So here’s a question for the economic statisticians

Poverty is less than 60% of median household income, equivalised.

OK. It’s also usually measured by looking at disposable income – after taxes and benefits. OK, should be, obviously.

But here’s the question. The median household income that that is supposed to be 60% of. Is that also disposable income? After taxes and benefits?

I’m sure it must be but on the other hand given the casuistry around poverty numbers it might, might, just, not be.

So, anyone know?

15 thoughts on “So here’s a question for the economic statisticians”

  1. Households below average income: an analysis of the income distribution 1994/95 to 2018/19 (from here) would suggest so:

    HBAI estimates incorporate widely-used international standard measures of low income and inequality. The primary measure used in HBAI is equivalised disposable household income adjusted for household composition (called equivalisation), estimated on both a before and after housing costs basis (BHC and AHC). Our main income measure includes contributions from earnings, state support, pensions, and investment income among others, and is net of tax.

    HBAI uses this equivalised disposable household income as a proxy for living standards. A household is said to be in relative low income if their equivalised income is below 60 per cent of median income, while they are in absolute low income if their equivalised income is below 60 per cent of the 2010/11 median income adjusted for inflation.

  2. Isn’t any definition of poverty guaranteed to be arbitrary? I would say that, if you have a roof, heat, light, clothes and enough food then you are not living in poverty. If you lack one or more of these things then you are. If we succeed in making sure that poverty so defined is eliminated those of a left leaning persuasion will re-define poverty so that there are millions living in it. Even if we reached some kind of economic utopia with full employment and high living standards throughout, lefties would be wringing their hands over people being forced to run a five year old car.

  3. @Stoneyground

    Exactly.

    Poverty is defined as “whatever definition is required to ensure that millions can be described as living in poverty”

  4. Poverty is:

    Inability to get the latest iPhone
    Inability to afford all the recreational drugs and booze one wants
    Inability to afford designer clothes (especially handbags)
    Iability to have holidays on the Costa whatever
    Inability (on the part of slags) to spawn as many half-caste kids as they want
    Inability to hold down any sort of job

    … and that’s just for starters

  5. I suppose I may have lived in poverty in my student years. It didn’t feel like it.

    I guess that the real problems arise with drug/alcohol abuse, other cases of impaired sanity, those with intellectual impairment, and with “single mothers”.

    Categories two and three are obviously a legit charge on the taxpayer. Might charities be left to pick up case one? Could they, in a period when people managing charities prefer political campaigning to actual work?

    I have no idea what might best be done about case four.

  6. While it’s nice that single mothers are no longer condemned I’m totally baffled as to the move to having to praise and celebrate them for their struggle etc.
    Maybe we can blame the evolution of Pride for this as it seems once they achieved their goal of being proud of who they are (fair enough and good for them) they decided to change the goal posts to we all should be proud of who they are and that seems to have spread to other groups wanting acclaim for their ‘struggle’

  7. “I would say that, if you have a roof, heat, light, clothes and enough food then you are not living in poverty. If you lack one or more of these things then you are.”

    What if you lack one or more of those things because of your own actions? Ie spent all the welfare money you were given on other things? Are you in poverty or not?

  8. equivalised disposable household income adjusted for household composition
    And there lies some of the rub, for there are a remarkable number of people I’ve dealt with who have brought their parents over from South Asia to help with childcare on NRTPF visas, and who have no income. I’m not even sure if Sri Lanka and its neighbours even pay a state pension.
    So the survey says that this is a household of 6, when those who are legally resident might be 4. As an example of course. That becomes a family counted as being in relative inequality.
    Possible solutions is to make childcare cheaper, stop subsidising it out of the wages of the earner in this example, and to measure inequality in consumption.

  9. @ Jim
    Yes.
    That is why Tories used to talk about the “deserving poor” – being those in poverty other than through their own fault.

  10. I’m pretty sure most places use a straight 60percent of pre-tax median income.

    Because most places are activists or politicians who use it to try to gain more power and money.

    *Serious* groups don’t – but no one listens to them because their stance is ‘well, basically, poverty has been ended’.

    It’s the difference between ‘absolute’ and ‘relative’ poverty.

  11. [email protected].
    We had a task during a company indoctrination session seminar called “How proud are you of what you do?”, where you had to stand behind a number 1 (not) – 10 (very). Being raised to consider pride as conceit, arrogance and one of the 7 deadly sins, I got a lot of flack for saying I don’t do ‘Pride’ and stood at 1.
    To me it’s just another example of everybody needing to feel they’re special these days.

    And according to their definition, everybody I knew growing up in the 60’s was ‘in poverty’.

  12. 1) TW and PJH are right: the median is measured on a disposable income basis.

    2) A relative poverty measure, plus economic growth, does mean that today’s ‘poverty’ line was yesterday’s typical income. 60% of median income in the UK today corresponds to what was the median in the UK in 1987.

    3) in aggregate the original income (wages etc) of those who end up in ‘poverty’ in the UK today accounts for a bit more than half (68%) of their eventual disposable income. Cash benefits of all sorts (including state pensions) also account for a bit more than half (54%). Direct taxes (income tax, NI, council tax) knock off 22% to get the final total back to 100%.

  13. Check out the people going in and out of the local Job Centre. Do they look like they’re in poverty? In the 50s and 60s they would have had holes in their clothes and shoes – today, not so much. If you wish to see what real poverty looks like, visit Burundi (or somewhere with a similar GDP/capita).

    But there’s a huge poverty industry in the west, providing cushy 6-figure jobs for all those otherwise unemployable Tarquins and Aramintas with sociology degrees. So poverty (as so defined) ain’t ever going away.

  14. I’ve always assumed it’s all income before all and any outgoings. Thinking about it a bit, anything that *isn’t* all income before all and any outgoings destroys the very meaning of calling it “income”.

    So, if your household get £20k from people working and £5k from benefits and 1k from investments, that’s £26k household income. How much the mortgage is is irrelevant, how much is spent on food is irrelavent, how much tax is paid is irrelavanet. They are all *outgoings*, not income.

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