Why We Need a Relative Income Poverty Measure
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feature Why we need a relative income poverty measure The latest international comparisons of child poverty rates from UNICEF show a smaller proportion of children living in relative income poverty in Hungary, Slovakia and Estonia than in the UK, Italy, Spain or the United States. Amid the current political debate about the value of measuring child poverty in this way, Dragan Nastic draws together UNICEF’s perspective to argue why it is still the best measure of the government’s success in countering child poverty. Introduction almost nothing about the suffocating nature In May this year UNICEF published its Report of child deprivation. It also fails to assess the Card 10, setting out the latest internationally opportunities a child has to break free from comparable data on child poverty in the world’s their present circumstances. rich countries using two very different meas- ures. The first league table (Table 1) shows the Iain Duncan Smith, Secretary of State for Work proportion of children in each country who are and Pensions, stated that: deprived, defined here as lacking two or more The failure of the relative income poverty of 14 items considered normal and necessary measure in isolation to properly reflect the for a child in an economically advanced coun- real experience of poverty in the UK in such try. The second league table (Table 2) shows the hard economic times drives home the need percentage of children living in relative income for us to think differently about poverty. poverty, defined as living in a household whose income, when adjusted for family size and com- His statement was a comment on the latest offi- position, is less than 50 per cent of the median 1 cial figures, which revealed that the number of income for the country in which they live. Justin Tallis/Reportdigital children living in relative income poverty in the UK fell by 300,000 in 2010/11, even as average The two league tables paint a very different pic- household incomes dropped.3 ture of child poverty in the world’s advanced economies. In Hungary, Slovakia and Estonia, ‘Real’ poverty, deprivation and relative for example, a smaller proportion of children live income in relative income poverty than in the UK, Italy, It is often argued that relative poverty is not Spain or the United States. However, this is not ‘real’ poverty. Real poverty, it is said, means because a smaller proportion of their children lacking basics – enough food to eat, adequate are poor in an absolute sense; it is because the clothing, a dry home, an indoor toilet, hot water, incomes of most poor households in these for- and a bed to sleep in. Can there really be more mer centrally planned economies do not fall as children living in poverty in the UK or the United far behind the median level of income for the States than in Hungary or Lithuania? nation as a whole. Arguments such as these lead many to reject Controversy the relative income measure and look for an Report Card 10 was published in the midst of, absolute, objective standard, for instance by and contributed to, a heated debate in the UK using a ‘direct’ measure like deprivation. In about the value of the relative income poverty practice, however, deprivation measures are measure. A Centre for Social Justice paper also relative. released around the same time highlighted, for example:2 The deprivation index developed by UNICEF is … our serious concerns with this measure, based on the kind of possessions, services and most notably that the exclusive use of an opportunities that most people would consider arbitrary line to measure child poverty tells us normal for a child growing up in a wealthy coun- Poverty 143 13 feature Why we need a relative income poverty measure households that are not income poor, and not Table 1: Percentage of children (aged 1 to 16) who lack two deprived in households that are income poor. or more of the following 14 items because the households in which they live cannot afford to provide them Second, and important for UNICEF as an inter- governmental organisation working all over the 0.9 Iceland 1.3 Sweden world, when comparing relative child poverty 1.9 Norway rates in different countries, a poverty line drawn 2.5 Finland at a percentage of median income only works 2.6 Denmark well if the countries being compared have 2.7 Netherlands broadly similar levels of income and living 4.4 Luxembourg costs. Otherwise ‘relative poverty’ comes to 4.9 Ireland mean very different living standards in different 5.5 United Kingdom countries. For example, a household with 50 7.0 Cyprus per cent of median income in Bulgaria has an 8.1 Spain actual income of €1,400 a year; a household 8.3 Slovenia with 50 per cent of median income in Norway 8.7 Austria has an income of €17,000 a year. 8.8 Czech Republic 8.8 Germany And yet, for all its weaknesses, the relative 8.9 Malta income poverty measure has its strengths and 9.1 Belgium is an indispensable tool. 10.1 France 12.4 Estonia The idea of defining poverty in a relative, rather 13.3 Italy 17.2 Greece than an absolute, sense is not new. In the eigh- 19.2 Slovakia teenth century, Adam Smith famously argued 19.8 Lithuania that poverty is the inability to afford, ‘not only the 20.9 Poland commodities which are indispensably necessary 27.4 Portugal for the support of life, but whatever the custom 31.8 Latvia of the country renders it indecent for creditable 31.9 Hungary people, even of the lowest order, to be without.’ 4 56.6 Bulgaria 72.6 Romania By the early 1960s, sociologists and econo- 0 10 20 30 mists like Victor Fuchs in the United States and Peter Townsend in the UK were arguing that governments should recognise the essentially try today. In other words, it is relative to both relative nature of poverty by setting national time and place. Twenty years ago, for example, poverty lines at a fixed percentage of national such a list would not have included an internet median income. A political consensus was also connection. Go back a little further in time and emerging. In the United States, the Republican ‘having at least one meal a day with meat, Party endorsed the relative idea: ‘No objective chicken or fish’ would not have been regarded definition of poverty exists,’ said a Republican as normal. In fact, the longer the historical view, congressional response in 1964. ‘The definition the more obvious it becomes that poverty is an varies from place to place and time to time. In essentially relative concept. Any poverty line America as our standard of living rises, so does intended to represent a minimum acceptable our idea of what is substandard.’5 standard of living in the industrialised world today implies higher standards of food, cloth- For UNICEF, the obvious alternative to a futile ing, housing, water supply, sanitation, health- search for an absolute standard is to update care, education, transport and recreation than national poverty lines in such a way as to track were available to even the wealthiest house- the norms and living standards of the society. holds of previous eras. The real question is how often, and by what method? Should the poverty line be updated The relative income measure has two principal irregularly in an ad hoc way, subject to political weaknesses. First, even those of us who sup- pressures and the competing influences of dif- port the principle of measuring child poverty in ferent interest groups? Or should it be updated a relative way would concede that household in a regular and systematic way in order to pre- income may not always be a reliable proxy for serve its relationship with contemporary living the real resources available to the child. It is, at standards? Setting the poverty line at a per- best, an indirect measure, leaving open the centage of each nation’s median income and possibility that children may be deprived in updating it every year is, we believe, the 14 Poverty 143 feature stronger option. This is why the Innocenti Table 2: Percentage of children (aged 0 to 17) who are Report Card series, in common with both the living in relative poverty* European Union and the OECD, continues to use a child poverty line based on a percentage 4.7 Iceland of median household income. 5.3 Finland 6.1 Cyprus What is child poverty? 6.1 Netherlands The starting point in deciding how to measure 6.1 Norway and tackle child poverty is understanding its 6.3 Slovenia true nature and multi-dimensional character. 6.5 Denmark 7.3 Sweden In its Resolution on Children’s Rights, the United 7.3 Austria Nations General Assembly adopted a definition 7.4 Czech Republic of child poverty which recognises the special 8.1 Switzerland nature of poverty for children, stating clearly 8.4 Ireland that child poverty is about more than just a lack 8.5 Germany of money, and can only be understood as the 8.8 France 8.9 Malta denial of a range of rights laid out in the United 10.2 Belgium Nations Convention on the Rights of the Child. 10.3 Hungray 10.9 Australia According to this definition, measuring child 11.2 Slovakia poverty can no longer be lumped together with 11.7 New Zealand general poverty assessments, which often 11.9 Estonia focus solely on income levels, but must take 12.1 United Kingdom into consideration access to basic social servic- 12.3 Luxembourg es, especially nutrition, water, sanitation, shel- 13.3 Canada ter, education and information.6 14.5 Poland 14.7 Portugal UNICEF bases its work and approach on this 14.9 Japan decision.