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Oct 15, 2012

What is 'poor'? Finding the bread line in an affluent Australia

A new ACOSS report point to high levels of poverty -- but is this calculated in a meaningful way? A look at the Council's prior work on defining poverty may paint a more accurate picture.

It was an easy headline, especially given the report was released on a Sunday. “One in eight Australians live in poverty,” said the ABC. “More than two million Australians in poverty,” ran the AAP copy. Fairfax ran some profiles of people struggling to make ends meet off the back of the Australian Council of Social Services’ new report on the extent of poverty in Australia.

Few bothered to look into the basis for ACOSS’s numbers, beyond that it was an internationally-accepted poverty benchmark. ACOSS used the OECD’s poverty definition, which is 50% of median disposable income. It also provided data for another, less austere benchmark, 60% of median disposable income. On the basis of the lower OECD definition, which ACOSS prefers, 2.265 million Australians are living in poverty. Using the 60% definition, 3.7 million Australians are.

Fifty per cent of median disposable income is $358 a week for a single adult and $752 for a couple with two children.

Neither sum is easy to live on. But they’re the product of an arbitrary benchmark: there will always be a substantial proportion of the population identified as “living in poverty” if you define poverty in relation to median income.

But deprivation-based measures of poverty allow us to move away from arbitrary benchmarks and consider how many people are actually in financial circumstances where they’re unable to afford basics most of us consider essential. And some high-quality work on this has already been done, including by ACOSS.

Earlier this year ACOSS published a report, “Who is missing out? Material deprivation and income support payments“, based on a study by Professor Peter Saunders and Melissa Wong of UNSW. The study, which used data from the 2010 “Poverty and exclusion in modern Australia” (PEMA) survey, looked at how many households displayed “deprivation indicators” based on a range of indicators widely agreed to be “essential” for households.

For example, 99% — or more — of people agreed warm clothes and bedding, medical treatment, ability to afford prescription medicines, and a substantial meal at least once a day were essential. Over 90% agreed up-to-date schoolbooks, the ability for kids to participate in school activities and outings, a decent and secure home, and regular social contact were essential. The only survey indicator that appears to have been widely disputed as “essential” was “a week’s holiday away from home”, which was identified as essential by 54%.

Using median income as a measure of poverty allows us to capture the sense of “relative poverty”, which is important in a prosperous Western country. But the PEMA approach also enables a comparative element. For example, 72% of PEMA respondents agree computer skills are “essential”, even if they would not fit into any meaningful definition of absolute poverty.

Using the PEMA data, Saunders and Wong provided us with an alternative take on poverty in Australia. But the result isn’t one to fill us with complacency: 15.3% of households reported lacking at least 3 of the “essential” indicators.

This included 18.5% who couldn’t afford a week’s holiday; indicators at the other end of the scale are much lower: inability to buy prescribed medicines was 2.9%; inability to afford children’s participation in school activities 2.6%. But 20.7% reported not having $500 in emergency savings; nearly 12% reported being unable to pay a utility bill at least once a year.

The most at-risk group for lacking “essential” items is, unsurprisingly, Newstart-recipient households; 61% reported lacking at least three indicators, although the sample size is too small to provide reliable figures. Households reliant on the disability support pension or parenting payments also featured strongly in households reporting deprivation indicators; age pension recipient households featured much less prominently; indeed, had a lower rate of lacking at least three essential indicators than the community as a whole; it was age pension recipients who didn’t own their own homes who were overrepresented.

This returns us to the debate over whether to increase the level of Newstart assistance. In August, even the Centre for Independent Studies, a serial participant in the “poverty wars”, argued there may be a case for an increase in Newstart for the long-term unemployed, provided it came with stronger requirements for recipients to search for work. This would be cheaper than an across-the-board rise that would simply represent a windfall for the majority of Newstart recipients who only receive it temporarily while between jobs.

And however arbitrary, the weekend report from ACOSS does put a human face on poverty. It’s worth examining to see who else is overrepresented: people in poverty are more likely to be female, more likely to be kids or older people, more likely to be single or lone parents, more likely to be from a non-English speaking country. But the difference between metropolitan and regional/rural poverty is quite low: 12.6% of people in cities and 13.1% of people in regional areas.

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14 thoughts on “What is ‘poor’? Finding the bread line in an affluent Australia

  1. Down and Out of Sài Gòn

    The difference between rural and urban poverty many be low when averaged nationally. In some states, the distinction is more stark. Take Queensland: 9.5 per cent below the poverty line in Brisbane, and 15 per cent outside Brisbane.

    http://www.brisbanetimes.com.au/queensland/states-great-financial-divide-20121014-27l36.html

  2. blackdog

    I read an excellent article about aggregates and what this does to representations of reality…World Bank likes the aggregates where it can support drops in poverty, while grassroots community welfare workers prefer disaggregated views because this highlights where the real experiences of poverty exist…often the places the grassroots workers have to run programs have seen literal increases in poverty or experiences of distress even when overall the aggreagate paints a better picture of less poverty.

    for eg – income-expenditure measures don’t include losses in public services so if people must pay for services that were once publically available, or if a bus servivce is cut and a person’s QOL is negatively affected – this won’t show up as a measure of the population’s wellbeing…or the long term impact of a poor region losing teachers and school books…and is a great concern considering neoliberal policies prefer lower national social spending, thus the impacts of social services do not show up as contributing to QOL and a healthy society

    and 2nd eg – in Mexico 1990-94 there was a national drop in poverty but the drop was in urban areas with an increase in rural areas…a concern if this eliminates accountability for bad policies or rejecting improvement programs

    a 3rd eg – the incidence of poverty is different than the absolute number of poor – something to do with increases in population

    Aggregates could fuzz the line about farmers’ nd their families experiences too…if there are other industries in the same areas such as mining or tourism, the reality of real people’s situations, needs and crises will not be identitfied, measured or acknowkedged

  3. CML

    Easy way to reduce poverty? Just increase income tax by 10% and redistribute the extra money.
    Not keen on that solution – thought not!!

  4. Gerry Hatrick, OAP

    Well, using the median takes out a lot of the high income earners – I’d like to see graphs on income distribution though between the USA and AUS and laugh!

  5. AR

    CML – increase which tax rates? Across the board would be pointless and there is plenty of scope for a separate high tax band. Once garnered though, how to spend/redistribute?
    Let’s have clear cut off points for all government benefits, high but not breachable by shyster accountants.

  6. izatso?

    shysters to get deep six’d, along with the trainee pirates, and etc. etc ….. thanx fer that.

  7. blackdog

    CLM & AR – if we had a bit higher income tax, if this money were spent on public services rather than personal benefits, there would be an immediate flow-on effect because MANY people would be able to utilise more public services. This would remove stigmas and segregation in society based on class/advantage situations and would empower individuals to use the income they do have in more personally supportive ways, ie than just scraping through meeting the bare minimums (like I have to do).

    Better still, if smaller communities and neighbourhoods could advocate for what services are most in need or that would most make a difference inj a specific demographic or region, then the welfare benefits would have a great deal of power in changing peoples lives, in empowerment (rather than punishment and coercion that centelink does) and in QOL for larger numbers of people.

  8. Damien Walker

    I own my home, send my child to a private school, am in excellent health and have a Masters level university degree so I was a little surprised to learn today that, according to my income, I live below the poverty line.

    It’s no surprise such a lazy and inadequate method of reporting ‘poverty’ has been doing the rounds in local radio today. It makes for an uncomplicated conversation starter for lowest-common-denominator talkback callers looking to rail on the government for causing them to live ‘below the poverty line’ by not paying them enough in welfare.

    Our local radio host (a likeable ABC Hobart guy who you regularly speak with, Bernard) asked a studio guest if we should raise the Newstart allowance to ‘bring these people above the poverty line’. With an arbitrary measure like 50% of the mean it’s mathematically self-defeating to raise incomes in order to reduce the percentage below the line. Anyone with high school level maths can work that out.

    Rather than tut-tutting about the government not doing enough for the poor, I’d prefer to see an intelligent discussion of the type you’ve mentioned here because by focusing on income alone poverty research fails to connect with the actual living standards experienced by those in poverty.

  9. Christopher Nagle

    ‘Poverty’ in affluent country’s like Australia is relative and geared very closely to education, decision making competance and social values. It is possible to live a good life on an extremely tight budget. But for dysfunctional individuals and groups that are informed by crummy values, no amount of money will compensate for their financial mismanagement and social incompetance.

    If one has ever lived amongst the poor in third world countries, one could not be anything but astounded by the extrordinary focus and discipline that ordinary people exercise to scrape by on almost nothing.

    This view sees much of the conversation around poverty in Australia as half arsed excuse littered evasion of the basic facts of life about what makes people ‘poor’. ‘Disadvantage’ becomes a euphemistic cliche to obfuscate critical judgment.

    And to subscribe to that view does not necessarily mean one also subscribes to the existing and perverse trend towards ever greater income disparity with a whole upper socio-economic group laden with far more resources than they can possibly use productively or reasonably, or without damaging themselves, everyone else and the broader environment.

  10. CML

    It doesn’t matter which way you “research” living below the poverty line, the poor will still be with us. Seems to be the number in such circumstances that is in dispute. And what should be done about it.
    Some of the countries with very high standards of living, the best health and education facilities etc., are to be found in Scandinavia. Everyone is taken care of, but that is only possible with high rates of taxation – especially those in the top income brackets.
    If you want these benefits for everyone, both state and federal governments need more money to provide them. Instead what we get in this country is everyone up in arms if they are asked to pay more tax, and a similar reaction if any services are cut. You can’t have it both ways!

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