Income, Deprivation and Poverty: a longitudinal analysis Richard Berthoud and Mark Bryan Institute for Social and Economic Research University of Essex

The poor shall be taken to mean persons.... whose resources.... are so limited as to exclude them from the minimum way of life of member states in which they live. (European Union 1984) Agreed processLack of resources  Exclusion from minimum way of life Interpretation 1“Poverty”Outcome of poverty Interpretation 2Cause of poverty“Poverty” How do you measure poverty?

The poor shall be taken to mean persons.... whose resources.... are so limited as to exclude them from the minimum way of life of member states in which they live. (European Union 1984) Agreed processLack of resources  Exclusion from minimum way of life Interpretation 1“Poverty”Outcome of poverty Interpretation 2Cause of poverty“Poverty” How do you measure poverty?

BHPS data Nine waves: Household level variables: deprivation scores, net income, household structure etc Follow individuals over time Below pension age 6,590 individuals from 2,279 original households, 50,159 person wave observations

Components of the deprivation index Daily living (don’t have/can’t afford) Financial strainDurables (don’t have) HolidayNo savingCar FurnitureHousing paymentsColour TV ClothesDifficulty managingVideo MeatWashing machine VisitorsDishwasher Microwave Computer Hi fi Cable/satellite Telephone Cronbach’s α = 0.75

Deprivation score plotted by income

Trends in daily living deprivation score :

Summary of a pooled cross-sectional regression equation predicting deprivation scores Group of covariates Variance explained Log of income 14.1% Age 0.8% Family composition 4.5% Health 2.0% Education 0.8% Income sources 7.2% Housing tenure 6.8% Region 1.0% Overall 37.5%

Cross-sectional and longitudinal relationships between log income and deprivation Coefficientt-ratioVariance explained Cross-section % Between effects % Within effectsCurrent % Lagged

Cross-sectional and longitudinal relationships between log income and deprivation Coefficientt-ratioVariance explained Cross-section % Between effects % Within effectsCurrent % Lagged

Cross-sectional and longitudinal relationships between log income and deprivation Coefficientt-ratioVariance explained Cross-section % Between effects % Within effectsCurrent Lagged %

Conclusions Two measurement issues –Very low incomes –Deprivation over time The dynamics of deprivation –Longitudinal relationship much weaker –Focus on longer term incomes Poverty is less common, but more serious and more intransigent than one-off measures record

Further information R. Berthoud, M. Bryan and E. Bardasi, The Dynamics of Deprivation, DWP Research Report 219, Department for Work and Pensions, 2004 Shorter article on request from