A Framework for Poverty Measurement Using EU-SILC Brian Nolan and Christopher T. Whelan
Jan 05, 2016
A Framework for Poverty Measurement Using EU-SILC
Brian Nolan and Christopher T. Whelan
Outline
• The current position on poverty measures and targets
• Moving forward – the case for a tiered approach
• Moving forward – a revised consistent poverty measure
• Conclusions
The Current Position
• Poverty defined as exclusion because of lack of resources
• Low income on its own does not distinguish those experiencing generalised deprivation– For various reasons, identifies “at risk of poverty” not “poor”
• Scale of income growth means relative income poverty rates particularly misleading as sole indicator for Ireland– Poverty has not gone up!
• Combining low income with basic deprivation to measure “consistent poverty” captures those in most need
The Current Position
• 8 “basic deprivation” items originally used in constructing consistent poverty measure
• Adapted set explored in various more recent ESRI studies, which also monitor relative and “anchored” income poverty rates
• NAPS global poverty reduction target set in terms of reducing consistent poverty to < 2%
• Based on original set of deprivation items
• Change from LII survey to EU-SILC means measured deprivation levels higher in 2003
Need for A Framework
• No one indicator tells us all we want to know
• Both income and deprivation are measured imprecisely
• Both living standards and relativities matter
• In the short term, improvements in living standards have a major immediate impact
• In the medium/longer term, expectations adjust so distance from the median also matters for “participation in ordinary life of society”
A Tiered Approach
• Three-tiered approach to monitoring progress suggested by ESRI some time ago
• Want to see:– 1/ Real incomes rising and deprivation levels falling
for those on low incomes– 2/ Consistent poverty falling (with both fixed and
slowly changing set of items)– 3/ Relative income poverty falling
• Priority ordering as listed
Monitoring the Tiers
• Tier 1: Numbers below income poverty thresholds anchored at a point in time (Laeken); deprivation levels, esp. for those on low incomes (being developed at EU level)
• Tier 2: Consistent poverty with both fixed and changing set of items
• Tier 3: Numbers below relative income thresholds; numbers persistently below those thresholds; poverty gaps (all Laeken)
Revising Consistent Poverty
• EU SILC Data.
• Identifying dimensions of deprivation.
• Propose a new 12-item basic deprivation index.
• 6 items drawn from earlier index relating to food, clothes, heat.
• 6 new items relating to acceptable level of involvement in family and social life.
Deprivation Dimensions
• Basic : two pairs of strong shoes, a warm waterproof coat, a roast once a week…
• Consumption: a telephone, a dish washer, a car…
• Housing facilities: bath/shower, hot water, central heating…
• Neighbourhood environment: leaking roof & damp, pollution, noise…
Basic Dimension
Household & Household members can not affordOLD ITEMS
• Two pairs of strong shoes
• A warm waterproof coat
• New rather than second-hand clothes
• Eat meals with meat, chicken, fish (or vegetarian equivalent) every second day?
• A roast joint (or its equivalent) once a week
• Go without heating during the last 12 months through lack of money (ref pers)
NEW ITEMS
• Presents for family or friends at least once a year
• A week’s holiday away from home in the last 12 months
• Keep the home adequately warm
• Replace any worn out furniture
• Have family or friends for a drink or meal once a month
• Have a morning, afternoon or evening out in the last fortnight, for entertainment (ref pers)
Distribution of Deprivation on Basic Deprivation Scales
1+2+
01020304050607080
0 1 2 3+ % abovethreshold
LII 8 item EU-SILC 12 item
Economic Strain by Deprivation
0102030405060708090
100
0 1 2 3 4+
LII 8 item EU-SILC 12 item
Economic Strain Among Income Poor by EU-SILC 12
0
10
20
30
40
50
60
70
60% median Poor 70% median Poor
Below EU-SILC 12 item (2+) Above EU-SILC 12 item (2+)
Consistent Poverty by Alternative Deprivation Scales
02468
101214161820
60% median 70% medianLII 8 item (1+) EU-SILC 12 item (2+) EU-SILC 12 item (1+)
EU-SILC 14 item (2+)
Deprivation Items by Consistent Poverty Measures (70% Line)
0 20 40 60 80 100
Going without Heating
Shoes
Roast joint or equivalent
Meals with meat, fish or chicken
New rather than second-clothes
Warm water proof overcoat
Household Adequately Warm
New not Second Hand Furniture
Family for drink or meal
Afternoon or Evening Out
Holidays
Presents for family/friends
EU-SILC 12 NCP (70% median) EU-SILC 12 CP (70% median)
Deprivation Dimensions by Consistent Poverty Measures (60% & 70% Median Line)
Consistent Poor 70 %
Consistent Poor 60 %
0 1 2 3 4 5 6 7
Consumption
Housing
Neighbourhoodenvironment
EU-SILC 12 NCP (70% median) EU-SILC 12 CP (70% median)
EU-SILC 12 NCP (60% median) EU-SILC 12 CP (60% median)
Economic Strain by Consistent Poverty Measures (70% Median Line)
0
10
20
30
40
50
60
70
80
LII 8 item EU-SILC 12 item
Not consistently poor Consistently poor
Housing Costs a Heavy Burden by Consistent Poverty Measures (60% & 70% Median Line)
0
10
20
30
40
50
60
EU-SILC 12 (60% median) EU-SILC 12 (70% median)
Not consistently poor Consistently poor
Debt & Expenses Difficulties by Consistent Poverty (60% & 70% Median Line)
Consistent Poor 70 %
Consistent Poor 60 %
0 10 20 30 40 50 60 70 80
Debt problems
Arrears problems
Unexpectedexpenses
EU-SILC 12 NCP (70% median) EU-SILC 12 CP (70% median)
EU-SILC 12 NCP (60% median) EU-SILC 12 CP (60% median)
Conclusions• Tiered approach should replace sole focus on consistent poverty in
measuring progress in NAPS: focus on– Real incomes and living standards– Consistent poverty– Relative income poverty.
• With EU SILC, 12-item index captures basic deprivation
• Combined with income line and using threshold of 2+, level of consistent poverty similar to original measures.
• Identifies distinctive group experiencing generalised deprivation due to lack of resources