Jamie Whyte: Poverty statistics suffer from paucity of common sense

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Our threshold for poverty rises with the general level of income. Photo / Jason Oxenham
Our threshold for poverty rises with the general level of income. Photo / Jason Oxenham

SEE LATEST REPORT: Jamie Whyte defends 'self-plagiarism' claim

There is no poverty in New Zealand. Misery, depravity, hopelessness, yes; but no poverty.

The poorest in New Zealand are the unemployed. They receive free medical care, free education for their children and enough cash to pay for basic food, clothing and (subsidised) housing. Most have televisions, refrigerators and ovens. Many even own cars. That isn't poverty.

Why then do we keep hearing that more than 20 per cent of New Zealand children live in poverty? Those who tell us this do not mean by "poverty" what most people do. They have a statistical definition: you live in poverty if your household's income is less than 50 per cent of the national median (after tax and housing costs, and adjusted for the number of adults and children in the household).

For example, the Herald recently published an article by Susan St John, spokeswoman for the Child Poverty Action Group, that claimed 220,000 children live in poverty because they "fall under the stringent 50 per cent after-housing-costs poverty line".

Alas, the measure is not stringent; it is ridiculous. It means, for example, that doubling everyone's income would have no effect on the amount of poverty in New Zealand. Our incomes would all remain the same percentage of the median.

Yet lowering incomes might reduce poverty. If the median income fell, then those on the minimum wage or unemployment benefit would find their unchanged incomes closer to the median.

Using this definition, a 2014 Unicef report claimed there is more child poverty in Japan than in Hungary and more in the United States than in Greece. This at a time when the Greek economy was in tatters, unemployment was running at 27 per cent and masses of Greeks were queuing for handouts at soup kitchens.

It is a relative rather than absolute measure of poverty. Being an American pauper means having half the income of the average American. Being an Indonesian pauper means having half the income of the average Indonesian. Never mind that an American "pauper" may be richer than the average Indonesian.

Any sensible definition of poverty must be relative. Our threshold for poverty rises with the general level of income. But it does not follow that "an income less than 50 per cent of the national median" provides an accurate measure of poverty.

Why the nationalism? Why not compare someone's income with a more local median, such as incomes in her province, or with the global median? And why 50 per cent of the median? Why not 25 per cent or 75 per cent? These arbitrary elements of the measure determine how many people get counted as paupers.

Worse, the measure disregards consumption that people do not pay for with their own money. Consider two 10-year-old boys who live in the same quality of house, attend the same school, visit the same doctor when ill, wear the same brand of tracksuit and so on. Their material wellbeing differs in only one respect. Whereas Jimmy's parents give him $20 a week in pocket money, Timmy's give him only $10. Should we conclude that, since his disposable income is only half of Jimmy's, Timmy is a pauper?

Suppose the housing, schooling and so on that they both receive are worth $200 a week, and that both spend all their pocket money. Then Jimmy consumes $220 a week and Timmy consumes $210. Though Jimmy's disposable income is double Timmy's, he is only 5 per cent better off.

The same goes for New Zealand households. A large portion of their consumption is not paid for from their disposable incomes. Education, healthcare and housing are all in this sense free. Differences in disposable income exaggerate differences in consumption. Yet poverty is a matter of consumption.

Why would anyone use such a preposterous definition of poverty? Interviewed by The Guardian, British poverty campaigner Peter Kenway defended it on the grounds that "it is a simple and reliable statistic which has played a huge part in propelling poverty up the policy agenda."

It is far from reliable, and what it "pushes up the policy agenda" is not really poverty but inequality, which, in rich countries, is not the same thing. Poverty statistics based on this measure are misleading anyone who believes them.

Jamie Whyte is a former leader of the Act Party.

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- NZ Herald

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