150324 Poverty statistics
  • Curiouser… Let’s start not by looking at where the lines go, but what they are. The blues lines are both for relative poverty: the proportion of people who have household incomes that are less than 60 per cent of the median, where the median changes from year to year. The pink lines are for absolute poverty: where the median is set, in real terms, in a particular year – in this case, 2010-11. “BHC” and “AHC” are “before housing costs” and “after housing costs”.
  • …and curiouser… Now let’s look at where the lines go. Broadly speaking, under the Coalition, absolute poverty has increased, whilst relative poverty has decreased. Why so? Here we come to the first quirk of the statistics. Because relative poverty is measured against a median that changes every year, it can go down simply because the median income goes down, not because people have actually been listed out of poverty. This is basically what has happened recently. And it’s why most observers prefer to use the relative measure over longer periods. The idea is that it reflects how society’s notions of poverty change with time, not how poverty itself has changed over the past couple of years.
  • …and curiouser… There’s not just a difference between relative and absolute, but also between poverty measured before and after housing costs. Look at the line between 2011-12 and 2012-13. Absolute poverty declines before housing costs are accounted for, yet increases after housing costs. This could well be because, as the Institute for Fiscal Studies suggests (p.69), people on low incomes didn’t benefit so much from low interest rates. Fewer of them have mortgages in the first place.
  • …and curiouser… So far, we’ve had four measures of poverty – how about some more? The Department for Work and Pensions now calculates its absolute poverty numbers with four different measures of inflation (p.2). The IFS publishes data for those in deeper poverty than the (rather arbitrary) 60 per cent level. There are figures for material deprivation and arrears on bills and illiteracy. And yet the Government’s work is still informed by two numbers in particular: relative and absolute childhood poverty, measured before housing costs. It has vowed to reduce the former to 10 per cent by 2020, and the latter to 5 per cent. Even the newer target for “persistent poverty” has been set in terms of relative poverty.
  • …and curiouser still? This has been a complicated story to tell in a handful of bullet-points, but that’s because poverty itself is complicated. Iain Duncan Smith recognised this by working towards a new measure of poverty that would range across various indicators, not just one. He wanted to get away from the focus on income that prevailed under Labour, and by which £millions were spent on raising people from just below the official poverty line to just above it. But whatever happened to that new measure? Sadly, it perished last year. Cause of death: politics. The next Government, whoever it is, should look to resurrect it.