By Paul Johnson in THE TIMES, 17 September 2018:
How many people in the UK live in poverty? Well, it all depends what you mean by poverty. That’s a question which has been debated down the ages. To be poor, it has been accepted at least since the time of Adam Smith, does not simply mean to be starving or homeless. Broadly it has come to refer to not having enough resources to participate to some acceptable degree in society, to avoid shame as well as destitution.
Which as a definition is all very well, but it doesn’t help much with measurement, or answering that question about the extent of poverty. And measurement matters if we want to have some sense of the extent of the problem, where it lies and whether we are making progress in tackling it.
When the last Labour government set out to halve child poverty, and then legislated targets for its near abolition by 2020, it had to have a measure in mind. The particular measure targeted was to reduce the number of children living in households with incomes below 60 per cent of the median. That line — 60 per cent of the median — has become the unofficial poverty line in the UK.
This is a measure of poverty based purely on contemporary income — those with assets and those with debts, those with highly marketable skills and those with none, are considered equal if their income is the same this week. Yet we know these and other characteristics really matter to people’s living standards. A measure of poverty that ignores them is lacking.
Even ignoring this, the current measures don’t even have the merit of clarity and simplicity. There are actually several semi-official poverty measures hidden beneath the one apparently simple definition. Official statistics track two measures of income — income before housing costs are deducted and income after they are deducted — and two definitions of the median income on which to base the poverty line — the contemporary median, or the median as it was in 2010. Not only do these different measures give different answers to the question “how many people are in poverty?”, they give different answers to the question “are the numbers going up or down?” That inevitably leads to cherry picking. The government can say poverty is falling, the opposition can say it is rising and they can both find official figures to prove their point.
On the other hand, we wouldn’t want to stick forever with a poverty line defined against income levels as they were in 2010 (or any other year in the past). The numbers below 60 per cent of the 2010 median are often, misleadingly, referred to as the numbers in absolute poverty. By 2030 there will be little reason to be interested in the numbers with incomes below this arbitrary benchmark. The poverty line should, to some degree at least, move with the times.
Given all that, the publication today of an important new report on how to measure poverty is most welcome. The enticingly named Social Metrics Commission, chaired by the Tory peer Baroness Stroud and with academics, poverty experts and former Labour advisers among its members, has come up with a new method of measuring poverty which may at least go some way to providing us with a more credible single metric than we now have.
Still a measure that has income at its core, and hence still readily measurable, it aims to iron out some of the problems with current measures. For instance, it makes some allowance for the costs of disability. It also takes account of the costs of childcare. And it takes some account of savings. All of which seems eminently sensible. That’s no doubt why, compared with the traditional poverty measures, those who this new proposed measure classifies as being in poverty align much more closely with those who report themselves as being materially deprived, in the sense of being unable to afford a number of specific items.
Looking for a single metric, it combines elements of the current absolute and relative measures by comparing incomes to a rolling three-year average of median incomes. For my taste that still looks a little too much like the current relative measure. I’m not sure our view of the poverty line should move quite that fast. But that’s a judgment call.
And so to the original question: how many people in the UK are poor? On this measure about 14 million or just over a fifth of the population, a fraction which appears to have changed little over the past 15 years. Poverty is concentrated among working-age families with children. It is much lower among pensioners than among other groups, and has fallen fast among pensioners over the past 15 years. Perhaps most strikingly, nearly half of those defined as being in poverty on this measure are living in a household containing someone with a disability.
You can never do justice to a phenomenon as complex, and subjective, as poverty with a single measure. But the demand for a single measure will never go away. This is not a perfect answer to that demand, but it’s probably the best we have for now.
Paul Johnson is director of the Institute for Fiscal Studies. Follow him on @PJTheEconomist