Findings: Understanding poverty

Statistics need to look beyond the poverty line

The headline measures mask the changing dynamics of poverty

The headline ‘poverty line’, drawn in HBAI at 60% of median income, is widely used as the level at which to describe individuals being in poverty. Whilst some users we spoke to feel that this line is not drawn at the right level, most argued that there is no clear rationale for the line to be drawn at any particular point and that there will always be people around the margins of the line who are experiencing poverty but who are not captured by the data.

The number of people falling under this poverty line has remained stable over the past few years, at around 14 million individuals. However, we found that only looking at the headline poverty line can mask what is happening to different groups both above and below this line. For example, whilst the number of people falling under the poverty line may not have changed, it is important to understand whether, within that group, there are increasing numbers of people facing the most severe levels of poverty. Without this distinction, policies and support cannot be effectively targeted towards those most in need.

We found that users are increasingly interested in understanding who is experiencing ‘deep’ poverty. Whilst there is no consistent definition of deep poverty, it is generally used to refer to those at the lowest end of the income distribution. Users we spoke to were also interested in understanding people’s transitions in and out of poverty, and how long they remain in poverty, in order to assess how difficult it is for those just below the poverty line to alleviate themselves from poverty compared to those in deep poverty.

The importance of understanding the composition of poverty below the headline poverty line has been highlighted by the SMC in their poverty measurement framework. The framework focuses on understanding the depth and persistence of poverty, as well as measuring how many people are in poverty overall.

DWP publishes the HBAI low-income measures at 50% and 70% of median income, alongside the leading 60% metric, to allow users to understand what is happening just above and below its headline poverty line. It also publishes Income Dynamics statistics, based on Understanding Society longitudinal data which tracks sampled individuals over time and can therefore provide insight on the persistence of poverty across different groups. The Income Dynamics statistics present a wealth of data on how persistent low-income varies for different household formation, tenure and regions. In the latest release, the Income Dynamics statistics included new information on entry and exit rates to low-income and explored the extent to which certain ‘events’ are associated with low-income entry and exit, such as changes in income components (e.g. earnings and benefits), employment within the household, and demographic changes.

ONS also publishes statistics on persistent poverty as part of the European Union Statistics on Income and Living Conditions (EU-SILC). As the UK has now left the European Union, there is no longer a requirement for ONS to publish these statistics, but it told us that it plans to work with DWP to produce a coherent set of persistent poverty statistics, that makes best use of data available to both producers.

We found that there is a good foundation of information available to understand the numbers of people above and below the headline poverty line and movement in and out of poverty, but that statistics producers should do more to draw out the necessary insights to allow users to understand the nature of poverty and how this varies between groups at differing levels of poverty, as identified above.

Income alone can’t tell you how people experience poverty

Whilst this review is focused on income-based poverty, it is widely understood that poverty is closely linked to many other aspects of people’s lives, from employment prospects to health outcomes. As part of its ‘Improving Lives: Helping Workless Families’ policy, DWP publishes data against nine national indicators to track progress in tackling the disadvantages that affect families and children’s outcomes. These are divided into two main groups, one focused on the prevalence of parental disadvantages, including entrenched (long-term) worklessness, family breakdown, problem debt, and drug and alcohol dependency. The other group of indicators track children and young people’s educational and employment outcomes.

When the SMC was formed, it sought to develop a framework for reporting on the wider experiences of people in poverty as part of their new measure of poverty. With this in mind, the SMC has recommended a set of ‘lived experience’ indicators to reflect a family’s experience of poverty and the factors that make it more likely for them to be trapped in poverty. These contextual indicators cover four domains: health; labour market opportunity; family, relationships and community; and family finances. These indicators were developed based on data which are already available in official statistics, but these are not currently collected in a single source.

We found that users are divided on the need for ‘lived experience’ indicators in income-based poverty statistics. Some users we spoke to feel that the absence of contextual data on poverty has led to income often being seen as the only policy lever for tackling poverty. They feel that, in order to introduce targeted interventions, it is important to understand the relationships between income and various non-income indicators such as education, health and crime measures. This would require data to be available which links these factors to income measures.

Other users we spoke to question the concept of ‘lived experience’ and feel that some of the proposed SMC indicators are instead ‘lifestyle’ indicators. For example, an individual’s addiction may be unrelated to their level of income. There are also questions surrounding what the average ‘lived experience’ is and how this might differ for different age groups and backgrounds. The experience of poverty will also vary depending on the reasons why a person or family ended up in poverty, which can be complex and therefore difficult to capture through contextual indicators.

We found that many users feel the best mechanism for understanding ‘lived experience’ of poverty is through qualitative research – a process of collecting and analysing non-numerical data, which often includes interviews with individuals who have personally experienced poverty. Users we spoke to generally feel that it is the role of researchers and think tanks with an interest in poverty and low income to carry out this type of research which supports the wider evidence base on poverty. This was particularly clear when talking to users about their interest in understanding the drivers and pathways to poverty, as well as the consequences of being in poverty, such as the concept of ‘poverty premium’ (the additional costs poor people may pay for essential goods and services). Users told us that researchers and think tanks who have experience of working with people whom the data concern are often best placed to present data on the drivers and impacts of being in poverty.

Several users pointed to the work of the Joseph Rowntree Foundation (JRF) as an example of this type or research – particularly its work on destitution. The JRF’s destitution study aims to capture those who do not have the essentials needed to eat, stay warm and dry, and keep clean. The 2020 report is the third in a series of mixed methods ‘Destitution in the UK’ studies, which integrate findings from a major quantitative survey of users of crisis services with qualitative data from in-depth interviews with a purposively selected sample of destitute respondents. Users we spoke to feel this work adds public value to the evidence base on poverty and highlights the experience of those in the deepest levels of poverty and their interaction with essential services.

Non-official research on income-based poverty, including the JRF Destitution studies and other statistics set out in Annex B of this report, come at a significant cost to the organisations who produce them. DWP and ONS need to understand why experts are funding their own data collections and analysis and consider whether this reflects weaknesses in the existing official statistics. They should also consider whether there is a role for them to address any of these weaknesses, if discovered, or whether users prefer qualitative research to be produced by organisations outside of government and official statistics.

Material deprivation is seen as a more tangible way of talking about poverty

As well as the measures of low-income, DWP’s HBAI statistics include data on material deprivation. These data record the self-reported inability of individuals or households to afford particular goods and activities that are typical in society at a given point in time, irrespective of whether they would actually choose to have these items. Material deprivation is a metric used to understand living standards.

A suite of questions designed to capture the material deprivation experienced by families with children has been included in the FRS since 2004/05. These data fed into the Child Poverty Act 2010 target on children who are materially deprived, and meet the legal requirement for government to produce metrics on child poverty, as set out in the Welfare and Work Act 2016. In the FRS, respondents are asked whether they have 21 goods and services, including child, adult and household items. If they do not have a good or service, they are asked whether this is because they do not want them or because they cannot afford them.

The original list of items was identified by independent academic analysis in 2004: Developing deprivation questions for the Family Resources Survey. The questions were designed to be the best discriminator between those families that are deprived and those that are not. A new suite of material deprivation questions was later developed specifically for pensioners. However, no questions currently exist to report material deprivation for working-age adults without children.

Users we spoke to told us that material deprivation is often an easier poverty concept to communicate than income thresholds, as the public tend to associate poverty with a lack of resources, rather than just a lack of income. We also found that many users feel material deprivation can be used as a proxy for lived experience of poverty. Material deprivation is included in the SMC’s ‘lived experience’ indicators.

DWP already produce statistics within HBAI on children in ‘combined low income and material deprivation’ for children in families which are classed as materially deprived and have an equivalised household income below 70% of median income before housing costs, and statistics on children in ‘severe low income and material deprivation’, where the equivalised household income is below 50% of median income before housing costs. DWP are considering ways to improve or extend these statistics to provide users with a better understanding of those in deep poverty who lack essential resources and income.

Although users we spoke to find the DWP’s material deprivation statistics useful, they raised concerns about the suitability of the current set of questions and whether they are reflective of essential needs in society today. The HBAI methodology document states that the questions are kept under review, with the last update taking place in 2010/11. Some users pointed to JRF’s Minimum Income Standards (MIS) research as representing a more reflective set of basic needs in society today. This research is based on what the public has said is needed for a decent minimum living standard, as opposed to essential items and services. The MIS are updated more regularly than the material deprivation questions.

We found that the current material deprivation questions are weakened by the lack of clarity in some of the questions – for example around holidays, where a holiday is not defined as being in the UK or abroad, an answer which may involve dramatically different costs. Similarly, the questions on material deprivation do not ask individuals about their income. If your income is above the poverty lines drawn in HBAI, it is still possible to be classed as materially deprived, but not considered to be in poverty. The material deprivation measure therefore needs to be considered alongside the low-income measures for it to be meaningful. There is also currently no way to compare material deprivation across different groups for example, couples with children, without children and pensioners.