A Framework for Poverty Measurement Using EU-SILC Brian Nolan and Christopher T. Whelan.

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+


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 %


0 1 2 3 4 5 6 7

Consumption

Housing

Neighbourhoodenvironment



Economic Strain by Consistent Poverty Measures (70% Median Line)

0

10

20

30

40

50

60

70

80


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)



0 10 20 30 40 50 60 70 80

Debt problems

Arrears problems

Unexpectedexpenses



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

A Framework for Poverty Measurement Using EU-SILC Brian Nolan and Christopher T. Whelan.

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