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What is Poverty?

 

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What is poverty?

Poverty and social exclusion can affect all age groups. It is multi-faceted and combating it requires a multi-policy response. This is reflected in the definition of poverty and social exclusion which the Government first adopted in 1997:

People are living in poverty if their income and resources (material, cultural and social) are so inadequate as to preclude them from having a standard of living which is regarded as acceptable by Irish society generally. As a result of inadequate income and resources people may be excluded and marginalised from participating in activities which are considered the norm for other people in society.

This definition continues to be valid and underpins the Government’s strategic response to tackling poverty and social exclusion as set out in the National Action Plan for Social Inclusion 2007 – 2016 (NAPinclusion).

 

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What are the terms used?

Many words concerning poverty and social exclusion are used interchangeably. However, they do have different meanings, as defined below:

  • Deprivation is defined as unmet basic human needs;
  • Poverty is deprivation due to a lack of resources, both material and non-material, e.g. income, housing, health, education, knowledge and culture. It requires a threshold to measure it;
  • Social exclusion is being unable to participate in society because of a lack of resources that are normally available to the general population. It can refer to both individuals, and communities in a broader framework, with linked problems such as low incomes, poor housing, high crime environments and family problems;
  • Inequality is a comparative or relative concept. It does not measure deprivation or poverty and does not require a threshold. It is possible for inequality to exist with or without poverty. Similarly, poverty can exist with or without inequality;
  • Resources can be personal, within the family, or within the society.

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How can we measure poverty?

There is no one measure that gives a complete picture of the situation regarding deprivation, poverty and social exclusion. This is particularly true for a country like Ireland that has experienced rapid economic growth over the last ten years. Therefore, a number of indicators are used to measure progress in achieving social inclusion covering areas such as income, levels of deprivation, early school leaving, jobless households, long-term unemployment, and life expectancy.

Indicators such as these are also used at EU level to obtain a picture of the situation regarding poverty and social exclusion across Member States. In June 2006 EU Member States adopted a revised set of common indicators of social protection and social inclusion. The main social inclusion indicators are as follows:

Income

  • At risk of poverty rate
  • At risk of poverty rate anchored at a fixed moment in time
  • Persistent at risk of poverty rate
  • At risk of poverty gap
  • At risk of poverty rate before social transfers
  • Dispersion around the at risk of poverty threshold
  • In-work poverty risk
  • S80/S20 income ratio
  • Gini co-efficient

Employment

  • Long-term unemployment rate
  • Regional Cohesion (dispersions of regional employment rates)
  • Jobless Households
  • Employment gap of immigrants
  • Making work pay indicators (unemployment trap, inactivity trap, low-wage trap)

Education

  • Early school leavers
  • Persons with low educational attainment
  • Low reading literacy performance of pupils

Health

  • Healthy life expectancy
  • Child well-being (to be developed)

Housing

  • Housing (to be developed)

Deprivation

  • Material deprivation (to be developed)
  • Self reported limitations in daily activities

 

More information on EU social inclusion indicators can be obtained from the European Commission website at: http://ec.europa.eu/employment_social/social_inclusion/indicators_en.htm

 

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What is Consistent Poverty?

The official Government approved poverty measure used in Ireland is consistent poverty, developed independently by the Economic and Social Research Institute (ESRI). This measure identifies the proportion of people, from those with an income below a certain threshold (less than 60% of median income), who are deprived of two or more goods or services considered essential for a basic standard of living.

The consistent poverty measure was devised in 1987 using indicators of deprivation based on standards of living at that time. The Government in 2007 accepted the advice of the ESRI to revise the deprivation indicators to better reflect current living standards and, in particular, to focus to a greater degree on items reflecting social inclusion and participation in society. This resulted in the measure, originally based on lacking one or more items from an 8-item index, changing to one based on lacking two or more items from the following 11-item index:

1. Two pairs of strong shoes

2. A warm waterproof overcoat

3. Buy new not second-hand clothes

4. Eat meals with meat, chicken, fish (or vegetarian equivalent) every second day

5. Have a roast joint or its equivalent once a week

6. Had to go without heating during the last year through lack of money

7. Keep the home adequately warm

8. Buy presents for family or friends at least once a year

9. Replace any worn out furniture

10. Have family or friends for a drink or meal once a month

11. Have a morning, afternoon or evening out in the last fortnight, for entertainment

 

This revised set of deprivation indicators will be used to measure consistent poverty over the duration of the new NAPinclusion. The current (2006) rate of consistent poverty using the new measure is 6.5%, having reduced from 8.2% in 2003.

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What targets have been set to reduce poverty?

The target set in the Revised National Anti Poverty Strategy (2002) was to reduce the numbers of those who are consistently poor to 2.0% by 2007 and, if possible, to eliminate consistent poverty, as then defined. A major discontinuity between the Living in Ireland Survey (LIIS), previously used for monitoring progress, and the new EU Survey on Income and Living Conditions (EU-SILC), which was introduced from 2003, meant that it was not possible to compare trends in consistent poverty between the two surveys. However, continuing low levels of unemployment and the substantial resources devoted to social welfare and other social services support the view that the downward trend, (from 8.3% in 1994 to 4.1% in 2001), would have continued and the target would have been reached.

 

The overall goal of the new NAPinclusion is to make a decisive impact on consistent poverty.  This is underlined by the fact that a new target is being set, using the new set of up-to-date indicators, which are more realistic and in keeping with living standards today. The new target is:

To reduce the number of those experiencing consistent poverty to between 2% and 4% by 2012, with the aim of eliminating consistent poverty by 2016, under the revised definition.

The new target reflects experience and expert advice that it may be difficult to bring consistent poverty down to zero. This is due in part to the subjective and sensitive nature of the survey questions used to identify deprivation. This is borne out by the fact that, in addition to those below the 60% poverty threshold, a significant minority of people with incomes above that threshold also report deprivation.  This may occur for a variety of reasons such as consumption patterns and choices, or temporary and unexpected heavy spending. It is accepted, however, that the consistent poverty measure does clearly identify those who are most vulnerable.

There are difficulties in setting poverty targets for a number of reasons, as recognised in the national social partnership agreement Towards 2016, including the relatively recent status of EU-SILC. Nonetheless, the Government and the social partners have agreed that it is important to set real and achievable targets. In this context, the overall approach to effective poverty measurement will be reviewed by the Office for Social Inclusion (OSI), supported by its Technical Advisory Group, which advises the Office on the development of its data strategy. For more on OSI’s data strategy click here.

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What is ‘at risk of poverty’?

The ‘at risk of poverty’ indicator identifies all those (households or people) who fall below a certain income threshold, which in the EU has been set at 60% of the median income. Median income is the amount that divides the income distribution into two equal parts, half of people having incomes above the median and half having incomes below the median. This measure is the best known and quoted indicator as it affords some comparisons with other countries. It does not, however, measure poverty as such, but rather the proportion of people below a certain income threshold who may be ‘at risk of poverty’. Whether persons below the 60 per cent threshold are actually experiencing poverty will depend on a number of factors. These include:

  • The degree to which income is below the relevant thresholds;
  • The length of time on this relatively low income – a long such period can lead to real deprivation, as a person’s assets run down and cannot be fully maintained or replaced;
  • Possession and use of other assets, especially one’s own home.

The ‘at risk of povertyindicator has particular limitations as a measure of poverty in the case of Ireland in recent years. It takes no account of overall living standards and fails to reflect the fact that the 60% median income threshold increased by 98% from €102.44 in 1997 to €202.49 in 2006. Over the same period (1997 – 2006), prices (CPI) increased by just 35.8%, average industrial earnings increased by 61.8% and basic social welfare payments increased by 99.7%. The high levels of economic growth led to an increase in the number of women in the workforce and, consequently, in the number of two income households. Incomes in these cases outpaced the incomes of those who were not in the workforce and of some single income families. All groups in society have benefited from economic growth, therefore the main value of the indicator is in identifying particular groups which may have difficulty keeping pace with living standards generally. It has also been acknowledged that the ‘at risk of poverty’ indicator is not suited to making comparisons between countries at different stages of economic development. The problems inherent in using the ‘at risk of poverty’ indicator for international comparisons were restated in an article in the UN Development Programme journal “Development and Transition”, which concluded that:

  • The results too often belie common sense;
  • The ‘at risk of poverty’ label sends the wrong signal to the public and policy makers;
  • The ‘risk of poverty’ logic does not lead to effective national policy.

A copy of this article can be accessed on the following website: http://www.lse.ac.uk/collections/developmentAndTransition/DevAndTransFour.pdf  

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What is the current data on poverty?

The most up to date data on poverty in Ireland is contained in the results of the new EU Survey on Income and Living Conditions (EU-SILC) for 2006, published by the Central Statistics Office (CSO) in November 2007 (the results, together with commentary on the key findings, can be found on the CSO website at http://www.cso.ie/eusilc/default.htm )

These latest survey results show that the overall rate of consistent poverty (revised measure) in 2006 was 6.5%, having reduced from 8.2% in 2003. The survey results also show a decrease in the ‘at risk of poverty’ rate in Ireland from 19.7% in 2003 to 17.0% in 2006. The reduction results in part from the successful implementation of policies to move persons from unemployment into employment and to provide substantial real increases in incomes and improvements in other services for persons not in a position to enter employment, particularly older people.

EU – SILC results for 2006 also record continuing positive trends in relation to poverty and social exclusion, and show the impact being made by the greatly increased resources now devoted to social welfare and other social services. For example:

  • There was a significant reduction in the ‘at risk of poverty’ level for older people from 20.1% in 2005 in 13.6% in 2006. In 2003 the equivalent figure was 29.8%. Social transfers (pensions and other payments) made a major contribution to these reductions, causing the risk of poverty for the elderly to reduce from almost 86% to 13.6%.
  • The rate of consistent poverty (revised measure) for older people also reduced from 3.1% in 2005 to 2.2% in 2006. This means that the NAPinclusion consistent poverty target for older people for 2012 has already been met.
  • Lone parents remain a high-risk group. Results show that 27.3% of lone parent households were in consistent poverty (revised measure) in 2006, compared to 26.9% in 2005. 39.6% of lone parent households were ‘at risk of poverty’ in 2006, compared to 40.7% in 2005 and 49.3% in 2003.
  • There was a slight decrease in the consistent poverty (revised measure) rate for children, from 10.2% in 2005 to 9.8% in 2006.  The percentage of children ‘at risk of poverty’ fell by one per cent, from 21.2% in 2005 to 20.2% in 2006.
  • There was an increase in the ‘at risk of poverty’ rate for persons regarded as unemployed, from 40.6% in 2005 to 44.0% in 2006. The consistent poverty rate (revised measure) for this group showed a slight decrease, from 23.7% in 2005 to 22.0% in 2006. Conversely, for persons who are at work, both the ‘at risk of poverty’ rate and the consistent poverty rate showed further reductions.
  • The 60% median income threshold used to calculate persons ‘at risk of poverty’ increased by 5.1% from €192.74 in 2005 to €202.49 in 2006 (single person). For a family with two adults and two children the increase was from €447.15 in 2005 to €469.77 in 2006.  In comparison, the basic social welfare rate increased by 11.4% over the same period, from €148.80 to €165.80.

EU - SILC results for 2006 also include information on health related variables, such as possession of medical cards and whether a person smokes. The survey also contains information on poverty rates based on nationality, with non-Irish nationals experiencing a higher ‘at risk of poverty’ rate (23.5%) compared to Irish nationals (16.6%). Non-Irish nationals also experience a higher consistent poverty (revised measure) rate at 8.5% compared to Irish nationals at 6.4%.

                                                                            

The following tables illustrate some of these results, together with other results from EU-SILC 2006, and also provide comparisons with earlier years.

 

 

 

Table 1 – ‘At risk of poverty’ and consistent poverty (revised) rates (2003 - 2006)

Table of at risk of poverty and consistent poverty rates

Based on 60% median income threshold and using the national equivalence scale.

 

Table 2 - Consistent poverty (revised) rates by age group (2003-2006)

          

table of consistent poverty rates by age group

Based on 60% median income threshold and using the national equivalence scale. Children: aged 0-14, Working Age: aged 15-64, Older People: aged 65+

 

 

 

 

Table 3 – ‘At risk of poverty’ rates by age group (2003-2006)

           

Table of at risk of poverty rates by age group

Based on 60% median income threshold and using the national equivalence scale. Children: aged 0-14, Working Age: aged 15-64, Older People: aged 65+

 

Table 4 - Consistent poverty (revised) rates by household composition (2003 - 2006)

  Table of Consistent Poverty rates by household composition             

Based on 60% median income threshold and using the national equivalence scale

 

 

 

Table 5 – ‘At risk of poverty’ rates by household composition (2003 - 2006)

At risk of poverty rates by household composition          

Based on 60% median income threshold and using the national equivalence scale

 

Government Response to the EU-SILC Results

In responding to the 2006 EU-SILC results, the Minister of State with Responsibility for Older People, Máire Hoctor T.D., welcomed the reductions in poverty rates and said that ‘these changes are evidence of the success of the Government’s commitment to tackle poverty and social exclusion. This is especially the case for older people.’  The Minister added that ‘The Government aims to build on the significant progress that has been made in reducing poverty over the past 10 years and to deliver real improvements in living standards and wellbeing for the most vulnerable in our society.’ For the Minister’s Press Release on the EU-SILC results, click here.

 

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Department of Social Protection, Gandon House, Amiens Street, Dublin 1, Ireland.
An Roinn Coimirce Sóisialaí, Teach Gandon, Sráid Amiens, Baile Átha Cliath 1, Éire.

 

Tel: + 353 1 7043245 Fax: + 353 1 7043945 e-mail:social.inclusion@welfare.ie

 

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