Mapping the Australian Poverty Profile: A Multidimensional Deprivation Approach

The limitations of income‐based poverty lines are widely acknowledged, but Australia lags behind many other countries in implementing new measures of social disadvantage based on the deprivation approach. A new suite of questions included in wave 14 of the Household, Income and Labour Dynamics in Australia (HILDA) survey allows the deprivation approach to be applied. This article describes the advantages of the deprivation approach and shows that while the income and deprivation approaches can produce similar overall results, the circumstances of some sub‐groups vary greatly according to which measure is used. A measure based on deprivation alone and/or a combined measure would be an important complement to conventional income‐based poverty rates.     

RELATIVE OR ABSOLUTE POVERTY LINES: A NEW APPROACH

When measuring poverty over time analysts must choose the value of the income elasticity of the poverty line, which essentially determines whether an absolute or relative poverty line is being used. The choice of this parameter is ultimately a value judgement, but this paper suggests an approach which has some empirical basis. Borrowing from the life-style and deprivation approach to poverty, various dimensions of poverty and deprivation are identified and the income elasticity of these items is used as the income elasticity of the poverty line. Data from the 1987 and 1994 Irish Household Budget Surveys suggest an upper bound of 0.7 for this parameter. Poverty measures using a number of values of the income elasticity of the poverty line are presented and test statistics are presented to determine whether observed differences in poverty measures are statistically significant.     

A SYNTHESIS OF POVERTY LINE DEFINITIONS*

A fundamental point of discussion in poverty research is whether poverty is an absolute or a relative concept. If poverty is seen to be a situation of absolute deprivation, a poverty line will usually be defined to be independent of the general style of living in society. If poverty is considered to be a situation of relative deprivation, a poverty line will be defined in relation to the general style of living in society. The choice for one of these two approaches has important consequences for social policy, as absolute poverty may be reduced by economic growth, while relative poverty will only decrease when income inequality decreases. This paper suggests a poverty line definition that is not a priori meant to be either absolute or relative, but depends on the perception of poverty in society. If the poverty line is higher in countries with higher median income (as an indicator of “general style of living”) the poverty line is said to be relative; if the poverty line does not vary with median income, it is said to be absolute. The poverty line definition suggested appears to be a generalization of almost all well-known poverty line definitions. Poverty lines thus defined are estimated for eight European countries on the basis of a 1979 survey. The resulting lines appear to have an elasticity with respect to median income of 0.51, and hence can be said to be halfway on the scale between absolute and relative.     

MEASURING POVERTY AND DEPRIVATION IN SOUTH AFRICA

This paper compares a standard expenditure-based poverty measure with a specifically created composite measure of deprivation using household survey data from South Africa. While there is a strong overall correlation between expenditures and levels of deprivation, the correlation is much weaker among the worst-off South Africans. In addition, the two measures differ considerably in the impact of race, headship, location (urban, rural), and household size on expenditure poverty versus deprivation. In general, the deprivation measure finds more Africans, rural dwellers, members of de facto female-headed households, and members of smaller households deprived than expenditure poor. Only the differences in the effect of household size on poverty are sensitive to assumptions about equivalence scales. As a result, the two measures diverge greatly in identifying the poorest and most deprived sections of the population, which may have considerable consequences for targeting.     

THE SIZE AND DISTRIBUTION OF THE POVERTY GAP IN CANADA: A MICRO ANALYSIS OF VARIATIONS AMONG DEMOGRAPHIC GROUPS

Poverty is a much used term by politicians, economists, sociologists, the media and interest groups. Although there is some common consensus that the word poverty means some type of deprivation, there is a lack of comprehensive measures to quantify this term. Although deprivation can relate to a number of areas such as health and education, the focus in policy development has been aimed at economic deprivation or more specifically, income adequacy. Even in this perspective, the availability of comprehensive measures are limited. The United States is the only major industrial nation that has an official poverty line. Several unofficial poverty lines have been developed in Canada, but the poverty measures have not gone beyond head counts of people who fall below these lines. In an environment where the goal is to further progressive social development constrained by inadequate public resources, the emphasis has been on first directing scarce resources to those "most in need". To get a better perception of economic need, this paper provides a micro analysis of the size and distribution of the poverty gap so that meaningful comparisons can be made between demographic groups. The results of this analysis yield some interesting findings. For example, there are virtually no poor elderly couples and although there are a large number of poor single elderly, their income shortfalls are relatively small and are highly concentrated near the poverty line; the poverty rate among families with children is quite low but their incomes on average fall well below the poverty line and are widely dispersed; and single parents fare badly on all measures.     

Absolute and Relative Deprivation and the Measurement of Poverty

This paper develops the link between poverty and inequality by focussing on a class of poverty indices (some of them well–known) which aggregate normative concerns for absolute and relative deprivation. The indices are distinguished by a parameter value that captures the ethical sensitivity of poverty measurement to "exclusion" or "relative–deprivation" aversion. The indices can be readily used to predict the impact of growth on poverty. An illustration using LIS data finds that the United States show more relative deprivation than Denmark and Belgium whatever the percentiles considered, but that overall deprivation comparisons of the four countries considered will generally depend on the intensity of the ethical concern for relative deprivation. The impact of growth on poverty also depends on the presence of and on the attention granted to concerns over relative deprivation.     

Multidimensional Poverty and Material Deprivation with Discrete Data

We propose a characterization of a popular index of multidimensional poverty which, as a special case, generates a measure of material deprivation. This index is the weighted sum of the functioning failures. The important feature of the variables that may be relevant for poverty assessments is that they are discrete in nature. Thus, poverty measures based on continuous variables are not suitable in this setting and the assumption of a discrete domain is mandatory. We apply the measure to European Union member states where the concept of material deprivation was initiated and illustrate how its recommendations differ from those obtained from poverty measures based exclusively on income considerations.     

Relative standing and temporary migration: Empirical evidence from the South Caucasus

This paper empirically investigates the relationship between households’ relative deprivation and the intentions of their members to temporarily migrate abroad in three transition economies of the South Caucasus: Armenia, Azerbaijan and Georgia. To capture respondents’ relative deprivation, we use self‐reported information on respondents’ perception of the relative standing of their household in comparison to those of their neighbors. Controlling for households’ absolute income and other relevant subjective dimensions, we illustrate that households’ relative position vis‐à‐vis their reference groups plays an important role in determining the intentions of their members to migrate abroad. In particular, individuals are more willing to engage in temporary emigration if they perceive themselves to be poorer than the reference group. Our results may have important policy implications. A conjectural suggestion of our empirical exercise is that if migration has to be curbed, reducing absolute poverty alone may not be sufficient. In addition, policy‐makers may need to decrease relative income differentials within the country.     

Poverty as social deprivation: a survey

The concept of poverty is discussed using qualitative and quantitative measures as an indicator for social deprivation. Poverty can be absolute, relative, income based, consumption based, or entitlement based. The variation in the concept of poverty reveals its dimensionality. However, when closely examined, these dimensions are seen to be conceptually interrelated and complementary rather than substitutable. The concept used to define poverty determines the methods employed to measure it. Composite indicators can hide important policy messages inherent in their constituent variables.     

INCOME POVERTY AND MULTIDIMENSIONAL DEPRIVATION: LESSONS FROM CROSS‐REGIONAL ANALYSIS

The study of multidimensional deprivation has become one of the most relevant lines of research in the analysis of low‐income households. The search for significant relationships between multidimensional deprivation and income poverty has been a central issue and most empirical studies have found a very weak link. This paper aims at examining the possibility of an aggregation bias in national‐level studies, which could conceal disparities between regions. As regional differences and decentralization processes stand out in Spain as compared to other OECD countries, we focus the analysis on this country. Latent class models are used to define deprivation indices using the Spanish EU‐SILC. The results seem to show that the absence of significant relationships between both phenomena still holds at a regional level. The decomposition methods used in the paper show that it might be due to some regional singularities in some determining factors of income and multidimensional poverty.     

Income, Health and Happiness

This article utilises unit record data from the 1989–90 National Health Survey to explore the relationships between low income and perceptions of health and happiness. After describing how the key variables were constructed, attention is focused on the incidence of perceived poor health and unhappiness among those individuals living in income units on either side of a poverty threshold related to the Henderson poverty line. The results reveal that those in poverty generally have poorer health and are less happy than those above the poverty threshold. The observed differences are statistically significant for many income unit types, particularly non-aged single people and couples with children. Attention then turns to exploring how health and happiness vary across the deciles of the income distribution. Again, significant differences are revealed, particularly when more sophisticated distributional measures are employed. Finally, consideration is given to the possibility that the results reflect reverse causality, and that the observed correlations incorporate the role of intervening variables.     

How reliable and consistent are subjective measures of welfare in Europe and Central Asia?

This paper analyses the reliability and consistency of subjective well‐being measures, using the Life in Transition Survey. Drawing on two life satisfaction questions with alternative scales, our results do not reveal substantial biases in accounts of life satisfaction due to framing. Subjective individual assessments of household relative income position, on the other hand, do not appear to be reliable predictors of objective poverty or wealth. We find that subjective relative income position is only weakly correlated with objective welfare measures. There are differences in evaluations of the household's relative standing across different household members, and these differences are correlated with respondent characteristics.     

A Consistent Poverty Approach to Assessing the Sensitivity of Income Poverty Measures and Trends

This paper examines the sensitivity of estimates of income poverty rates and trends to variations in the poverty line and to whether or not certain households are included or excluded from the sample used to estimate poverty. The approach draws on the concept of consistent poverty, which has been used to identify those with incomes below the poverty line who also experience deprivation. Our approach involves excluding households with incomes below the poverty line if they report zero or negative income or are self‐employed, have expenditure well in excess of their income, have substantial wealth holdings, or if they do not report having experienced financial stress over the past year. The combined impact of all four exclusions is to reduce the half‐median income poverty rate from 9.9 per cent to 5.4 per cent, but also suggests that poverty increased by more over the decade to 2003–04 than the original estimates indicate.     

Individual needs and social pressure: Evidence on the Easterlin hypothesis using repeated cross-section surveys of Canadian households

This paper provides additional evidence, using time-series and cross-sectional Canadian survey data, for the Easterlin hypothesis of an important income elasticity of individual needs. Our analysis is based on the regression of a minimum income to satisfy needs equation derived from a simple utility maximization framework. Moreover, our specification allows computing the Arrow-Pratt relative risk-aversion index and the Intertemporal Rate of Substitution. Our results are robust to different estimation methods dealing with the endogenous nature of income. We also compute poverty rates using our estimated equation parameters and standard OECD measures of poverty and find that some subjective measures are relatively close to the OECD measures.     

Demand,Supply, and Labor Market Analysis

Our previous research argued that interest payments on consumer debt should be subtracted from household income to measure poverty. We estimated 4 million additional poor Americans in 2007, calling them "debt poor." This paper finds that the debt poor are somewhat like the poor (they are unlikely to own a home or have private health insurance), somewhat like middle-class households (race), and in-between in other ways (education levels). Debt poor households were likely middle class once, having access to considerable consumer credit; but following a loss of income, their large debt burden put their living standard below their poverty threshold.     

THE EFFECT ON POVERTY STATUS IN ISRAEL OF CONSIDERING WEALTH AND VARIABILITY OF INCOME

This paper assesses the effects of including wealth and the variability of income on the incidence of poverty and the degree of income inequality in Israel. A special survey, which includes data on the wealth and income of a national sample of Israeli families in 1963–64 and 1964–65, allows us to go beyond measures based on current income alone.
The first section reviews earlier studies of poverty in Israel. The next section looks at poverty and inequality in terms of current income, current wealth, and a combined measure of income and wealth. The combined measure is the Hansen-Weisbrod measure (HW), which equals income plus the annuity value of wealth, assuming all wealth is just consumed at the time of death. It is interesting that, in spite of the much higher wealth inequality than income inequality, the HW measure was slightly more equally distributed than income. This result occurred because the annuity component made up a low share of the total HW measure and the correlation between income and wealth was well under 1. Although overall inequality and poverty were similar for income and HW measures, the incidence of poverty by subgroup depended on the measure used.
The final section presents a dynamic view of poverty and inequality. Year-to-year changes in poverty were substantial. Because of the use of a relative poverty concept and the rise in real incomes, the real income poverty line rose by 15 percent between 1963 and 1964. Still, of those in income poverty in 1963, 37 percent managed to escape poverty in 1964. The paper shows how the degree to which poverty was stable or transitory varied substantially by age and country of origin.     

Poverty,inequality and growth in Albania

This article studies the distribution of well‐being and, specifically, the degree of poverty and deprivation in Albania, in the years 2002 and 2005, using Living Standard Measurement Surveys (LSMS). The distribution analysis is performed by applying both one‐dimensional and multidimensional approaches, in particular to better examine the link between economic growth, inequality and poverty in Albania. Furthermore, by estimating a non‐monetary indicator, as proposed by Bossert et al. ( 2007 ), and a nonlinear principal component model together with a probit model, the paper focuses on the multidimensional measures of poverty to address the relationship between poverty and socio‐economic factors. Our evidence shows that absolute poverty decreased from 2002 to 2005 while national relative poverty increased; economic growth reduced poverty in Albania over the observed period; and living in rural and mountain areas, being female, poorly educated and with a large family increased the probability of suffering from deprivation.     

MEASUREMENT OF POVERTY: POLAND IN THE 1980s

This paper presents results of an examination of poverty in Poland in the 1980s. The individual welfare measure is expenditure on consumption per equivalent adult. Household equivalence scales are estimated using a quasi-exact scales trans logarithmic model. Four poverty indices are calculated. These are intended to capture the following aspects of poverty: (1) incidence, (2) relative deprivation, acid (3) social ability to eliminate poverty by income transfers. The study revealed significant changes in poverty during the investigated period, from 9 to 30 percent with persistent poverty resulting for pensioners, farmers and low educated persons.     

Changes in Poverty Rates during the Howard Era

This article considers changes in poverty rates under the Howard government. We also make three methodological contributions. We consider the statistical significance of the estimated changes in poverty. We propose a decomposition technique that reconciles the trends in absolute and relative poverty. We also use 'poverty profiles', which illustrate sensitivity to alternative poverty lines. We find decreases in absolute poverty and increases in relative poverty, both of which are statistically significant over a range of poverty lines. At a poverty line equal to half of the median income, the increase in relative poverty is statistically significant for all people and borders on significance for children.