Economic Well-being 3 rd March 2015 Email: [email protected].
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Transcript of Economic Well-being 3 rd March 2015 Email: [email protected].
Beyond GDP?
3 separate concepts, 3 sets of measurements
• Economic activityGDP? Production boundary? Satellite accounts?
• WelfareDashboards or single indicator?
• SustainabilityJudgments/predictions about the futureBut look at balance sheets/’genuine saving’
What is Economic Well-being
• While it is right that GDP plays a central role in monetary and fiscal policy, it has long been recognised as presenting an incomplete picture of how our society is doing.
• Economic Well-being presents a complementary framework to shine light on broader socio-economic measures.
• Economic Well-being recognises many dimensions of well-being are outside the material sphere.
• Regular quarterly bulletin to coincide with QNA.
The Framework for Economic Well-being
Key Points (1)• In Q3 2014, GDP per head increased 0.6% compared to Q2 2014 but remains 1.8% below pre-economic downturn levels. This was a slightly slower growth rate than the 0.7% quarterly increase seen in GDP.• Net National Disposable Income (NNDI) per head, which represents the income for UK residents, has remained broadly flat since Q1 2012 and remains 5.6% below pre-economic downturn levels
Key Points (2)
• In Q3 2014, household income (RHDI) per head decreased 0.2% on the quarter, but remains broadly in line with its pre-economic downturn levels. • However, despite recent improvements, households still consider their financial position to be slightly worse than a year ago.
Key Points (3)
• In 2012/13, median income fell 1.4% compared to 2011/12 to £23,300, its lowest level since 2002/03.
• Between 2011/12 and 2012/13, there was a slight increase in income inequality.
Key Points (4)
• In Q3 2014, household spending per head grew 0.8% compared to the previous quarter – continuing the general upward trend that started in Q3 2011.
Key Points (5)
• In 2013, the wealth position of the economy as a whole increased 4.4% to £7.6 trillion.
• In the same year, household net wealth increased 2.6% mainly due to an increase in the value of dwellings.
Data Sources
Figure 5: Net Financial and Non-Financial CapitalUnited Kingdom
Figure 6: Household (Sector) Net Wealth by Assets TypeUnited Kingdom
Data Sources
Table 1: Median Household WealthUnited Kingdom
Year Median Wealth (£)2006-08 196,700 2008-10 204,300 2010-12 218,400
Source: The Offi ce for National Statistics
Summary facts on WAS
• WAS started in July 2006• Longitudinal survey – with each wave lasting 2 years• Wave 1 – approximately 30,000 households• Wave 2 onwards – approximately 20,000 households• New Cohort introduced every wave from wave 3
onwards• Wealthiest 10% of households over-sampled
What does the survey cover
The survey aims to gather an accurate picture of the economic position of the nation’s households. The questionnaire covers areas including: -•Savings and investments•Saving for Retirement•Debts•Value of personal possessions•Attitudes and behaviours•Economic activity•Income
Wealth and Assets Survey
Strengths• Coverage• Breadth of data from a single source• Distribution of Wealth• Longitudinal
Limitations• Self valuation• Difficult subject matter
Distribution of Total Household Wealth
Aggregate Total Wealth in Great Britain:
£9.5Trillion
Bottom 50% of households 51 to 90% of households Top 10% of households
The bottom half of households owned less than
10% of overall wealth.
The wealthiest tenth ofhouseholds owned more than
40% of overall wealth.
9.3%
46.4%
44.3%
Wealth Thresholds
Top 10% of householdsBottom 10% of households
Total Wealth < £13,000
Total Wealth > £918,000
Top 1% of households
Total Wealth>£2,507,000
Median Wealth£218,000
Regional Distribution of the Wealthiest Households
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Scotland
North West
North East
Yorkshire and The Humber
Wales
East Midlands
West Midlands
East of England
South West
London
South East
Percentage
6.9%
15.5%
Wealthiest 10% Bottom 50%
Breakdown of Total Wealth, by Components
Private Pension WealthNet Property WealthNet Financial WealthPhysical Wealth
56.6%
£742,00025.9%£340,000
12.7%
£123,200
£68,000
4.8%£0
£4,000
30.4%
36.6%
£0
3.8%£400
29.2%
£18,000
Financial Debt
Household Financial Debt
FINAL DEMANDOverdraftStatement
£££
Households with Financial Debt
51%
Average Financial Debt(for households in financial debt)
£3,200
Total £94.7 Billion
1 2 3 4 5 6 7 8 9 10
The Extent of Financial Debt
£1 - £1 - £1 - £1 - £1-100
-80
-60
-40
-20
0
20
40
60
80
100
Total Household Wealth Decile
Percentage
Inheritance
£57bn (76%)
£0.4bn (0.6%)
£1.4bn (1.8%)
£4.4bn (5.9%)
£11.8bn (15.7%)
Distribution of Inheritance over a 2 year period
Wealth and Income
Total household wealth, by total household income quintile
10th Percentile
point
90th Percentile
point
2nd Quartile
MEDIAN 3rd Quartile
Future Developments
• Wave 3 publications• Wealth in Great Britain: Wave 4 (Dec 2015)• User Engagement
• Ongoing Development of user documentation• User meetings
• Long term future of the survey• Wave 5• Wave 6 and beyond
Economic Well-being: What’s next? 3rd March 2015
Lee Mallett, Claire Shenton and Richard TonkinEconomic Well-being / Household Income & Analysis
Economic Well-being: What’s next?
• Human, natural and social capital
• Household Satellite Account
• Developments in distribution of income statistics
On-going development
• Continue development in response to consultation• Improvements to timeliness• Continue with improvements to understanding –
release and infographic• Report on feasibility of regional estimates of human
capital
• Improving understanding of links to other ONS outputs
Social Capital
• Social Capital represents social connections and all the benefits they generate.
• It is associated with civic participation, civic –minded attitudes and values which are important for people to co-operate such as tolerance or trust.
• ONS developed a framework and set of measures which went out to public consultation
• 25 measures across 4 key aspects - personal relationships, social network support, civic engagement and trust and cooperative norms.
• Baseline analysis of social capital in the UK, using the latest available data, released January 2015.
Ongoing developments
• Develop and refine social capital measures based on ongoing feedback from users
• Carry out further analysis, in particular to highlight inequalities in social capital
• Valuation? – difficult to value social capital overall: 4 different aspects + largely based on relationships
Natural Capital
• The elements of the natural environment which provide valuable goods and services to people such as sub soil assets, clean air, clean water, food and recreation.
• Valuing nature is necessary so that it is no longer ignored when deciding, for example, where to build infrastructure or whether to invest in pollution saving technology.
Future plans (2015 – 2020)
• Broaden and improve natural capital estimates• Water (cross-cutting)• Recreation (cross-cutting)• Semi-natural grassland• Mountain, moorland and heath• Coastal• Urban• Improve the existing accounts• Explore the link with other capitals
Household Satellite Account
• Household production is all unpaid goods and services produced by households.
• Not taken into account by GDP If they were paid for, they would be included in the
National Accounts Means by which the influence of changing patterns of
unpaid work in the economy can be measured
• HHSA is a separate from but conceptually consistent with the UK National Accounts
HHSA: Work to date
• 5 out of 7 methodologies have been reviewed and updated
• http://www.ons.gov.uk/ons/rel/wellbeing/household-satellite-accounts/index.html
• Nutrition and Housing Services methodologies still under development
49
Improving the timeliness of statistics on distribution of income
• Effects of Taxes & Benefits on Household Income • Produced since 1961 & examines how taxes and benefits affect the income of
households in the UK • Provides estimates of the average taxes paid and benefits received, for different
types of households with different levels of income• Includes indirect taxes (e.g. VAT) & benefits in-kind provided by state (e.g.
Education, NHS)
Improving the timeliness of statistics on distribution of income
• ETB currently published 15 months after reference period • Very strong user demand for more timely statistics
• Improving timeliness without impacting on quality is challenging • Issues with source data presented early publication for 13/14 data• Currently redeveloping plans for future years
Improving the timeliness of statistics on distribution of income
• Also investigating ‘nowcasting’ key statistics from ETB• Nowcasting involves updating existing data to reflect:
• Changes in earnings, labour market participation, population structure, etc.
• Policy changes, including changes to tax thresholds and benefit rates, as well as more structural reforms
• Potential to provide early estimates within a few months of income reference period• Currently undertaking methodological work – need to ensure
methods robust• Intend to publish initial report on work in Summer 2015
Small Area Income Estimates and Households in Poverty Estimates
• Model based estimates of average weekly household income & the proportion of households in poverty
• Available for middle layer super output areas (MSOAs) in England and Wales
Four income measures: 1. Total income
2. Net income
3. Net equivalised income before housing costs
4. Net equivalised income after housing costs
Poverty measure: • % of households with net
equivalised income AHC below 60% of median
Small Area Income Estimates and Households in Poverty Estimates
• Produced using FRS data combined with Census & variety of administrative data sources.
• Income estimates and households in poverty estimates are usually published trienially
• Next set of small area income estimates to be published in Q2 2015
• Next set of households in poverty estimates will follow after the income estimates
• To provide the closest link to Census data, estimates will be for 2011/12
Future Analysis
• 10th March: Poverty and Employment transitions, 2007-2012 • To what extent is moving into employment associated with
moving out of poverty?• How do people leave in-work poverty?
• Distribution of expenditure• What can we learn about how economic well-being has changed
in recent years for different groups?
• Bringing it all together• Better understanding of overall trends in income and earnings