Poverty not just about incomes

Jenesa Jeram.
Jenesa Jeram.
Is it time to stop measuring poverty, Jenesa Jeram asks. 

Whenever commentators get stuck debating the numbers on poverty, there are inevitably calls to stop the academic pontificating and "just do something''.

So the argument goes, it is obvious that there is poverty in New Zealand; why waste time debating the academic nuances?

Those working on the frontline of social services must certainly get frustrated with the endless debates in Parliament and throughout academia, where even our elected leaders and experts cannot agree on how many people are in poverty.

The New Zealand Initiative has recently released a report, "Poorly Understood: The state of poverty in New Zealand''.

Though a lot has already been written and said about the subject, there is still widespread disagreement on how poverty is characterised in New Zealand, how many people are in poverty, and the most effective solutions for addressing poverty.

The report pinpoints some of the major areas of contention, such as the definitions, measurements and causes of poverty.

Last year, for example, Deputy Prime Minister and Finance Minister Bill English publicly criticised the measurements used by poverty advocacy groups.

Victoria University's Jonathan Boston retorted by arguing the minister does not understand how poverty measurements are calculated.

Let's assume both men are well-meaning in their assertions.

So why can't they agree?

And if they cannot agree on how many people are in poverty, how can they possibly help those most in need?

Our report acknowledges that in developed countries like New Zealand, poverty is a necessarily subjective term.

Yet that does not mean nothing can be done to help those in hardship.

What the report does urge is better awareness that different measures yield different results.

And can imply different solutions.

One of the most-favoured measures of poverty used by advocacy groups is a relative income measure, where the threshold is set at 50%-60% of the median wage. But this is in fact a measure of income inequality.

That is not to say that the use of inequality measures is incorrect or has no use.

On the contrary, it can yield valuable insights into how much disposable income households have to live on.

Yet viewed by itself, it also has implications for policy solutions.

First, if income inequality is what is being measured, then a likely policy response is to simply give poorer households more money.

But it is rather tautological for "lack of income'' to be both a cause and symptom of poverty.

Measures of inequality could also misrepresent the country's income as a fixed pool of money, where the rich are rich at the expense of the poor.

Inequality measures tend to hint at greater redistribution. But inequality measures, viewed by themselves, say nothing about how households are actually struggling, what their material needs are, or what additional non-monetary support they may be receiving.

In fact, the Ministry of Social Development estimates that there is only a 35%-45% overlap between some measures of income inequality and measures of material hardship.

That means that not all households on the bottom end of the income distribution are necessarily suffering material hardship, and not all households suffering material hardship are necessarily experiencing income inequality.

So would focusing solely on material hardship measurements be a more insightful measure?

Not necessarily.

As an advantage, material hardship measurements can give a better insight into what is going on inside the home.

One of the more frequently used measures in New Zealand uses criteria such as having enough money to warm the home, or to afford a computer and internet connection.

But on the down side, this measure, based on self-reported evidence, gives no insight into why households cannot afford these things.

It therefore may not inform policy solutions addressing the causes of poverty.

One could assume it is due to lack of income, but the lack of overlap between relative income inequality and relative hardship figures imply that there is more to the picture than income alone.

No single measure of poverty can give a full picture.

It must be frustrating for those working at the coal-face to once again hear more talk of defining the problem (or even agreeing there is a problem), rather than talk of how to make real, effective change.

And it could be that some parties will simply have to agree to disagree on the definition of poverty in New Zealand.

However, focusing on different measures will define different sets of households and poverty, and will therefore guide which households get the most help.

Different measures could also hint at different policy solutions.

Ideally, there could at least be more widespread agreement that you generally don't fix what you don't measure, and you'd want to measure what you are trying to fix.

Jenesa Jeram is a policy analyst at The New Zealand Initiative in Wellington, and co-author of ‘‘Poorly Understood: The state of poverty in New Zealand''.

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