1. Income Poverty in Australia Results, Methods and Issues
Rob Bray
Centre for Social Research and Methods
ANU
29 March 2017

2. Structure Approaches to poverty Relative income poverty in Australia
Issues in measurement
Poverty & alternative measures
Some conclusions

3. Poverty
By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but what ever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. …. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct.
Adam Smith 1776

4. Poverty - Conceptual approaches
Absolute – don’t worry about the shirt – do you have enough to eat?
Income poverty line:
Do you have enough money for a linen shirt?
or two if everyone else has four ?
Deprivation – do you have a linen shirt ?
Sen – do you have the capability (including the right to do so) of obtaining a linen shirt if you value it ?
Social exclusion – are there communities where no one has a linen shirt (and may not even aspire to have one)?
Behavioural – the reason people don’t get a job and buy a linen shirt is because the government keeps giving them free cotton ones.

5. Income Poverty Lines
A level of income below which a person is considered to be in poverty.
Headcount (also can do poverty gap)
Can be derived
‘Scientific’
Budget Standards
Expert lines
Consensus
Distributional

6. Relative income poverty 1982-2014: 50% & 60% median lines – SIH current income

7. Relative income poverty 2009/10 – 2013/14 SIH 50% median

8. Recent trends – relative half median – various surveys

9. Changing living standards SIH 1982– : Income poverty - using real and relative 50% median poverty lines

10. Duration HILDA 2001-2015 years in poverty (50% median)
34.4%
7.7%
2.9%

11. Issues in measurement Definition of income (and data quality)
Unit of analysis
Person, income unit, family, household, extended household
Income Pooling
Equivalisation - Accounting for needs
OECD 1/0.5/0.3
Weighting
Scope of population
Relative to whom
Time period – income smoothing?
Weekly, annual

12. Investment/ Unearned Income
Components of Income
Salary Sacrifice
Market Income
Private Income
Domestic
Production
Investment/ Unearned Income
Illicit/Cash income
Government Transfers
Gross Income
Imputed Rent
Private Transfers
Income Tax
Disposable Income
Cost of Earning, incl.
Childcare
Indirect Benefits
(Health/Ed’n etc)
Total Income
Indirect Tax
Final Income
Capital gains
(net of tax)
Comprehensive Income

13. Income and Expenditure HES 2009/10 – Equivalised disposable income and goods and services expenditure

14. Income – and imputed rent SIH : Relative income poverty – 50% median – calculated on a income (10.7%) and income + imputed rent and rental subsidy (9.4%) basis (ABS lifecycle HH type)

15. Unit of analysis SIH : Relative income poverty – 50% median – calculated on a household (10.7%) and income unit (12.0%) basis

16. Population – relative to who Tasmania: SIH : Relative income poverty – 50% median – calculated relative to the Australian and the Tasmanian median equivalised disposable income

17. Income poverty and other measures
Wealth
Consumption
Perceptions
Hardship/Deprivation

18. Wealth Distribution of those in poverty by net wealth decile (SIH 2013-14, 50% median)

19. Income and consumption poverty (HES 2009/10)
Income poverty 11.9%

20. Income and consumption poverty (HES 2009/10)

21. Income and consumption poverty (HES 2009/10)
Income poverty 11.9%
Consumption
poverty 11.5%
Income & Consumption
poverty 4.6%

22. Perceptions Distribution of those in and not in (50% median) poverty by self assessed financial circumstance, HILDA 2015

23. Deprivation (1) HES

24. Deprivation (2) HES

25. Conclusion (1) Income poverty is sensitive Definitions of income
Quality of data
Technical decisions
Relative income poverty does not match well with alternative measures
Use with caution
Language of ‘at risk of poverty’

26. Reflection Need to ask why we persist with these measures?
Other options
Better deprivation measures
Use of big data – who has problems
Where does the safety-net fail?
Newstart rate & partial capacity
Suspensions
Underemployment
Those with high costs
Those outside the system
Some private renters

27. Conclusion (2)
“The definition of poverty has been subject to extensive, occasionally useful, discussion”
Piachaud & Sutherland
Piachaud, D & Sutherland, H, 2000, 'How Effective is the British Government's Attempt to Reduce Child Poverty?', Innocenti Working Paper, no. 77, UNICEF Innocenti Research Centre, Florence, Italy.