The problem with relative poverty measurements

As detailed here, from the OECD.

Another is that economic growth is the answer to poverty; if you believe that inequality fuels growth, then living with inequality is the best way to defeat poverty.

However, economic growth and poverty have not been strongly related within the OECD in the past generation. There is little evidence of a relationship between poverty and household income growth in either a positive or negative direction. For example, Ireland has had very rapid income growth over the period and a large rise in poverty, while income growth has stagnated in Belgium in combination with a considerable reduction in poverty.

The problem being of course that relying upon relative poverty as your measure leads you to insane drivel like this.

For the argument is not that income growth will reduce relative poverty. It is that income growth will reduce absolute poverty.

Which, when you come to think of it, is pretty obvious. Poverty is not having enough money, income growth is having more money and thus income growth will reduce poverty. Absolute poverty.

Now, if you, as the OECD does, define poverty only as relative poverty, you end up in a very strange place. OECD poverty is defined as less than 60% of equivalised median household income.

And using that definition you can, like the OECD does there, claim that one of the great booms of all time, one in which incomes rise substantially, causes more poverty.  Which is barking.

No, rising incomes reduce poverty. Although they might (and do not have to) increase income inequality. Which is why we need to scrap this idea of relative poverty.

There are no problems at all in keeping the same calculations as a measure of inequality if that\’s what people want to measure and fret about. Just don\’t call it poverty: because when you do you\’ll end up spouting the arse felching nonsense quoted above. Everyone getting richer leads to an increase in poverty.


5 thoughts on “The problem with relative poverty measurements”

  1. Am I right in thinking that if all the world’s billionares were to move to the UK relative poverty would increase? And therefore be a bad thing?
    Is it just me but is this crazy?

    Tim adds: Yes, this is the argument. And yes, it is crazy.

  2. Right. Also, the argument is that a country with a huge amount of people in dire straits, and a rich elite – whether it is Brazil or North Korea – has zero poverty.

    The guy with a median income is starving. He is dirt poor. And so is the other 50 % or more of people. And then there is no relative poverty, because the median person is not making more than the poorest.

  3. There’s also the issue of when you measure relative poverty: before or after redistribution (free health, free education, roads to use, subsidised housing, income supplements and benefits). If before, anyone getting at all richer increases relative poverty but also increases the pool for redistribution (apart from anything else).

  4. “Am I right in thinking..”

    No,you’re not right, as that would not have a discernable impact on median household income.

  5. “Relative poverty” was a wheeze invented by the Left to keep them going after “absolute poverty”, or “actual” poverty to give it a more accurate description, was more or less eliminated.

    Other tricks they use include inventing new standards of poverty, e.g. Brown claiming that anyone without a broadband connection was in dire poverty.

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