8 ways to measure poverty

The Institute has a very thoughtful discussion paper on poverty. They pose a number of questions, and also outline eight different ways you can measure . They eight ways are:

  1. Average income threshold – a percentage of mean or median income
  2. Consumption expenditure – a percentage of amount spent on consumption compared to average household
  3. Budget standards – based on a budget judged high enough to avoid deprivation
  4. Component and multiplier – based on amount needed for an essential such as food, and multiplied
  5. Subjective measures – based on self-assessment as poor
  6.  Benefit-based/statutory measures – based on government definition of minimum income
  7. Material deprivation indices – based on actually lacking essential necessities
  8. Multi-dimensional measurement of poverty, deprivation or social exclusion – a mixture of the above and more

No measure is prefect. I don’t like the income measures because they treat all households as identical in terms of needs, and they are more about income spread than actual poverty. They also avoid the effect of tax, as they tend to be on before tax incomes.

My preference is No 7.  Stats NZ already do this – an occasional survey asking if families can afford stuff such as more than two pairs of shes for kids, transport to school etc etc. This is relatively objective, and measures actual deprivation rather than merely equality of income.




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