2002 Income Distribution Study

Statistics Unit Policy & Resources Department

Jersey Income Distribution Study 2002

Introduction

This is the first in a series of reports analysing the Jersey Income Distribution Survey undertaken in mid-2002 by Business Development Research Consultants Ltd (BDRC).

The sample was composed of two parts: a random sample of households drawn from the postal address file, and a smaller supplementary sample of households of particular interest, for example:

• households with members who were disabled or suffering from long-term sickness;

• single parent families;

• households with members studying at university;

• households in receipt of housing subsidies: rent abatement for States tenants or rent rebate for other tenants.

These  supplementary  households  were  selected  by  the  States  Departments  concerned.   No identifiable individual information was passed to the Statistics Unit. The random sample was designed so that it could be "grossed-up" to produce statistically valid estimates for the Island as a whole. Whilst the random sample would enable us to estimate how many households have a disabled member, however, it was unlikely to provide sufficient cases to enable detailed analysis of their incomes and expenses as a sub-group. The supplementary sample was therefore designed to provide additional information about such sub-groups.

After a series of validation checks and rounds of imputation for missing or incredible values, a total of  1,499  acceptable  responses  remained:  1,238  from  the  random  sample  and  261  from  the supplementary sample. This first report is based solely on the random sample, because only a random sample (or a full census) can be representative of the distribution of incomes in the population of Jersey as a whole.

Initial  comparisons  of  household  structures,  forms  of  tenure,  types  of  dwelling,  residential qualifications and economic activity in the random sample as compared with expectations from the 2001 Census found significant differences, probably reflecting the ease with which interviewers made contact with the different household types. For example, two-pensioner households, single- parent families, States tenants and purpose-built apartments were substantially over-represented in the sample, while private renters, the self-employed, residentially non-qualified households, those living in detached houses and non-purpose-built apartments were under-represented. A process of "post-stratification" was therefore undertaken, assigning weights to the sample results to achieve estimates better representing the structure of the population in Jersey as a whole, as established in the Census. We are grateful for the advice and assistance of Professor Tim Holt of Southampton University in achieving this.

Thus, in this report, numbers of households total 35,562 and numbers of persons total 84,800 reflecting the numbers of private households and their members measured in the Census. The "average" household, which of course is not a typical household, comprises 2.38 people: 0.39 pensioners[1], 1.57 other adults and 0.43 children2,3 - 1.15 males and 1.23 females.

The Composition of Household Income

The weekly income of the average household in Jersey in mid-2002 may be broken down as follows:

Table 1 – The Composition of Household Income  £  £  £

Taxable earned income (including pensions)  707

Taxable unearned income  6

Total taxable income  713 Non-taxable cash income other than benefits (eg gifts)  25

Pre-benefit income  738 Household cash benefits  8

Personal cash benefits (excluding pensions)  17

Total cash benefits  24

Gross cash income  763 Less  Income tax  (64)

Social security contributions  (13)

Other deductions (eg pension contributions)  (19)

Total deductions  (96)

Net cash income  666 Plus  Income in kind (eg rent abatement)  32

Net income before housing costs  698 Less  Mortgage interest  (47)

Other housing costs (gross rent, rates, etc)  (88)

Total housing costs  (136)

Net income after housing costs  562

From the survey data covering some 1,300 full-time equivalent workers it was estimated that the average pay of a full-time worker was about £480 per week.

Income of Different Types of Household

Though averages (means) give only a summary measure, it is nevertheless informative to see how average incomes vary across different types of household.

Table 2 - Average Weekly Income by Household Structure

Households  Pre-  Gross  Net  Net  Net

in 2001  benefit  cash  cash  BHC  AHC Census  £  £  £  £  £

Person living alone (pensioner)

Single parent with at least one child < 16 Person living alone (not pensioner)

Two or more pensioners

Single parent with all children > 15 Two or more unrelated persons

Couple one pensioner

Couple not pensioners

Couple with at least one child < 16 Couple with all children > 15

Other[1]

All households

4,115  224 1,374  341 5,713  448 2,811  481 1,043  613 816  733 1,056  748 6,438  884 7,011  1,052 2,607  1,017 2,578  1,505

35,562  738

250  240 416  385 460  391 496  466 648  569 768  655 784  689 904  779 1,071  940 1,064  922 1,542  1,298

763  666

266  183 448  286 417  287 487  426 619  448 686  500 711  621 804  660 980  778 945  814 1,350  1,268

698  562

Changes in the ranking of incomes as one moves from left to right in the table give clues to the effects of the taxation and benefit systems. There are no shifts in ranks between the pre-benefit and gross cash columns, suggesting that cash benefits (other than pensions) do not greatly affect the situation of, for example, single parent families. Similarly, the taxation system (the difference between gross and net cash income) does not have sufficient influence on particular household types to alter their relative positions. Benefits in kind (the difference between net cash income and net income before housing costs) temporarily shift the balance making single parents better off, in this somewhat simplistic sense, than non-pensioners living alone, but housing costs reverse that relationship once more. Housing costs also increase the AHC income of couples with children of 16 and over relative to that of couples with younger children. This latter effect may reflect the lower current cost of housing acquired in the more distant past, with a lower mortgage or none at all.

Table 3 - Average Weekly Income by Tenure of Property

Households  Pre-  Gross  Net  Net  Net

in 2001  benefit  cash  cash  BHC  AHC (estimated[1])  £  £  £  £  £

States tenancy

Parish or housing association tenancy Private tenancy (including lodgers) Owner-occupancy without mortgage Owner-occupancy with mortgage Other[1]

All households

4,644  295 401  350 10,674  584 8,512  776 9,488  1,148 1,843  665

35,562  738

341  319 475  450 608  535 796  699 1,162  998 674  571

763  666

393  250 455  226 547  380 708  695 1,029  840 722  537

698  562

Cash benefits, eg rent rebate, contribute to a £125 per week difference between pre-benefit and gross incomes for Parish and housing association tenants. States tenants on average show a £74 per week increase between net cash income and their net total income before housing costs, reflecting an average subsidy (as found in the survey) of £3,600 a year. This comprises not only rent abatement but other benefits in kind received by States tenants, for example the subsidies on visits to the doctor and prescriptions. The table also highlights the benefit of outright home ownership: owner-occupiers without a mortgage have average weekly housing costs of £13, while those still paying mortgage interest have average weekly housing costs of £189. It should be noted that some respondents had difficulty in distinguishing the interest and repayment elements of their mortgage payments, and so there is probably some overstatement of the interest element. In principle, the repayment element is not included in housing costs as it is regarded as saving or investment rather than expenditure.

Table 4 - Average Weekly Income by Residential Qualification of Head of Household

Households  Pre-  Gross  Net  Net  Net

in 2001  benefit  cash  cash  BHC  AHC Census  £  £  £  £  £

Not qualified  4,378  599  610  525  562  413 A to H  30,303  730  756  664  692  560 J or K  881  1,732  1,737  1,456  1,590  1,368

All households  35,562  738  763  666  698  562

The most striking feature of Table 4 is the level of income of the J or K[1] category households, which averages more than twice that of other residents at every stage. Also noteworthy is the high level of housing costs of unqualified households, averaging £149 per week, while those of A to H qualified residents averaged rather less, at £132 per week. This is, of course, largely a consequence of the fact that many A to H qualified residents own their homes outright, a possibility not available to the non-qualified.

The Distribution of Income of Jersey Residents

This part of the report examines the variation in incomes across the population and the influence of taxes, benefits and housing costs on that distribution.

To maintain the same standard of living a family of four would clearly need a larger income than a person living alone. In order to take account of this and to compare the spread of incomes through the population it is necessary to adjust the actual income received by the household to take account of its size and structure. This is done by dividing the household income by a factor determined by the number and ages of the members of the household, a process known as "equivalisation", the equivalised income being attributed to each member of the household. There are a number of techniques for doing this, the one normally used in the UK being the McClements scale. Even this has two variants, one being used to equivalise household incomes before housing costs (BHC) and the other to adjust them after housing costs have been deducted. This analysis uses the former scale for the four "before housing costs" totals and the latter for the "after housing costs" (AHC) one. These results can thus readily be compared with corresponding results for the UK. As examples:

• A single person living alone has a McClements BHC equivalisation factor of 0.61;

• A married couple has a factor of 1.00;

• A couple with two pre-school children has a factor of 1.36.

Figure 1 illustrates the spread of pre-benefit incomes in Jersey up to £1,250 per week in £25 bands. It is estimated that some 9,400 persons (11.1%) had pre-benefit incomes in excess of £1,250, spread out over a very long tail.

Figure 1 - Pre-benefit Income Distribution

Before Housing Costs

6000 5000 4000 3000 2000

1000 0

0 200 400 600 800 1000 1200 Equivalised personal income (£ per week)

The  median[2]  equivalised  pre-benefit  income  was  £28,530  per  year  (£547  per  week).   This compares with a mean equivalised income of £37,230 per year (£714 per week).

A frequently-used indicator of the spread of the distribution is the ratio of the 90th to the 10th percentile[3]: in this case its value is 5.98. A more comprehensive indicator of inequality is the Gini coefficient, which takes account of the whole shape of the distribution and varies from 0 for a distribution in which everyone has the same income to 1 when all but one person have no income at all. Thus the greater the Gini coefficient the greater the inequality of the distribution. In this case the Gini coefficient is 0.38.

Figure 2 shows the distribution of equivalised gross cash incomes in Jersey up to £1,250 per week in £25 bands. Some 9,500 persons (11.2%) had gross cash weekly incomes in excess of £1,250. These estimates include cash benefits received by households.

Figure 2 - Gross Cash Income Distribution Before Housing Costs

6000 5000 4000 3000 2000 1000 0

0 200 400 600 800 1000 1200 Equivalised personal income (£ per week)

The median equivalised gross cash income was £29,690 per year (£569 per week). This compares with a mean equivalised income of £38,420 per year (£737 per week).

It will be apparent that the bars of figure 2 are more tightly clustered than those of figure 1. For example, there are no longer any households with zero incomes. This is an indication of the extent to which the cash benefits provided by Jersey's social security system help to reduce inequalities in people's incomes. Quantifying this effect, the 90/10 percentile ratio reduces from 5.98 to 5.23, while the Gini coefficient falls from 0.38 to 0.36.

Figure 3 shows the distribution of net cash incomes in Jersey up to £1,250 per week in £25 bands, ie disposable income after deduction of income tax, social security contributions, maintenance payments and occupational or private pension contributions (these latter being regarded as deferred income). Some 5,800 persons (6.8%) had net incomes in excess of this. This concept of income is frequently used for international comparisons.

The median equivalised net cash income was £26,310 per year (£505 per week). This compares with a mean equivalised income of £33,540 per year (£643 per week).

Figure 3 - Net Cash Income Distribution Before Housing Costs

6000 5000 4000 3000 2000 1000 0

0 200 400 600 800 1000 1200 Equivalised personal income (£ per week)

A further tightening of the clustering of the bars from figure 2 will be apparent. This is an indication  of  the  effects  of  income  tax  and  social  security  contributions  in  reducing  income inequalities. Quantifying this effect, the 90/10 percentile ratio reduces from 5.23 to 4.56, while the Gini coefficient falls from 0.36 to 0.34.

Figure 4 shows the distribution of equivalised net total incomes in Jersey up to £1,250 per week in £25 bands. These incomes differ from the net cash incomes shown in Figure 3 in that they include benefits in kind. Such benefits include those provided by the States, like rent abatement for States tenants, subsidies to prescriptions and visits to the doctor, and also those provided by employers, like company cars, subsidised accommodation and food, and medical insurance. This concept of income is considered to be the fairest indicator of relative incomes before housing costs, as it takes into account as many components of income as possible. It has not been possible, however, to complete the picture by allocating all such benefits to households. Services free at the point of delivery such as education and health care are not included because their value to people of different ages is unknown.

Figure 4 - Net Total Income Distribution Before Housing Costs

6000 5000 4000 3000 2000 1000 0

0 200 400 600 800 1000 1200 Equivalised personal income (£ per week)

The median equivalised net total income was £27,250 per year (£523 per week). This compares with a mean equivalised net total income of £35,110 per year (£673 per week).

Overall, benefits in kind have a small further effect in reducing income inequalities, the gains from rent abatement, for example, being partially offset by perks for higher income households, like company cars. The 90/10 percentile ratio reduces from 4.56 to 4.07, while the Gini coefficient falls from 0.34 to 0.33.

Finally, we turn to the distribution of household incomes after deducting housing costs. Arguably this most fairly reflects a household's true standard of living. As already mentioned, this uses a slightly different equivalisation formula. Figure 5 shows the distribution of Final Income After Housing Costs.

Figure 5 - Final Income Distribution

After Housing Costs

6000 5000 4000 3000 2000

1000 0

0 200 400 600 800 1000 1200 Equivalised personal income (£ per week)

One effect of deducting housing costs from household incomes is to shift the whole distribution to the left, the modal group[4] now being from £225-£250 per week rather than £375 to £400 per week. the median falls to £20,960 per year (£402 per week) and the mean to £28,480 per year (£546 per week). Less obviously, the distribution shows much greater inequality than in the BHC case: the 90/10 percentile ratio rises to 5.78, and the Gini coefficient, at 0.39, is higher than in the original pre-benefit distribution.

International Comparisons of Income Distribution

As mentioned above, the concept of net income is commonly used for distributional analyses and comparisons. In the UK analysis "Households below average income" the concepts are very similar to the above Net Total Income Before Housing Costs and Final Income After Housing Costs, so direct comparisons are possible:

Equivalised Weekly  Equivalised Weekly Net Total Income  Final Income Before Housing Costs  After Housing Costs

Jersey  UK  Jersey  UK

2002  2001/02  2002  2001/02

Mean

Median

90/10 percentile ratio Gini coefficient Bottom quintile

2nd quintile

3rd quintile

4th quintile

Top quintile

£673 £523

4.07 0.33

<£334 £335 - £450 £451 - £589 £590 - £852 £853+

£384 £311

4.00 0.35

<£197 £198 - £271 £272 - £357 £358 - £495 £496+

£546 £401

5.78 0.39

<£223 £224 - £333 £334 - £481 £482 - £701 £702+

£338 £274

4.76 0.38

<£157 £157 - £235 £236 - £317 £318 - £442 £443+

Thus before housing costs the median Jersey personal income was some 68% higher than its UK equivalent. After  housing  costs  are  deducted,  however,  the  Jersey  median  was  46%  higher, reflecting the higher cost of housing. The degree of inequality as measured by the Gini coefficient was slightly lower in Jersey before housing costs and slightly higher after housing costs. The 90/10 percentile ratio was higher in Jersey than the UK both before and after housing costs, but the difference is far greater after housing costs.

A study carried out in Guernsey in 2001[1] by the Townsend Centre for International Poverty Research used another equivalisation scale developed for use on the Poverty and Social Exclusion Survey of Britain. That Guernsey study apparently generated only a few results on a money income basis, being more concerned with indicators of social exclusion. However, results have been calculated for Jersey using the same Townsend equivalisation basis.

Townsend Equivalised Weekly Net Total Income

Before Housing Costs Jersey  Guernsey 2002  2001

Mean  £604  £590 approx Median  £463  £420 approx

The difference in mean is small, suggesting that the Guernsey survey, which was based on a much smaller number of households, may have been influenced by some very high incomes. The difference in median, a more robust measure, suggests a level of incomes some 5% higher in Jersey, after the 1-year timing difference is taken into account[2].

Types of person and household in each part of the distribution

The  following  tables  show  the  proportion  of  all  those  persons  or  households  with  particular characteristics who are found in each quintile[3] of the distribution. These analyses are presented only for the Net Total Income Before Housing Costs and Final Income After Housing Costs distributions shown in Figures 4 and 5.

Table 5 - Percentage of Persons in Broad Age Groups

Number of  Bottom  Second  Third  Fourth  Top

persons  quintile  quintile  quintile  quintile  quintile

Before Housing Costs

Pensioners  13,800  35  26  18  12  9

Other adults  55,690  14  18  22  23  23

Children  15,310  27  20  16  18  19 After Housing Costs

Pensioners  13,800  28  24  20  15  13 Other adults  55,690  16  19  21  22  23 Children  15,310  29  21  18  16  16

Before housing costs, over a third of pensioners are found in the bottom quintile, and less than one in  ten  in  the  top  quintile. After  taking  housing  costs  into  account,  however,  the  pattern  is noticeably more uniform though still weighted towards the lower end of the scale. This can be attributed to the number of pensioners who own their homes outright and hence have lower housing costs than the average household. The reverse situation may be observed for children, where more are found in the bottom quintile and fewer in the top one after taking housing costs into account, reflecting the higher housing costs incurred by larger households whose adult members are of working age.

Table 6 - Percentage of Households by Household Structure

Number of  Bottom  Second  Third  Fourth  Top

households  quintile  quintile  quintile  quintile  quintile Before Housing Costs

Person living alone (pensioner)  4,115 Two or more pensioners  2,811 Single parent with at least one child < 16  1,374 Single parent with all children > 15  1,043 Couple one pensioner  1,056 Couple with at least one child < 16  7,011 Couple with all children > 15  2,607 Person living alone (not pensioner)  5,713 Couple not pensioners  6,438 Two or more unrelated persons  816 Other[1] 2,578

36  30  18 42  23  19 38  22  27 24  32  12 21  22  19 23  21  16 9  20  28 7  15  26 6  13  22 4  11  23 10  26  21

11  6 8  8 6  6 17  16 22  17 19  20 21  22 29  22 25  34 26  36 26  17

All households  35,562  19  20  21  20  20 After Housing Costs

Person living alone (pensioner)  4,115 Two or more pensioners  2,811 Single parent with at least one child < 16  1,374 Single parent with all children > 15  1,043 Couple one pensioner  1,056 Couple with at least one child < 16  7,011 Couple with all children > 15  2,607 Person living alone (not pensioner)  5,713 Couple not pensioners  6,438 Two or more unrelated persons  816 Other  2,578

36  30  15 30  26  17 45  30  13 34  7  20 16  17  28 23  23  19 6  31  13 16  13  27 8  10  23 4  23  29 10  8  32

11  8 16  11 6  6 24  16 15  25 19  16 27  22 24  21 24  34 25  19 24  26

All households  35,562  20  20  21  20  20

This table sheds some further light on the types of household that are to be found in the higher and lower income groups and the changes brought about by housing costs. It has already been observed that pensioners tend to be in the lower quintiles and working adults in the higher ones. Now it can be seen that for pensioners living alone no significant change arises out of taking housing costs into account. For households comprising two or more pensioners the situation before housing costs is particularly difficult, but is substantially improved after housing costs. Housing costs make a hard situation even more difficult for single parent families, especially those with older dependent children. Couples with young children tend slightly towards the lower quintiles, but those with older children or no children at all are to be found more frequently in the higher quintiles both before and after housing costs.

Table 7 - Percentage of Households by Tenure of Property

Number of  Bottom  Second  Third  Fourth  Top

households  quintile  quintile  quintile  quintile  quintile Before Housing Costs

States, Parish or housing assn. tenancy[1]  5,045 Private tenancy (including lodgers)  10,674 Owner-occupancy without mortgage  8,512 Owner-occupancy with mortgage  9,488 Other  1,843

35  34  20 12  24  27 32  16  20 8  13  16 12  11  24

9  2 24  14 17  15 24  40 24  28

After Housing Costs

States, Parish or housing assn. tenancy  5,045  52  24  17  5  2 Private tenancy (including lodgers)  10,674  24  21  25  18  12 Owner-occupancy without mortgage  8,512  12  19  22  24  22 Owner-occupancy with mortgage  9,488  6  14  18  27  34 Other  1,843  7  26  18  22  27

States and Parish tenants tend to be found in the lower quintiles before housing costs and even more so after housing  costs.   It  should  be  remembered  that  housing  costs  include  gross  rents,  rent  rebate  and  rent abatement being treated as cash and notional income respectively. Before housing costs private tenants are clustered in the middle three quintiles, but after housing costs more are found in the lowest three. Owner occupiers without mortgages tend to be in the lowest three quintiles before housing costs but in the highest three after housing costs. Those with mortgages tend to be found in the higher quintiles both before and after housing costs.

Table 8 - Percentage of Households by Residential Qualification of Head of Household

Number of  Bottom  Second  Third  Fourth  Top

households  quintile  quintile  quintile  quintile  quintile Before Housing Costs

Not qualified  4,378  11  21  27  25  16 A-K qualified[1] 31,184  20  20  20  19  20

After Housing Costs

Not qualified  4,378  15  19  31  19  17 A-K qualified  31,184  21  20  19  20  20

Residentially qualified households are uniformly spread across the quintiles both before and after taking housing costs into account. Unqualified households tend to be found in the middle three quintiles, both before and after housing costs.

Table 9 – Composition of Household Weekly Income by Quintile Group

Bottom  Second  Third  Fourth  Top Quintile groups selected before housing costs  quintile  quintile  quintile  quintile  quintile

Taxable earned income (including pensions)  234 Taxable unearned income  5 Total taxable income  239 Non-taxable cash income other than benefits (eg gifts)  2 Pre-benefit income  241

Household cash benefits  12 Personal cash benefits (excluding pensions)  17 Total cash benefits  29 Gross cash income  270

Less Income tax  (4) Social security contributions  (5) Other deductions (eg pension contributions)  (5) Total deductions  (14)

Net cash income  257 Plus Income in kind (eg rent abatement)  26 Net income before housing costs  283

Less Mortgage interest  (9) Other housing costs (gross rent, rates, etc)  (82) Total housing costs  (91)

Net income after housing costs  192

378  539  796  1,592 5  5  6  10 382  544  801  1,602 3  5  12  105 386  549  814  1,707 12  6  6  2 19  19  19  9 31  25  25  11 417  573  849  1,718

(16)  (38)  (74)  (191)

(11)  (11)  (18)  (21)

(8)  (16)  (23)  (41)

(35)  (66)  (115)  (253) 382  508  724  1,465 24  23  19  67 405  531  743  1,532

(20)  (30)  (55)  (121)

(99)  (95)  (85)  (81) (119)  (126)  (140)  (202) 286  406  603  1,330

Bottom  Second  Third  Fourth  Top Quintile groups selected after housing costs  quintile  quintile  quintile  quintile  quintile

Taxable earned income (including pensions)  239 Taxable unearned income  2 Total taxable income  242 Non-taxable cash income other than benefits (eg gifts)  3 Pre-benefit income  245

Household cash benefits  23 Personal cash benefits (excluding pensions)  20 Total cash benefits  42 Gross cash income  287

Less Income tax  (4) Social security contributions  (5) Other deductions (eg pension contributions)  (7) Total deductions  (16)

Net cash income  271 Plus Income in kind (eg rent abatement)  35 Net income before housing costs  307

Less Mortgage interest  (14) Other housing costs (gross rent, rates, etc)  (139) Total housing costs  (153)

Net income after housing costs  154

392  541  792  1,591 4  6  6  11 396  547  799  1,602 4  3  18  100 401  550  817  1,703 7  5  2  2 16  18  20  9 23  22  22  11 424  572  839  1,714

(18)  (37)  (74)  (192)

(10)  (14)  (17)  (20)

(10)  (15)  (21)  (41)

(39)  (66)  (112)  (253) 385  506  727  1,461 28  16  20  61 413  522  747  1,522

(29)  (36)  (61)  (96)

(96)  (76)  (67)  (64) (125)  (112)  (129)  (160) 288  409  618  1,361

Whether the quintiles are selected before or after housing costs the pictures are very similar. On an AHC basis:

• the top 20 per cent of households receive 46% of all pre-benefit income, 45% of gross cash income, 44% of net cash income, 43% of net income before housing costs and 48% of net income after housing costs.

• The bottom 20 per cent of households receive 7% of all pre-benefit income, 7% of gross cash income, 8% of net cash income, 9% of net income before housing costs and 5% of net income after housing costs.

Thus the tax and benefits system in Jersey have only a small influence on incomes at the top or the bottom of the scale, and their influence is more than reversed by the effects of housing costs on the distribution of incomes.

Low Income Households

There are no universally accepted measures of low income, either in absolute or relative terms. One absolute measure used by the UN, of an average income of less than a dollar a day, has wide acceptance for developing country use, though it takes no account of inflation and is clearly irrelevant in the developed world.

Most developed countries rely on a combination of indicators of deprivation, and this study has provided data for analysis of a selection of these. This first report, however, concentrates on income measures. Here, too, there are nearly as many measures as there are studies. As a factor in a composite indicator of development, the UN considers the proportion of the population whose income is less than half the median cash disposable income, without going into questions of income in kind or housing costs. The United States uses specific figures for the disposable income for households of different size, updated using their Retail price Index. Canada uses a threshold of 50% of median equivalised income. In Europe generally there seems to be a consensus that the most useful indicator of low income is based on a threshold of 60% of the median equivalised[1] income before housing costs. The UK does not take an absolute position, but provides results based on thresholds at 40%, 50% and 60% of the mean and 50%, 60% and 70% of the median equivalised[2] income both before and after housing costs[3]. In order to facilitate comparisons with the UK, the following analyses use the same selection of thresholds. Table 10 sets out the corresponding weekly household income levels for 5 example household types in Jersey and the UK (UK in brackets).

Table 10 – Relative Low Income Thresholds for Different Household Types (£ per week) Before Housing Costs

% of mean  % of median

40  50  60  50  60  70 Adult living alone  164(94)  205(117) 246(140)  160(95)  192(114) 223(133) Married couple  269(154) 336(192) 404(230)  262(156) 314(187) 366(218) Couple, two pre-school children  366(209) 457(261) 549(313)  356(212) 427(254) 498(296) Couple, children aged 5 and 11  393(225) 491(280) 590(336)  383(228) 458(273) 534(318) Single parent, children aged 5 and 11  288(165) 360(206) 432(246)  280(167) 336(200) 392(233)

Table  10  –  Relative  Low  Income  Thresholds  for  Different  Household  Types  (£  per  week) (Continued)

After Housing Costs

% of mean  % of median

40  50  60  50  60  70 Adult living alone  120(74)  150(93)  180(112)  111(75)  133(91)  155(106) Married couple  218(135) 273(169) 328(203)  201(137) 241(165) 281(192) Couple, two pre-school children  296(184) 371(230) 446(276)  273(186) 328(223) 382(261) Couple, children aged 5 and 11  320(199) 401(249) 482(299)  295(201) 354(242) 413(282) Single parent, children aged 5 and 11  222(138) 278(172) 335(207)  205(140) 246(168) 287(196)

Table 11 shows the numbers of people estimated to lie below these thresholds, and what percentage of the population in those age-groups in Jersey they represent. Corresponding percentages for the UK are also shown (in brackets).

Table 11 – People Below Relative Low Income Thresholds Before Housing Costs

% of mean   % of median

Jersey numbers  40  50  60  50  60  70

Children  1,740  4,360  6,370  1,590  3,410  4,940 Pensioners  2,600  4,800  7,050  2,420  4,250  5,850 Other adults  3,270  8,090  14,690  2,880  5,980  10,700

All persons  7,610  17,250  28,110  6,890  13,640  21,500 Jersey (UK) percent of age group

Children  11(10)  28(23)  41(37)  10(10)  22(21)  32(33) Pensioners  19(10)  35(24)  52(40)  18(11)  31(22)  43(34) Other adults  6(8)  15(15)  26(23)  5(8)  11(14)  19(21)

All persons  9(9)  20(19)  33(29) After Housing Costs

% of mean

Jersey numbers  40  50  60

8(9)  16(17)  25(26)

% of median

50  60  70

Children  3,050  6,470  7,620  2,770  5,070  6,650  Pensioners  2,520  5,750  7,050  2,290  4,500  6,050 Other adults  5,820  13,590  18,440  5,410  10,710  14,270

All persons  11,390  25,820  33,120  10,470  20,290  26,970 Jersey (UK) percent of age group

Children  20(18)  42(32)  49(41)  18(19)  33(30)  43(39) Pensioners  19(10)  42(25)  52(40)  17(11)  33(22)  44(36) Other adults  10(13)  24(20)  33(26)  10(14)  19(19)  26(24)

All persons  13(14)  30(23)  39(32)  12(14)  24(22)  32(29)

Whichever  threshold  is  considered,  it  is  apparent  that  before  deducting  housing  costs,  a substantially higher proportion of pensioners than of children have incomes below that threshold in Jersey.

After deducting housing costs, the picture changes somewhat. Irrespective of the threshold the proportions of pensioners and of children below the low income thresholds are very similar. Taking the cost of housing into account, therefore, increases the numbers of each age group below the thresholds, but particularly for children.

Characteristics of Relative Low Income Households

It would be confusing to carry out analyses of the types of person and household with low incomes for every one of the 6 thresholds shown above. As an example, therefore, the following analyses are based on the 60% of median threshold favoured by the EU and the UK. That is, a household income for the different example types of household as set out in Table 12.

Table 12 – 60% Median Income Thresholds for Different Household Types (£ per week)

Jersey  UK

BHC  AHC  BHC  AHC Adult living alone  192  133  114  91 Married couple  314  241  187  165 Couple, two pre-school children  427  328  254  223 Couple, children aged 5 and 11  458  354  273  242 Single parent, children aged 5 and 11  336  246  200  168

In  Jersey,  as  mentioned  above,  13,640  people  in  5,560  households,  representing  16%  of  the population of both people and households, lie below the before housing costs threshold (UK 17%). 20,290  people  in  8,520  households,  representing  24%  of  the  population  of  both  people  and households, lie below the after housing costs threshold (UK 22%).

Table 13 – People in Relative Low Income Households by Gender:

Before housing costs  After housing costs

 Number   % of total  Number   % of total

Males  6,410  16  9,480  23 Females  7,280  17  10,850  25

Females are slightly more likely than males to be living in low income households. This is likely to be the result of two factors:

1. Because women tend to live longer than men, there are more women pensioners than men pensioners.
2. More women than men of working age are not economically active, mainly as a result of family responsibilities.

Looking at households rather than individuals:

Table 14 – Relative Low Income Households by Household Structure

 Before housing costs  After housing costs Number  % of total  Number  % of total

Two or more pensioners

Single parent with at least one child <16 Person living alone (pensioner)

Single parent with all children > 15 Couple with at least one child < 16 Couple one pensioner

Person living alone (not pensioner) Couple with all children > 15

Couple not pensioners

Two or more unrelated persons

Other

All households

1,130  40 500  37 1,340  33 240  23 1,210  17 160  15 320  6 100  4 350  5 30  4 190  7

5,590  16

1,020  36 880  64 1,870  45 380  37 1,910  28 200  19 1,080  19 290  11 590  9 30  4 270  11

8,520  24

While households comprising two or more pensioners are less likely to be below the low income threshold after housing costs are taken into account (probably because a higher proportion of such couples  own  their  home  outright),  in  all  other  household  types  the  risk  of  falling  below  the threshold increases after housing costs. Highest risks, both before and after housing costs, are found in pensioner households, single-parent families and couples with children under 16.

Table 15 – Relative Low Income Households by Tenure of Property

 Before housing costs  After housing costs Number  % of total  Number  % of total

Owner-occupancy without mortgage  2,360  28  1,380  16 Owner-occupancy with mortgage  510  5  870  9 Private tenancy (including lodgers)  1,020  10  2,900  27 States, Parish or housing assn. tenancy  1,630  32  3,240  64 Other  80  4  130  7

As is to be expected, the low housing costs of those who own their property outright, results in the number of such households below the low income threshold falling substantially after those costs are taken into account. In contrast, the housing costs of tenants, particularly States and Parish tenants, result in large numbers of such households falling below the threshold[1].

Table 16 – Relative Low Income Households by Residential Qualification of Head of Household

 Before housing costs  After housing costs Number  % of total  Number  % of total

Unqualified  300  7  810  18 A to K  5,280  17  7,720  26

The residentially qualified are considerably more likely than the unqualified to be living below the thresholds, but both groups are similarly adversely affected by housing costs.

Table 17 – Relative Low Income Households by Whether Working or Not Working

 Before housing costs  After housing costs Number  % of total  Number  % of total

Non-working households  2,920  39  3,550  47 Working households  2,670  10  4,970  18

As might be expected, households in which there are no working members are much more likely to fall below the low income threshold than those where at least one person has a job, even part-time. Again, both groups are similarly affected by housing costs.

Table 18 – Composition of the Average Weekly Income of Relative Low Income Households

Households selected:  Before housing costs  After housing costs

£ per week  £ per week

Taxable earned income (including pensions)  212  255

Taxable unearned income  5  3

Total taxable income  218  257 Non-taxable cash income other than benefits (eg gifts)  3  3

Pre-benefit income  220  261 Household cash benefits  11  21

Personal cash benefits (excluding pensions)  18  20

Total cash benefits  29  41

Gross cash income  249  302 Less Income tax  (3)  (5)

Social security contributions  (4)  (6)

Other deductions (eg pension contributions)  (5)  (7)

Total deductions  (11)  (18)

Net cash income  238  284 Plus Income in kind (eg rent abatement)  28  33

Net income before housing costs  266  317 Less Mortgage interest  (9)  (17)

Other housing costs (gross rent, rates, etc)  (78)  (132)

Total housing costs  (87)   (148)

Net income after housing costs  179  168 Total number of households  5,590  8,520 Further Analysis

As noted in the introduction, this report is based solely on the random sample and concentrates on monetary aspects of income distribution. Further reports are planned which will examine:

• non-monetary indicators of social deprivation and their correlation with monetary ones;

• the situation of particularly deprived groups as indicated by the random and supplementary samples;

• a model of the tax and benefit systems which will enable the influence of changes to that system on income distribution to be examined.

Notes.

Accuracy. On overall income levels, the margin of uncertainty (95% confidence interval) on a particular estimate is about ±8%. On relative income levels, eg the proportion of the population below a particular threshold, the margins of uncertainty are substantially lower: of the order of ±1.5%.

Statistics Unit

Policy and Resources Department

September 2003