2013/140%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
7%
8% 8%
9%
% of Pensioners experiencing material deprivation in Scotland
(after housing costs)
Scottish Government
In work poverty in Scotland
All people Children Working age adults
30%
35%
40%
45%
50%
55%
60%
51%
56% 56%
46%
56%
50%
% of individuals in poverty in households with at least one adult in employment, Scotland, 2013/14
2012/13 2013/14
430,000 individuals experience ‘in work poverty’
Rates falling for working age adults
Rates remain static for households with children
Drivers:• Slow increase in hourly pay• Increase in hours worked• Small shift from self-employed to
employment
Scottish Government
Poverty in Edinburgh – Previous findings
Previous Findings
• Edinburgh is an affluent city, but still records poverty levels similar to the Scottish average– One in five Edinburgh households live on
incomes below the poverty threshold– In some communities over a third of households
live on low incomes– These pockets of poverty in Edinburgh are as
severe as any other Scottish city
• Low income communities co-exist with very affluent communities– Both low and high income communities can be
found in every ward and in every locality
Questions?
• A more up to date picture of Edinburgh’s poverty rate?
• How do trends in Edinburgh compare to the Scotland trend?
• More up to date evidence of income inequality?
Poverty rates in Edinburgh close to Scottish average
% households on low incomes, 2009
% children living in low income households, 2013
% Households in receipt of Housing Benefit, 2015
% Households who find it very difficult to cope on current
income, 2014-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
22%21%
17%
9%
20%
22%
19%
10%
Edinburgh Scotland
Income based proxiesPoverty estimates
Sources: Improvement Service, Child Poverty Action Group, DWP Housing Benefit Caseloads, Experian
Poverty rates in Edinburgh follow Scottish trends
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
0%2%4%6%8%
10%12%14%16%18%20%
Out of work benefits claimant rate2000-2015
Edinburgh Scotland
Feb/1
3
Apr/13
Jun/13
Aug/13
Oct/13
Dec/13
Feb/1
4
Apr/14
Jun/14
Aug/14
Oct/14
Dec/14
Feb/1
59596979899
100101102103
Housing Benefit claimant trendIndex, Jan 2014=100
Scotland Edinburgh
Benefits data understate total population living on low incomes...but do provide a useful tracker for trends in large sub-groups of that populationEdinburgh data generally tracks closely to the Scottish trend
Sources: DWP Benefits claimants, Housing Benefit Caseload Statistics
Poverty rates in Edinburgh follow Scottish trends?
2008 2009 2010 2011 2012 2013 2014£340
£360
£380
£400
£420
£440
£460
Median gross weekly earnings from employment, 2008-14
Edinburgh Scotland
Lowest
earning
Decile
20 25 30 40 50 60 70 75 80 Highest
earning
Decile
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
% change in gross weekly earnings2013 to 2014, by decile
Scotland Edinburgh
Some evidence that recent labour market drivers have been weaker in Edinburgh than in Scotland...Edinburgh earnings growing more slowly than Scotland...Earnings for lowest decile workers falling in Edinburgh, rising in Scotland.
Annual Survey of Hours and Earnings
Significant income inequality across the city
Cors
torp
hine
/Mur
ray.
..
Alm
ond
Inve
rleith
Dru
m B
rae/
Gyl
e
Fort
h
Nor
th W
est
Crai
genti
nny/
Dud
din.
..
Leith
Leith
Wal
k
Port
obel
lo/C
raig
mill
ar
Nor
th E
ast
Mea
dow
s/M
orni
ngsid
e
Sout
hsid
e/N
ewin
gton
City
Cen
tre
Libe
rton
/Gilm
erto
n
Sout
h Ea
st
Colin
ton/
Fairm
ilehe
ad
Foun
tain
brid
ge/C
raig
...
Pent
land
Hill
s
Sigh
thill
/Gor
gie
Sout
h W
est0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
12% 13% 14%18%
30%
18%
25% 25% 26% 28% 26%
11%15%
22%
27%
19%
11% 12%
17%
35%
20%
% o
f Chi
ldre
n in
low
inco
me
hous
ehol
ds, 2
013 North West North East South East South West
Child Poverty Action Group
Communities ranked amongst the poorest in Scotland
Shetland West
Shetland South
Hazlehead/Ashley/Queens Cross
Bridge of Don
Westhill and District
Banchory and Mid Deeside
Lower Deeside
Bearsden North
Monifeith and Sidlaw
Sgire an Rubha
0.00% 2.00% 4.00% 6.00% 8.00% 10.00%12.00%
4.5%
4.5%
5.3%
5.9%
6.1%
6.4%
6.8%
7.2%
7.7%
7.7%
Child Poverty in Scotland, 2013 Ten lowest child poverty wards
Ayr North
East End
Sighthill/Gorgie
Buckhaven, Methil and Wemyss Villages
Canal
Anderston/City
East Centre
Calton
Southside Central
Springburn
0.00% 10.00% 20.00% 30.00% 40.00% 50.00%
35.2%
35.2%
35.3%
36.0%
37.4%
39.2%
39.3%
41.3%
42.3%
43.6%
Child Poverty in Scotland, 2013 Ten highest child poverty wards
Child Poverty Action Group
High levels of income inequality across the cityMedian household income (Mosaic 2014)
Alm
ond
Cors
torp
hine
/Mur
rayfi
eld
Dru
m B
rae/
Gyl
e
Fort
h
Inve
rleith
Crai
genti
nny/
Dud
ding
ston
Leith
Leith
Wal
k
Port
obel
lo/C
raig
mill
ar
City
Cen
tre
Libe
rton
/Gilm
erto
n
Mea
dow
s/M
orni
ngsid
e
Sout
hsid
e/N
ewin
gton
Colin
ton/
Fairm
ilehe
ad
Foun
tain
brid
ge/C
raig
lock
hart
Pent
land
Hill
s
Sigh
thill
/Gor
gie
£0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
£70,000
£80,000
£90,000
Med
ian
Hou
seho
ld In
com
e £
per a
nnum
North West North East South East South West
Max/Min Datazone
Ward Mean
Experian – Mosaic Scotland
High levels of income inequality across the cityFinancial Stress (Mosaic 2014)
Alm
ond
Cors
torp
hine
/Mur
rayfi
eld
Dru
m B
rae/
Gyl
e
Fort
h
Inve
rleith
Crai
genti
nny/
Dud
ding
ston
Leith
Leith
Wal
k
Port
obel
lo/C
raig
mill
ar
City
Cen
tre
Libe
rton
/Gilm
erto
n
Mea
dow
s/M
orni
ngsid
e
Sout
hsid
e/N
ewin
gton
Colin
ton/
Fairm
ilehe
ad
Foun
tain
brid
ge/C
raig
lock
hart
Pent
land
Hill
s
Sigh
thill
/Gor
gie
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
% H
ouse
hold
s w
ho fi
nd it
‘ver
y di
fficu
lt to
co
pe’ o
n cu
rren
t inc
ome
Max/Min Datazone
Ward Mean
North West North East South East South West
Experian – Mosaic Scotland
High levels of income inequality across the cityBenefits Dependency (Out of work claimants, Feb 2015)
Alm
ond
Cors
torp
hine
/Mur
rayfi
eld
Dru
m B
rae/
Gyl
e
Fort
h
Inve
rleith
Crai
genti
nny/
Dud
ding
ston
Leith
Leith
Wal
k
Port
obel
lo/C
raig
mill
ar
City
Cen
tre
Libe
rton
/Gilm
erto
n
Mea
dow
s/M
orni
ngsid
e
Sout
hsid
e/N
ewin
gton
Colin
ton/
Fairm
ilehe
ad
Foun
tain
brid
ge/C
raig
lock
hart
Pent
land
Hill
s
Sigh
thill
/Gor
gie
0%
10%
20%
30%
40%
50%
60%
Out
of w
ork
bene
fits
clai
man
ts a
s %
of
wor
king
age
pop
ulati
on
Max/Min Datazone
Ward Mean
North West North East South East South West
DWP –Benefits Claimants
Costs of Income Inequality
FOCUS on Inequality and Growth, OECD, December 2014
• Income inequality has a negative and statistically significant impact on medium-term growth– Suppresses human capital accumulation– Undermines educational opportunities for disadvantaged groups– Slows skills development and productivity growth
• UK income inequality rose significantly during 1990-2010• Cost of inequality equal to 9% of GDP over that period
• No evidence that redistribution polices (tax and benefits) harm economic growth
“Policies that help to limit or reverse inequality may not only make societies less unfair, but also wealthier”
Looking forward
Impact of tax and benefits changes announced in July 2015 Budget
• Benefits cuts = removal of £12bn from welfare bill over next 6 years
• Equivalent to circa £270m in Edinburgh• Partially offset by NLW and other
announcements
Institute of Fiscal Studies analysis• Significant reduction in income for poorest
households• Average loss from cuts to benefits = £750 pa• Average gain from NLW = £200pw
“There may be strong arguments for introducing the new NLW, but it should not be considered a direct
substitute for benefits and tax credits aimed at lower income households.”
Future trends• Continued low inflation• Slow employment and earnings growthBut...• Tax and benefits changes likely to reduce
income for poorest households...• ...particularly low income, working families
IFS & JRF conclusions• Relative poverty rates likely to remain
steady at best• Upward pressure on in-work poverty• More stable position for Pensioner groups
Data sources
Scottish Government Poverty in Scotland 2013/14Dept. Work & Pensions Households Below Average Income 2013/14Improvement Service Local Incomes Modelling Project, March 2013Child Poverty Action Group Child Poverty map of the UK, October 2014Dept. Work & Pensions Housing Benefit Caseload Statistics, February 2015Experian Mosaic Scotland 2014Dept. Work & Pensions Out of work benefits claimants, February 2015Office for National Statistics Annual Survey of Hours and Earnings, 2014 OECD
Focus on Income Inequality and Growth, December 2014Institute for Fiscal Studies Assessment of Living wage and tax/benefit changes,
September 2015Institute for Fiscal Studies & Living Standards, Poverty and Inequality in the UK:2015,
Joseph Rowntree Foundation July 2015
