How do we measure poverty?

This briefing paper focuses on poverty defined in terms of disposable household income, although poverty may be defined in different ways and there is no single, universally accepted definition. 

Various poverty measures based on disposable household income are in common use and the trend can look quite different depending on the measure used. Two commonly used measures are:

  • people in relative low income – living in households with income below 60% of the median in that year;
  • people in absolute low income – living in households with income below 60% of (inflation-adjusted) median income in some base year, usually 2010/11.

Income can be measured before or after housing costs are deducted (BHC or AHC). 

How many people are in poverty?

In 2019/20:

  • 11.7 million people were in relative low income BHC (18% of the population), at a similar level to the year before.
  • 14.5 million were in relative low income AHC (22%), also at a similar level to the year before.

Looking specifically at children:

  • 3.2 million children were in relative low income BHC (23% of children), an increase from the year before.
  • 4.3 million were in relative low income AHC (31%), about the same as the year before.

Source: DWP Households below average income, 2019/20

Overall, levels of relative poverty have been fairly steady over the past few years, but this varies between population groups: the proportion of children and pensioners in relative poverty is higher than it was five years ago.

The share of people in absolute low income has remained reasonably stable over the last five years. 

Who is in poverty?

Some groups are more likely than others to be in poverty. 

Poverty rates are highest for people in households where the head of the household is from the Pakistani or Bangladeshi ethnic groups and lowest for those from White ethnic groups.

Around 40% of working-age adults in workless families were in relative poverty before housing costs in 2019/20, compared to 11% in families where at least one adult was in work. 

46% of social renters and 33% of private renters were in relative poverty in 2019/20, compared to 15% of people who owned their home outright and 11% of those who have a mortgage.

The proportion of people in relative low income before housing costs (BHC) was 27% for families where someone is disabled, compared to 15% for people living in families where no one is disabled.

Other ways of thinking about poverty

This note discusses income-based measures of poverty, but there is debate about whether this serves as a relevant measure of poverty. The Social Metrics Commission (SMC) proposed a new based on the extent to which someone’s resources meet their needs. This accounts for differences among households such as costs of childcare and disability, savings and access to assets.

The SMC also provides detailed analysis of the nature of poverty including characteristics that impact the experience of poverty, using SMC poverty numbers, such as experiences of community, family finances, health, and labour market opportunity.


Related posts