Measuring poverty in the UK and why it matters

Inequality, Poverty in the UK

Graham Whitham, Oxfam’s Senior Policy Advisor on UK Poverty and Inequality explains why poverty in developed nations cannot be separated from a relative lack of material resources. Income and material deprivation based targets could be removed from measures of child poverty under the welfare reform bill currently progressing through parliament. To do so could limit the ability to assess policies against their impact on the poorest in society. 

In 2010, the Child Poverty Act received cross party support and enshrined in law four income and material deprivation based targets to be met by 2020. The Welfare Reform and Employment Bill, currently passing through Parliament, removes the requirement on Government to meet these targets. 

The government intends to introduce a statutory duty to report on the number of children in workless households and levels of educational attainment, in place of the child poverty measures. They also intend to develop an additional set of indicators, likely to include measures of family breakdown, problem debt and alcohol and drug dependency, that they believe will enable them to measure progress on addressing the ‘root causes of poverty’. This is a marked shift away from longstanding empirical debates about how to measure poverty in a developed nation such as the UK. It also
goes against widespread understanding that poverty is defined as a lack of sufficient material resources. 

All this is happening at a time when rates of child poverty in the UK are expected to rise considerably in the years up to 2020.

Measuring poverty in developed nations

Absolute poverty measures focus on the minimum requirements needed to ensure ‘physiological efficiency’ (Rowntree 1901) and use thresholds of poverty that do not change over time. Relative poverty extends the concept from a lack of necessities needed for ‘physical efficiency’ to consider those in poverty as ‘social beings’ (Townsend and Kennedy 2004). This means that
people can be classed as poor if they lack the resources to participate fully in the society in which they live (Galbraith 1958).

The evidence across both the impact of relative poverty on the individuals it affects and on the society in which they live suggests that the consequences of poverty are longstanding and multi-faceted (Griggs and Walker 2008). Reducing rates of relative low income poverty in developed nations has been  a focus for policymakers across developed nations for the last 40 years.

In the UK, the focus has particularly been on child poverty. There are 3.7 million children in relative poverty in the UK after housing costs (28% of all children), and 2.3 million in relative poverty before housing costs (17% of all children).

These are the current targets in the Child Poverty Act:

  • Relative low income – to reduce the proportion of children living in households with income less than 60 per cent of current median income to less than 10%;
  • Combined low income and material deprivation – to reduce the proportion of children who live in material deprivation and have a low income to less than 5%;
  • Persistent poverty – to reduce to less than 7% the proportion of children in relative poverty for at least 3 out of the last 4 years
  • Absolute poverty – to reduce the proportion of children who live in absolute low income (below 60 per cent of median household income held constant at 2010/11 level) to less than 5%.

The measures tell us who is in poverty, which groups are at greatest risk of poverty, and whether rates of poverty are changing year on year. The relative measure enables us to understand whether low income households are getting nearer or further from the average income. This is helpful because the level of resources required to participate fully in society changes over time. 

Falls in median incomes

One of the perceived drawbacks of the relative measure is that if median incomes fall more quickly than incomes at the bottom it can appear as if poverty rates are falling even though the incomes of those at the bottom are not going up. The latter is what happened in the years after the financial crisis of 2008. In such instances it is important to look at poverty rates against fixed thresholds. This is also why policymakers need to understand what is being measured and, the way in which existing measures complement each other.  

Why the relative income measure needs to be retained

Poverty is a complex reality and there is no one perfect measure to capture it all. However, the relative income measure, along with the three other measures set out in the Child Poverty Act need to be retained. Children from low income households do worse in part because they have lower incomes.  Poverty is a complex reality and there is no one perfect measure to capture it all.

Combining the 60 percent median income-based measures of poverty with additional income or other measures of poverty is generally acknowledged to be the best way to describe and track poverty. This does not need to be, at the expense of tracking other indicators that are closely related to poverty and deprivation, but it is important to distinguish between measures of poverty with a strong empirical foundation and measures of the consequences of poverty, or indicators closely correlated with poverty.  

In a society such as the UK where resources are distributed unevenly and children’s outcomes are linked to their families’ backgrounds, it is vital that we recognise that poverty is fundamentally about a lack of sufficient material resources. The measures contained in the Act are vital in order to hold the government to account and enable it to assess policies against their impact on the poorest in society. 

Read More

Oxfam’s work on Poverty in the UK

Child Poverty Act 

The Welfare Reform and Employment Bill

Photo: Volunteers Jane Foote and Judith Crichton packing food at Tower Hamlets food bank. Credit: Oxfam/Sarah Brodbin

Author: Graham Whitham
Archive blog. Originally posted on Oxfam Policy & Practice.