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This report is the result of a project that assessed in detail how accurately the Scottish Household Survey (SHS) measures household income. To this end, we compared SHS data to data from the Households Below Average Income (HBAI) dataset, the “gold standard” for estimating household income data in the UK.
The comparison showed that SHS-based income estimates are accurate enough to determine whether a household is in poverty (before housing costs).
We therefore plan to include a poverty flag in the SHS dataset, enabling SHS data users to produce poverty breakdowns of any SHS-based measure of interest.
The SHS income variable compares reasonably well with HBAI income, and produces very good income estimates considering the wide remit of the survey.
However, benefit payments are underreported in the SHS, which affects those households most for whom benefits are the main income source. That includes most pensioner households, as the state pension is a major income source for most of them. Other economically inactive and unemployed households are also affected by benefit underreporting.
Average self-employed earnings are much higher in the SHS compared to the HBAI. Further work is required to unpick the reasons for this.
The SHS income variable produces reliable before housing costs (BHC) poverty estimates for children and working-age adults, although care needs to be taken when looking specifically at economically inactive or self-employed households.
Pensioners’ incomes in the SHS are not reported accurately enough to provide robust poverty estimates. Work is now underway to impute state pension and thereby improve pensioners’ incomes estimates. Until this has been done we recommend to exclude pensioners from any SHS-based income and poverty analysis.
SHS-based income and poverty estimates differ from Official Statistics and can therefore not be compared directly; this needs to be highlighted and differences explained in any publications using this data.
Guidance is required, explaining when to use which data source. Official Statistics (which are based on HBAI data) and administrative local poverty data, where available, are a better choice than any SHS-based poverty estimates. This guidance is provided in the Guidance section of the report.
It is possible to produce SHS-based regional poverty breakdowns where sample sizes allow, although these would be subject to fairly large measurement uncertainty. We instead recommend to use administrative data (see footnote) for regional poverty estimates.
The members of the Quality Assurance group found that the income analysis undertaken was thorough, they considered the findings plausible, and agreed with the conclusions. They made a number of comments relating to how the SHS income data could be improved using imputation (state pension, council tax, disability benefits) and the suggestion to allow negative self-employed earnings responses in the SHS, consistent with HBAI.