The definition of poverty – the income conundrum
Whilst government and political parties will no doubt be debating their record on poverty in advance of the general election, next year, is it time for a rethink on how we define and measure it? It’s something that we’ve been considering at the Wales Co-operative Centre, given the ways in which our work supports the wider tackling poverty agenda.
Many of us working in this field have, over the years, disagreed with the relative nature of its definition. This, in my view, is one of its fundamental flaws. To cut through the technicalities if Mr Jones’ income was low enough, he would be defined as living in poverty. If his income remained the same but the rest of the nation’s income fell, he would be lifted out of poverty. He would still have the same income and the same bills to pay, but he would no longer be officially hard up. This is because Mr Jones’ status of living in poverty is related to his income compared with everyone else’s, not how well he is able to live on the money he has coming in.
‘A new approach to reducing poverty should adopt a clear definition of poverty, which is based on resources and household needs, not just a narrow measure of relative income’ says a new report published by the Bevan Foundation. Its report, ‘Rethinking Poverty – Implications for Action’, points to three clear required actions; raising incomes, meeting minimum needs and essential skills.
This wider definition includes some important elements but the issue of income and money still troubles me. Why? The reason is that I have worked with many people who, on the face of it, have a moderate income but because their outgoings are so high, their disposable income is extremely low….so low sometimes that they can’t feed themselves or their family. Back to Mr Jones; if his employer starts paying the living wage, he may not be lifted out of poverty, it depends on everyone else’s income. Whether he can feed his family is immaterial.
This is where financial inclusion and financial capability are critical. Every person needs to have a safe, secure and flexible place to manage their money and the knowledge and confidence to manage it well and make the most of what they have coming in. This means access to responsible financial products and debt advice when things go wrong. Credit unions are a great starting point for many people who have been excluded from these essential services for far too long.
Teej Dew is Programme Director for Financial Inclusion at the Wales Co-operative Centre