Poverty


Ok, so the measurement and definition of poverty is a huge controversial field with scholars, politicians and social welfare groups disagreeing with each other about it.

The current measurement of poverty is the Henderson Poverty Line (HPL) which estimated the poverty line in 1973 for a family of two adults, two dependent children, one full-time wage earner on the basic wage including child benefits (or family allowances). Since then, that original dollar figure has been updated quarterly by the Melbourne Institute of Applied Economic and Social Research (MIESR) based on the movement of average weekly earnings over that time. The current weekly earnings figure for a family of four with one working person is $598 per week (including housing costs) disposable income which translates into $31,096 per year after tax. Assuming 20% is taken off by tax, this becomes $37,315 annual income (including family allowance). For a single person, this becomes $318.48 per week, $16,560.96 per year after tax, assuming 10% tax, $18,217.056.

I dont have a family so have no idea if that’s too little or too much but $318 a week after tax as the single person poverty line! Crickey! Luxury, that’s wot it is. Ok, I am notoriously tight but crikey!

The latest MIESR update can be found here.

So, it’s a relative measure based on data collected in 1979 then reasonably simple adjusted over that time. No investigation of underlying societal and economic changes. Interestingly enough, if the poverty line was adjusted based on CPI (which is more an absolute figure for purchasing power), the CPI adjusted poverty line would be on average 36% less than the current HPL measure.

I did find two interesting papers both by Prof Peter Saunders (director of the Social Policy Research Centre), one printed by the SPRC itself here and the other not quite as interesting or controversial making but still valuable one published by the ATO here.

The first is interesting in that he adjust the proportion of people below the HPL based on income, expenditure and hardship parameters (for example: Cannot afford a week’s holiday away from home each year). I wont bother repeating his findings here except using his adjusted values except that he finds the not surprising result of proportion of people below the poverty line falling remarkably. Whether his resulting figures are more accurate or not is hard to say.

The other thing of interest is that he finds the proportion of people below the poverty line more than halfed when he used half-median income as a new poverty line.

Anyway, it seems pretty clear to me that the HPL is inaccurate and needs to be modified. Poor and distrusted measurements result in the poverty question being swept under the rug with government finding it easy to say that people have become richer and opposition waving inflated poverty statisitcs. The question as to why, even though everyone seems to have criticised the HPL as a crap measure, a better measurement has not been created is mystifying to me.

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