Simon Power Managing Consultant John Rae Director Understanding Communities Through PayCheck

What we are going to talk about today? Using geodemographic & other non-official data sources to define, describe and meet the needs of distinct communities Demographics Affluence Income Lifestyles Attitudes Motivations

The leading independent Market Analysis company in the UK Within the public sector work with over 70% of Local Authorities and many government departments Capabilities include: Consumer classification systems, e.g. ACORN Largest location planning consultancy in UK Consumer lists for direct marketing CRM analysis Market planning software tools Who are CACI?

Our Clients

Key datasets PayCheck ACORN HealthACORN Citizen Insights StreetValue Community Insights Expenditure data People*UK LifestylesUK Retail Footprint InSite

PayCheck – Income Dataset

PayCheck What is PayCheck? PayCheck is a model that provides estimates of the distribution of gross household incomes, from all sources, right down to full postcode level.

Where did that data come from ? Probability estimates of an individual’s financial status Segmentation of individuals’ financial activity

Paycheck approach Identify the distribution of household incomes at various levels of geographic detail Assume this distribution maintains a constant form, where variation within the form is determined by the local mean and deviation Build models to predict the mean and deviation of this for any local area, the thus the distribution of incomes

PayCheck approach 8 million Lifestyles records Reweighted to match GB  Postcode Areas  ACORN Types Modeled using:  Selected census variables  ACORN  Other lifestyles variables Constrained from EFS Weighted average Lifestyle data records Reweighted Model mean & sd Measured income mean & sd Apply to distribution for local area

Income distribution for two postcodes

PayCheck Methodology – Data Sources Lifestyle Data The most recent 3 years lifestyle data from Data Locator Group (DLG). The complete set is 8.1m records. Expenditure and Food Survey (EFS) Four years of EFS data is used to establish a reference control distribution. Annual sample size is 6,500. UK Average Earnings Change Time series data on earnings from the ONS is used to ‘inflate’ both survey and lifestyle data from earlier years Census Statistics from the census used to provide explanatory variables for the modelling.

PayCheck – Sample Sizes

Strengths & Weaknesses  Sample  Comprehensive geographical detail  Regularly updated  Also an equivalised version  Available for academic use in Data Archive  Sample  Trade off between local precision and possibility of time series analysis  Assumption distribution is constant across geography  Micro-geographic variation in ‘accuracy’

PayCheck Frequently Asked Questions 1 Where do all the millionaires live? How much does Ewan McGregor earn? Why does x not appear in the top 10 postcode sectors? Why are the same areas often at the bottom of the rankings? Why don’t you get whole households in the bands?

PayCheck Also available from CACI Equivalised PayCheck The income that a household needs to attain a given standard of living will depend on its size and composition. For example, a couple with dependent children will need a higher income than a single person with no children to attain the same material living standards. "Equivalisation" means adjusting a household's income for size and composition so that we can look at the incomes of all households on a comparable basis.

PayCheck Equivalised PayCheck Calculated using the McClements Scale.

PayCheck Equivalised PayCheck Example Household 1 - Married couple with 3 dependent children has a joint income of £20,000, their weight (equivalisation score) is = Their equivalised income would therefore be £20,000/1.66 = £12,048. Household 2 – Single person with an income of £20,000 has an equivalisation score of The equivalised income is therefore be £20,000/0.61 = £32,787.

PayCheck - practicalities What you have….. Postcode Sector Mean Household Income Median Mode HIP (Household Income Profile) Also available… Intermediate Geography, Data Zone, Output Area and Postcode

PayCheck What does it look like?

PayCheck Working with PayCheck data Calculating the mean income of an area. Calculating the median of an area. What else can you do?…

PayCheck Calculating the mean income of an area

PayCheck How would you do it? Add it up and divide by number of postcodes = £33,700 WRONG

PayCheck How would you do it? Add it up and divide by number of Households = £2,747 WRONG

PayCheck How do you do it? Calculate the total income for each postcode. Divide by number of households in the area. Sum up the “Totals” for the area. £35,246

PayCheck Calculating the median of an area Create a distribution for the area: Add up all the columns!!

PayCheck Calculating the median of an area Calculate 50% of the households = 153  2 = 76½

PayCheck Calculating the median of an area Calculate 50% of the households = 153  2 = 76½ Cumulate the distribution to find in which band the median point lies.

PayCheck Calculating the median of an area Cumulate the distribution to find in which band the median point lies – £35-40k From the start of the band (74.97) to the end of the band (86.84) there are households.

PayCheck Calculating the median of an area From the start of the band (74.97) to the end of the band (86.84) there are households. The half way point (76½) is therefore 12.8% of the way through the band.

PayCheck Calculating the median of an area The half way point (76½) is therefore 12.8% of the way through the band. Assuming an even distribution across the band……

PayCheck Calculating the median of an area Assuming an even distribution across the band…… We can penetrate into the band by 12.8% to get a median of £35,640

PayCheck Applications Social exclusion Deprivation Supporting funding bids Monitoring project success Affordable housing Affordable leisure services

PayCheck Anything Else??? Housing Affordability Households below the “bread line” Lower quartile analysis …………

Paycheck Summary Model of household income at very local levels Based on very substantial, non-structured, sample The result is a combination of observed incomes and modelled incomes, the weighting between these two elements varying from location to location As a result Paycheck is not ideal for detailed time series

Questions? Paycheck Simon Power