Poverty Measurement in Ireland Poverty and Social Exclusion in

							Poverty Measurement in
        Ireland

         Brian Nolan
            UCD

Second Peter Townsend Memorial
          Conference
       Bristol, Jan. 2011
                    Outline

• The evolution of poverty measurement in Ireland
  over the last 25 years

• Some trends in key poverty indicators

• Some lessons?
           The Evolution of Poverty
           Measurement in Ireland

• In 1970s and 1980s, poverty discussed with
  reference to
  – relative income poverty rates
  – numbers on safety-net social security or below income
    thresholds derived from them
  – Numbers below adequacy standards proposed by
    official Commission on Social Welfare
                  The Evolution of Poverty
                  Measurement in Ireland
• Survey-based research in ESRI in late 1980s/early 1990s included both income and
  deprivation measures, latter heavily influenced by Townsend

• Emphasised limitations of low income on its own in distinguishing those
  experiencing generalised deprivation

• Income did not distinguish those manifestly experiencing exclusion due to lack of
  resources
    – Significant proportion of low income households not relatively deprived
    – Significant proportion of those just above commonly-used relative thresholds were
      relatively highly deprived
    – For a variety of reasons

• Proposed combining low income vis-à-vis relative benchmarks with “basic”
  deprivation to measure “consistent poverty”
             The Evolution of Poverty
             Measurement in Ireland
• 8 “basic deprivation” items originally used in constructing
  consistent poverty measure
• Unable to afford
   – new (not second-hand) clothes
   – two pairs of strong shoes
   – a meal with meat, chicken, fish every second day
   – warm overcoat
   – a roast once a week
   went without substantial meal
   went without heating during the last 12 months through lack of
     money
   debt problems in relation to ordinary living expenses
              The Evolution of Poverty
              Measurement in Ireland
• These items selected as capturing “basic deprivation” on
  the basis of
   – Factor analysis distinguished these as distinct dimension of
     deprivation
   – This cluster had relatively strong relationship with income
     (compared with e.g. housing or neighbourhood-related items)
   – Most regarded as necessity by substantial majority - but this not
     applied as criterion
   – Validated with reference to socio-economic profile, and
     relationship with self-assessed economic stress
           The Evolution of Poverty
           Measurement in Ireland
• Those „consistently poor‟ distinctive in terms of
  socio-economic profile (far fewer farmers, self-
  employed than low income population, more
  unemployed, ill, lone parents)
• High levels of self-assessed economic stress
• Very few savings/liquid financial assets
• Low wealth
• Implications as much for profile of those affected
  and underlying causal processes as for overall scale
          Poverty Measurement and Anti-
                 Poverty Strategy
• Ireland adopted formal explicit national anti-poverty strategy (NAPS) in 1997

• “People are living in poverty if their income and resources (material, cultural and
  social) are so inadequate as to preclude them from having a standard of living
  which is regarded as acceptable by Irish society generally. …excluded from
  participating in activities which are considered the norm for other people in
  society.”

• Original NAPS global target: reduce poverty by 2007 from (9-)15% to less than
• (5-)10% “as measured by the ESRI”
    – i.e. the numbers below (50% or) 60% relative income line and experiencing basic
      deprivation

• By 1999, clear this had already been achieved, target revised to < 5% by 2004

• Then to < 2%, still based on original set of deprivation items
            The Evolution of Poverty
            Measurement in Ireland
• In principle, clear from outset that indicators should be
  adapted over time as standards change
• Incomes rose very rapidly in second half of 1990s, levels
  of deprivation fell markedly, views about necessities also
  seen to change
• Change from LII/ECHP survey to EU-SILC 2001/2003
  meant some changes in items available in survey
• Adapted set of 11 items, 6 from earlier index + 5 new
  items relating to involvement in family and social life.
                   The Evolution of Poverty
                   Measurement in Ireland

     OLD ITEMS:
•   Two pairs of strong shoes
•   A warm waterproof coat
•   New rather than second-hand clothes
•   Meal with meat, chicken, fish (or vegetarian equivalent) every second day
•   A roast joint (or its equivalent) once a week
•   Went without heating during the last 12 months through lack of money

[dropped “went without meal” and “debt problems”]

    NEW ITEMS: Able to afford to
•   Give presents to family or friends at least once a year
•   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
     Evolution of Poverty Measurement
                 in Ireland

• Consistent poverty now = below 60% of median
  equivalised income plus enforced absence of at
  least two items from 11-item deprivation scale
• Change from LII survey to EU-SILC also meant
  measured deprivation levels higher in 2003
• Net result: level of consistent poverty in 2003 with
  new survey and measure similar to 2001 with
  original measure
    Deprivation by Consistent Poverty, 2004
      Presents for family/friends
      Afternoon or Evening Out
        Family for drink or meal
New not Second Hand Furniture
  Household Adequately Warm
    Warm water proof overcoat
New rather than second-clothes
Meals with meat, fish or chicken
       Roast joint or equivalent
                          Shoes
         Going without Heating

                                    0   20   40     60           80       100
            Not in consistent poverty             In consistent poverty
  Relative Income Poverty 1994-2009

                      n
% Below 60% of Median I come

1994 2000 2004 2007 2008 2009

15.6   20.9 19.4 15.8 13.9 14.1
               Relative Income Poverty by Age, Ireland

    50

    45

    40

    35
    30                                                   < 18
%




    25                                                   18-64

    20                                                   65+

    15
    10

    5
    0
       94




               97

               98



                        00

                        01



                                    03

                                    04

                                    05

                                    06

                                    07

                                    08

                                    09
    19




            19

            19



                     20

                     20



                                 20

                                 20

                                 20

                                 20

                                 20

                                 20

                                 20
       ‘Consistent’ Poverty 1994-2009
                       I
% Below 60% of Median ncome and Basic Deprivation
    (Index, Threshold Change Between 2000/04




1994 2000 2004 2007 2008 2009

15.1      6.2     6.8     5.1      4.2      5.5
  Understanding the Trends 1994-2007

• Unemployment fell from 16% to 4% by 2000, and
  remained low to 2007
• Social welfare rates lagged behind average income in
  early part of boom
• Real living standards rose for everyone, but elderly esp.
  fell behind (heavily reliant on flat-rate SW pensions)
• But from 2000 social welfare rates caught up
• Fall in „consistent‟ poverty reflects sharp declines in
  deprivation levels
   Understanding the Trends: 2008-09

• “Bust” in 2008 led to sharp increase in
  unemployment, but also falling earnings/profits
  for those still in work
• Social welfare initially protected as incomes fell
  during recession
• Then cut for working-age recipients but not
  pensions
• Substantial direct tax increases, progressive
• So Gini down!
                     Profiles

• “Consistently poor” have markedly different
  profile to those below income lines
• Points towards longer-term unemployed, lone
  parents, some working families, disability as key
  priority groups for policy
• Elderly as a group have much lower rates of
  consistent poverty because of low deprivation
• But sub-set of those on means-tested pensions
  have higher rates
                       Lessons?

• No one indicator tells us all we want to know about
  poverty and exxclusion!
• Both income and deprivation are measured imprecisely
• Both living standards and relativities matter
• In the short term, improvements in living standards have
  an immediate and important impact on deprivation
• In the 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:
• 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 at EU Level

• Tier 1: Numbers below income poverty thresholds
  anchored at a point in time; material deprivation
  indicator
• Tier 2: Could measure consistent poverty with
  common set of items and common or varying
  weights
• Tier 3: Numbers below relative income thresholds;
  numbers persistently below those thresholds;
  poverty gaps
                       Conclusions
• Measuring deprivation directly is invaluable

• Tiered approach better than sole focus on either relative income,
  “constant” income or consistent poverty in measuring progress

• Focus on
   – Real incomes and living standards
   – Consistent poverty
   – Relative income poverty

• „Consistent poverty‟ helps identify a distinctive group
  experiencing generalised deprivation due to lack of resources,
  priority group for policy as well as teasing out processes