International analysis of child poverty – ukmod/euromod modelling

Appendix A – Details on methodology

A.1 Data and period of analysis

Notes: ⁺2011 data not available. * data reporting incomes for the preceding calendar year

A.2 Decomposition methodology

Decomposition methodology can be found in the Supporting Documents.

A.2.1 Hypothetical example

The Hypothetical example can be found in the Supporting Documents.

A.2.2 Definition of poverty

The analysis focuses on poverty rates, , among ‘dependent children’. A dependent child is defined as someone who lives with their parent(s)/guardian(s), is not married/in a civil partnership/living with a partner, and is aged 0-15, or aged 16-19 and in full-time non-advanced education or unwaged government training. As per the Child Poverty (Scotland) Act 2017, (relative) child poverty is defined as the fraction of children living in a household with equivalised income less than 60% of the respective population median. Incomes are also equivalised using the revised OECD equivalence scale, in line with standard practice.^[16]

The definition of poverty lines considered for the current analysis do, however, depart from official statistics in a number of ways.

Original vs disposable incomes: Official statistics focus on poverty rates evaluated with respect to disposable incomes. As described earlier in this section, the current analysis is based on measures of both original and disposable incomes, which are contrasted to evaluate the influence of public transfers on poverty. Note that measures of poverty evaluated for original incomes, , are evaluated with respect to poverty lines based on the distribution of original incomes. Similarly, measures of poverty evaluated for disposable incomes, , are evaluated with respect to poverty lines based on the distribution of disposable incomes.

Ignoring housing costs: Before Housing Costs (BHC) income is considered for analysis, rather than After Housing Costs (AHC) income as is commonly considered in official distributional statistics for the UK.^[17] This aspect of the analysis is consistent with most of the available international evidence. It is motivated by the observation that housing costs add a layer of complexity to the analysis, and raise concerns over the international comparability of housing costs estimates in reported data.

Median income: Official poverty lines in Scotland are defined with respect to median incomes reported for the whole of the UK. The current analysis, in contrast, evaluates poverty lines based on the distributions of income observed in each country, including Scotland. This approach ensures consistency of application across each of the considered countries.

While it is important to bear in mind the technical issues outlined above when interpreting reported results, their potential importance should not be overstated. As described in this section, analysis focuses primarily on differences between measures of poverty, rather than absolute magnitudes. Hence, what is most important here is that the measures of poverty that are compared are consistent with one another. That is the primary motivation underlying the definitions adopted for analysis as described here.