Defining and measuring poverty Chris Goulden, Policy & Research Department, JRF

Can we agree on what poverty is? Poverty = resources not sufficient for minimum needs Resources What do people ‘deserve’ in/out of work, if disabled or parents? Financial and non-financial resources Direct (capabilities/capital) and indirect (services) Sufficient Income, costs and how resources are used Minimum needs Relationships, health, nutrition, housing, education, clothing, basic services but also… social participation, insurance, a holiday? Do we have a right to have our minimum needs met?

Why care about poverty? During a decade, over half of us will experience poverty at least once Affects health, education & other outcomes Child poverty costs UK £29 billion+ every year Work is not a guaranteed route out of poverty Poverty exists but is not inevitable

How do we measure poverty? Relative income poverty Below 60% median equivalised h/hold income Severe poverty (40% below) Fixed threshold poverty (“absolute”) Relative expenditure poverty Material deprivation Deprived of certain items and below 70% median The minimum income standard www.jrf.org.uk/mis Life chances and social mobility Dynamic Persistent Recurrent Transient Multi-dimensional ‘Sustainable Livelihoods’ Global poverty indices

Income poverty rates 1961 to 2012/13 Absolute based on 98/99 level (so same % as relative poverty in that year); Severe = 40% below median Before Housing Costs

Pros and cons Relative income poverty Fixed-threshold poverty Has a history, already being used in policy across EU, broadly based on needs Arbitrary, impossible to eradicate, data quality, inequality measure Fixed-threshold poverty Rhetorically stronger, perhaps easier to reduce (but not at present!) Actually measures relative spending power – not really ‘absolute’ Spending poverty Possibly a better guide to living conditions No real interest in policy circles, some save rather than spend, data quality Material deprivation Directly measures living standards But what items to choose and how to keep up with norms? MIS Not arbitrary, based on public consensus, based on needs and costs of living Not really a ‘poverty’ measure, doesn’t cover every household type Life chances Longer term and dynamic, looking at drivers of poverty Hard to measure, downplays structures, blames parents and individuals Dynamic Better representation of what’s really happening Harder to interpret, data lag Multi-dimensional Incorporates more of the complexity of poverty Can be hard to understand and often driven by single factors anyway

What’s best? It matters how we measure poverty But in many ways not Broadly same kinds of people are at risk No single measure is perfect Having a single measure focuses effort… But risks narrowing policy (Tax Credits?) A range of measures better reflects a comprehensive strategy for all groups