The Way We Measure Poverty is Broken – Liberal Article
My colleagues and I have written a lot about poverty; increasing food insecurity, income inequality and the social problems exacerbated by COVID-19. In all the articles I authored, I avoided wherever possible using official UK government poverty statistics as they are pretty unfit for purpose.
Somewhat remarkably, according to official statistics, the proportion of people living in poverty has not changed substantially in my lifetime. Roughly one out of five, since 1997, have been living in poverty. This steadiness persisted despite the five-quarter-long recession in 2008/9 and a decade of Conservative austerity. Is this evidence of an effective welfare state and safety net? Probably not. It is more likely evidence of a faulty instrument.
Is that just speculation? Stats, after all, don’t lie. The rate of free school usage at primary level has jumped to almost a quarter of children in the North East, universal credit and other low-income claims have steadily risen and the usage of food banks has skyrocketed. Why do these auxiliary measures of poverty paint such a starkly different picture than the official statistics?
According to the current methodology, a household is considered in poverty if they earn 60% below the median (or ‘middle’) income. Where the issue lies, as pointed out by Daniel Edmiston, is that it masks a worsening situation amongst those in the lowest income brackets. It only measures the distribution of income in the lowest half of households, meaning those earning less than £29,900 per year in FYE 2020.
The worst performing income brackets under the successive Conservative governments have been those already below the poverty threshold. Recent statistics from the ONS show that the poorest fifth of people saw their incomes fall on average 3.8% a year in real terms between 2017 and 2020, and are 5% worse off than they were in 2012. These decreases are not homogeneous; Black and other ethnic minorities have seen their incomes drop at a greater pace than their white counterparts.
Those worst affected by welfare reform were already likely to be below the poverty line, meaning they have fallen further below as a result. The lowest 5% of the income distribution have seen their incomes drop in real terms by 15% between 2012 and 2019 as a result of stagnated wages and the introduction of universal credit.
The choice of the 60% measure of poverty was an EU directive to provide comparable statistics throughout the bloc. For better or worse, we are out of the EU now. We should use the opportunity to tear up the old measure and introduce a new, more comprehensive way to talk about and measure poverty.
One way to do this is through the introduction of a Minimum Income Standard (MIS) as proposed by poverty charity the Joseph Rowntree Foundation (JRF). As the name suggests, it is a baseline income determined on the level of what things actually cost, not what the middle income of the country is. It would calculate the minimum cost of housing, food, energy, transport, internet access and all that the public – not government – believes is needed for a “minimum socially acceptable standard of living”.
The JRF propose the measure as they see poverty not as an individual’s place in the income distribution, but as being unable to afford to live; about having to make difficult decisions between “heating or eating”. This is a growing reality for thousands in one of the world’s wealthiest nations. It is a reality that is not adequately captured in the traditional poverty measure.
The growing disparities in income and wage growth, as I wrote about recently, is no doubt a contributing factor in this issue. Real wages for the lowest brackets remain too low to support an adequate standard of living. All while those in the highest brackets have seen significant increases in their market power through a concentration of wealth and a system designed to facilitate it.
38% of Universal Credit claimants were in work and six in 10 people (including children) in poverty have at least one employed person in their household. The Government is subsidising (but failing to adequately support) those exploited by large corporations who can afford to pay their workers a real living wage, but instead choose pay-outs to their directors and shareholders. More needs to be done to address these disparities, and a better measure of poverty is a start.
Written by Junior Liberal Writer, Daniel Jones
Point of Information
The government is out of touch – A Labour Response
Daniel’s article highlights a real-time problem. Poverty surrounds us, particularly following the past year of struggle and hardship. The problems with the system and the measurement instruments directly affect poverty itself and the issues with these are vast.
Mainly, it demonstrates just how out of touch the government is with what is happening beyond the walls of Parliament. For the most part, MPs don’t have to walk down the poorest streets in the country. Nor do they have to worry about their children going hungry or keeping a roof over their heads. They simply don’t see how poverty affects individuals. If they did, I am sure they’d realise that their contribution to the issue is not enough.
I agree with the entirety of this article, particularly that the 60% measure is insufficient. It means that the government only sees poverty as a statistic surrounding income. They are not seeing the hardship beyond these numbers.
With Britain having left the EU, the government has a real chance to move towards proactivity over comparability. The wellbeing of those in poverty is far more important than the glorification of statistics. The sooner the government realises this, the better.
Finally, ways in which they can do this could involve a Minimum Income Standard; Universal Basic Income; or, at the very least, the raising of the minimum wage – although there is naturally a debate for and against all of these issues. But for now, I would encourage and hope to see the government considering these and reaching a realisation of what poverty actually is.
They need to be better in touch with the people, especially those in poverty.
Written by Chief Labour Writer, Abi Clargo
So, what should we do? – A Conservative Response
I must applaud Daniel for a very thorough and well-researched article. He has certainly fired some shots, but they are accurate.
The first step in the redressing of any problem is recognition. Recognition that cannot be done, without the ‘vision’ that proper metrics may offer. It is for this reason, therefore, that I would not be surprised if a government decided to paint a ‘nicer’ picture (for them) with their choice in statistics.
This is an important problem to address. Not only from my own point of view but also from the point of view of the very elites in question; if the difference between those at the top and those at the bottom degenerates too far, there will be instability. Instability, that will threaten the position of those that benefit from the status quo.
It is true that Capitalism has led to the most incredible lifting of poverty we have ever seen. For that reason, I am a proponent. I must concede, conversely, that it has also led to an exponentially increasing concentration of wealth. As the saying goes, “the rich get richer” and the poor get left behind; it is basic mathematics.
So, what do we do?
If you attribute value to anything, hierarchies necessarily form. The ever-important problem, therefore, is to understand how to regulate these. There has been a hint of this with Daniel’s last paragraph centring on the wealthiest in our society; arguing that there should be more wealth redistribution.
And perhaps there should be, but we should first start with unburdening the poor. Lessening income tax, council tax, VAT, and other costs that affect the poorest the hardest, should surely be our first port of call?
Taxing the rich means the money goes through the government’s hands (and we know how greedy they are!). Lessening the taxation of the poor (allowed by the reduction of unnecessary public expenditure) means the money would go directly to those who need it. It also means that you don’t have to break the backs of the rich. They would simply leave, after all.
Written by Senior Conservative Writer, Alexander Dennis