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Measuring the Numbers of People in Poverty
Geoff Winter
Statistics Group
30 May 2000
Introduction
With as many as one in every six or seven people in Australia living
in poverty, including over three-quarters of a million children (see Table
1 below), the extent of poverty has become one of the continuing concerns
across Australian society generally, and occupies many policy-makers continually.
As very few people live in the kind of poverty usually associated with
some 'third-world' countries, which is often referred to as 'absolute'
poverty, the focus in Australia is on 'relative' poverty. Calculations
are usually in reference to the incomes (and to a lesser extent the assets)
of various groups and individual people in relation to their purchasing
power. The income levels below which people are considered to be in (relative)
poverty are often called 'poverty lines'. This Research Note does not
try to establish what the poverty lines are, but provides measures of
the numbers of people in (relative) poverty.
Table 1 below compares the estimates of these numbers in poverty from
various sources using income survey data with the estimates calculated
using 'proxy' measures. An example of the calculation of the 'proxy' estimates
for all people in poverty is shown in Table 2 below.
Income surveys
Over the years there have been many analyses conducted to estimate the
numbers of people living in poverty. In Australia most of these have been
based on the results of income and expenditure surveys conducted by the
Australian Bureau of Statistics (ABS). In simple terms, analysts have
applied the various poverty lines (generally compiled also using ABS data)
to the income distributions estimated from the surveys. Many different
outcomes have been derived from these surveys, depending on the assumptions
being used as the bases for the calculations. This Note does not discuss
the assumptions but presents many of the outcomes, as shown in Table 1.
Experimental 'proxy' measures
Although poverty lines have been published quarterly for many years,
unfortunately income distribution surveys have been conducted far less
frequently, and estimates of the numbers in poverty have not been calculated
regularly. For some interested parties this has been an unsatisfactory
situation and they have sought alternatives. In response, experimental
measures have been developed, around the notion that people in families
without jobs are the most likely to be in poverty. Certainly social security
payments do take many of these people out of poverty, but these measures
are only a guide, hence their 'experimental, proxy' nature. They are 'indicators'
of what the numbers are likely to be, not definitive estimates.
These experimental estimates have, in several comparisons with estimates
from income surveys, produced very similar results (see 1985-86 and April
1994 in Table 1). Hence a full series of these experimental estimates
has been calculated and is shown in Table 1. These calculations can be
made for any month as they come from the monthly labour force survey (LFS)
conducted by the ABS. They are particularly useful for estimating the
number of children in poverty.
This Note provides two 'proxy' measures: 'minimum' numbers in poverty
and 'likely' numbers. The 'minimum' numbers refer only to people in families
where no member at all has a job; it is highly unlikely that the actual
total number of people in poverty is anywhere near as low as this figure.
The 'likely' numbers attempt to include all people at risk of being in
poverty.
The advantages of these 'proxy' measures are that (i) they are available
monthly, and (ii) they are consistent estimates over time, unlike many
of the estimates based on income surveys.
Precautions
These 'proxy' measures are 'crude' estimates; they are not unrealistic
but they rely heavily on poverty being an outcome of joblessness. They
are broad measures only, with shortcomings that may or may not roughly
compensate for each other overall. The 'shortcomings' are listed below:
- people classified as unemployed by the ABS are not necessarily in
poverty, as (i) social security payments can raise their total incomes
significantly and (ii) they may be without work only temporarily;
- people classified as not in the labour force are not necessarily in
poverty as many are self-funded through superannuation, investments,
etc.. However many have age, disability or other pensions or transfer
payments as their only source of income and may be in poverty;
- some families with an earner may still be in poverty as the income
from that person may still be below the poverty line;
- these measures take into account only people who are usually resident
in a household where a family relationship is determined (in March 2000
about 770 000, or 5.1% of civilians aged 15 years and over, did
not have family relationship determined).
As with many kinds of estimates, the shortcomings may result in slightly
inaccurate figures, but, as each observation is measured the same way,
movements from period to period in the measures would reflect fairly accurately
the changes in the numbers in poverty as much as it can attributed to
joblessness.
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