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![]() Poverty in Canada (2nd Edition)Chapter 2: Defining and Measuring PovertyTHERE EXISTS NO "OBJECTIVE" OPERATIONAL definition of poverty. There cannot be. States of well-being or "ill-being" are essentially personal and depend on the individual's preferences, expectations, self imagecharacteristics which are in turn determined by some mysterious mix of biology and environment. For each person the condition of poverty will lie somewhere on the continuum of well-being. The location will be quite unique for each individual and at different stages of life for the same individual. Poverty is an eminently subjective state and any precise definition for the purpose of measuring poverty will necessarily be subjective. For example, dictionary definitions specify or imply that poverty involves the absence of basic necessities. We encounter problems as soon as we try to become more specific than this. What exactly are those basic necessities the lack of which would qualify one as poor? Who gets to decide? Should the list include some "social" amenities as well as needs essential for physical maintenance? Is the judgement of an expert panel or the poverty researcher less subjective than that of low income families themselves in the development of a list of necessities? If people decide on the basis of their own experience that they could not "get along" or "make ends meet" below a particular income, is this a valid poverty line? In rejecting this latter approach, Ringen (1988) argues that "This is to accept that people are poor if they feel poor." Is it the absence of all basic necessities (however the list is determined) that constitutes poverty or just most of them? How do we classify people who lack some basic necessities but who also consume non-necessities? Are they "really" poor if they could have acquired all their basic needs but chose not to? The distinction between voluntary and involuntary poverty is extremely tricky. Are those who willingly deprive themselves of all but their basic physical needs genuinely poor? If they believe that spiritual or environmental salvation lies in the rejection of most material possessions and live their lives according to that belief, on what basis are they poor? If we allow that people are not poor if they freely choose to reject some of the comforts and amenities that most in the community enjoy, how do we regard those who voluntarily select a lifestyle which almost inevitably leads to a state of misery and deprivation, a result they would never choose? Have many drug-addicts and alcoholics freely chosen their poverty? Is the poverty of some high school dropouts and unwed mothers voluntary? The answer to these and related questions involves subjective judgement. That judgement largely depends on the definer's notion of what it means to be poor and, of course, his ideological bias. This does not mean, however, that all subjective definitions of poverty are equally valid. What it does mean is that no definition can claim to be objective in the sense in which the scientific definition of water is objective or even the sense in which the economic definition of price is objective. In terms of subjectivity, defining poverty is comparable to defining disability. It is up to the definer to make the case that his definition, in spite of its subjectivity, is a more useful tool for measuring the problem than the alternatives. The extent of poverty within a country or region should be measured primarily because it is an important social and economic problem. However it is defined, the word suggests misery, discomfort, and certainly an unsatisfactory standard of living. Compassion requires us to extend a helping hand to people in need. Before we act, however, we must have a clear idea of the severity of the problem. So measurement is an essential first step in the development of the appropriate policy, public or private. But poverty is not just a policy problem. It is also an important demographic fact. If we wish to have an accurate picture of ourselves and how we live, we should determine among other things the incidence of poverty. This information contributes not only to an understanding of how we are doing as a society, but more importantly to the very valuable process of intertemporal and international comparisons. Absolute and relative poverty The standard distinction in the literature is between absolute and relative definitions of poverty. The former approach focuses on the lack of basic necessities while the latter emphasizes inadequacy compared to average living standards. There is a sense in which the distinction is artificial. Any operational definition must be relative because what is considered to be a necessity depends to some extent on the conditions in the larger society in which one is a member. Yet at the same time there seems to be an irreducible core of necessities invariant through time. An individual or family lacking water, food, shelter and clothing would have been poor at the time of Plato, Adam Smith or in the late 20th century. What is absolute (or nearly so) about the absolute approach is the items included in the list of necessities. What is relative about the absolute approach is the quantity and quality of each included item. Therefore, while all operational definitions of poverty are, to some extent at least, relative, it is fair to say that conventionally the term absolute poverty conveys a sense of the lack of all the basic physical necessities, whereas, the term relative poverty conveys the impression of a lack of both physical and 'social' needs. This distinction is almost universally used in the literature on poverty and is one I shall employ in this study. In fact, I shall use the terms "necessities approach" and "absolute approach" synonymously. I will also use the terms "social amenities approach" and "relative approach" to mean the same thing. Measurement indicator Defining poverty is one thing. Measuring poverty involves a whole range of additional problems. For example, we must decide how poverty as we have defined it is manifested in society. Is poverty a problem of low consumption or is it a problem of low income? If we believe it is the former, we would measure poverty by surveying household consumption and determining for how many consumption was deficient according to the operational definition. This approach has much to commend it. It directly examines living standards which is really the essence of poverty research. It is the lack of adequate housing, nourishing food, and other consumption needs after all that constitutes poverty. One difficulty with this approach is that some households may lack necessities but be consuming some non-necessities. How should such cases be classified? The major problem, however, with the use of consumption levels as indicators of poverty is a very pragmatic one. Should we measure consumption by volume or expenditure. The latter is easier to do but using it does not tell us if consumption levels are adequate. Even if we use a volume approach, it does not tell us whether the quality is appropriate. A detailed examination of consumption (quantities and qualities) would, in general, be prohibitively expensive, and therefore, this approach is not widely regarded as a practical one. Overwhelmingly, income is used as a proxy indicator of the level of well-being in poverty studies. An income cut-off below which a household is judged to be poor is determined and is referred to as a poverty line. Society is then divided in two groupsthose with incomes below the line (the poor) and those whose incomes takes them above the line (the non-poor). The problem is that income and standard of living may be quite different even for those with very low incomes. In-kind income, wealth, do-it-yourself activities and thrifty practices are not easily accounted for when income is used as an indicator of well-being. The consumption approach, reflecting what people actually have, is better able to account for these things and represent living standards despite its other disadvantages. Ultimately, the major advantage of the income approach is the great volume of information that we have about income and income distributions. While income is acknowledged as an imperfect indicator of well-being for individual cases, in aggregate it is a reasonably good proxy for the consumption choices available to households. Accounting period Once the decision to use income as an indicator has been made, the issue of the appropriate accounting period immediately arises. Does insufficient income over a period of one month constitute poverty? Six months? One year? Several years? In her excellent survey article, Sawhill (1988) points out that "estimates of poverty are extremely sensitive to accounting periods. Far more people experience short periods of temporary poverty than are consistently poor over longer periods of time." Therefore, poverty rates using short accounting periods, such as one month, will be much higher and more volatile than rates for longer periods. The difficulty with accounting periods of less than one year is that well-off people with temporary cash flow problems might be counted as poor. In addition, many thousands of seasonal workers might be counted as poor or well-off depending on when the income survey was taken. Fewer such problems arise with an annual accounting period. On the other hand, very few households are permanently poor, thus a lifetime accounting period, so important in the study of inequality, is of little practical value in examining the problem of poverty. Without suggesting that it is ideal, the one year period is a reasonable duration over which to measure poverty. The issue, of course, is (at the present time) academic because data on personal incomes is only available on an annual basis. Poverty lines: direct and indirect methods Poverty lines can be determined directly or indirectly. The direct approach, also referred to as a budget standard, develops a list of needs (given a particular operational definition), costs the list for families of various sizes (and sometimes for different regions) and sets the poverty line equal to the cost of the list. The indirect method of developing poverty lines typically uses some device or equation to calculate lines without direct or implied reference to actual costs of a list of needs. A common misconception regarding the use of budget standards to establish poverty lines is that the resulting lines will necessarily be "absolute," that is, at the level of subsistence or bare necessities. This view, perhaps developed as a result of the early association of absolute approaches with budget standards and the apparent use of budget standards to establish social assistance benefits, is nevertheless incorrect. Budget standards are quite capable of incorporating as many needs, social as well as physical, as one might wish. A good example of this is the Metropolitan Toronto Social Planning Council's Guides for Family Budgeting. Besides basic physical needs such as housing, food, clothing, personal care and household furnishings and maintenance, the Council includes a variety of contemporary social amenities such as sports, recreation, social outings, alcohol, tobacco and a vacation. The point is that budget standards use a direct, "cost" approach to establishment of poverty lines, regardless of how poverty is defined. "Consensual" approaches to determining poverty lines represent a relatively new category of direct methods. These approaches typically involve the use of public opinion surveys (ie. Gallup poll) to determine what families need to "get along" in the community. The average of survey responses, adjusted for family size, is used as a poverty line. Advocates of consensual approaches such as Rainwater (1974), Leyden school researchers Goedhart et al. (1977) and Hagenaars (1986), Piachaud (1987), Veit-Wilson (1988) and Walker (1988) argue that the choice of a poverty line is a social choice. Essential needs are socially derived and it is society that should decide what level below which people are poor. Supporters argue that this "democratic" approach to determination of poverty lines is intrinsically preferable to selections made by one or more "experts." In Canada, Gallup has been conducting annual in-home surveys asking the question, "Generally speaking, what do you think is the least amount of money a family of fourhusband, wife and two childrenneeds each week to get along?" In 1988, the mean response to this question was $452 per week or $23,504 for the year. The use of Gallup or other similar survey results as poverty lines cannot be taken seriously. What kind of wisdom are we getting from people who are asked, on-the-spot, to determine the amount of money on a weekly basis that a family of four needs to "get along"? Does the typical person even have an accurate idea of what they themselves spend in an average week? Might their answers be different if they had a day or two to reflect on the question? And how does the average person interpret the words "get along"? In the minds of on-the-spot interviewees, does it mean "acquire basic necessities of life" or is it more likely to mean "achieve some measure of comfortable living"? If it is the latter, might respondents not be roughly estimating what they wish for the "poor" rather than what it means to be living "in poverty." Public opinion polls are, at best, of only peripheral interest in a serious analysis of economic problems. For example, a recent Gallup poll reported that 71 percent of Canadians believe that Quebec would suffer economically if the province separates from Canada. While these poll results have obvious political uses, they are of no economic value. I don't know of a serious economist who would even include this result in an article or book analyzing the economic costs of separation. Both CCSD and Statistics Canada employ an indirect approach to the determination of poverty lines. The CCSD line is essentially set at one-half the average income. Statistics Canada's Low Income Cut-Offs (LICO)about which much more will be said in chapter 3are determined by finding the income level at which a family must spend 58.5 percent of its income on the three basic necessities: food, shelter and clothing. Both of these approaches are indirect in the sense that they are not connected to the costs of a list of necessities. Both employ a relative definition of poverty, the CCSD by tying its poverty lines firmly to average incomes and StatsCan by linking its lines to average expenditures. Special mention needs to be made of the U.S. official poverty line, the so called "Orshansky method." Developed by statistician Mollie Orshansky in 1965, it was decided that anyone who had to spend more than a third of their budget on food would be poor. Thus, current U.S. poverty lines are set by calculating the cost of an "economy" nutritious diet and multiplying by three. The multiplier is larger for singles and couples and somewhat smaller for farm families reflecting the availability of home-grown food. The Orshansky method is predominantly an indirect approach to the setting of poverty lines. The cost of one necessity (food) is directly calculated; however, the overall poverty line is indirectly determined as a multiple of the necessary cost of food. The resulting lines appear to measure 'absolute' poverty, although it is not clear if this was intended. Because of the relative decline in the cost of food (i.e., relative to other necessities), the living standard of those at the poverty line has similarly diminished. Families will find it much more difficult to live on three times the cost of food now than they did during the 1960s. As Robert Haveman puts it,
Critique of relative and absolute approaches These two approaches to understanding and defining poverty can be distinguished quite simply: poverty as insufficiency versus poverty as inequality. Both approaches have weaknesses which require exposition and discussion. What follows is a critical evaluation of both relative and absolute notions of poverty. Relative poverty Galbraith (1958) has eloquently stated the case for a relative definition of poverty:
Supporters of the relative approach argue that the traditional definition of poverty, tied to "subsistence" is too narrow and too mean spirited. Poverty means having significantly less than others; it means standing out in the community and not being able to enjoy a "normal" living standard. Using this approach, having relatively "low" income qualifies an economic unit as poor even though it may have all of the necessities. Some advocates would argue that there is a moral component to the justification of relative lines. Every individual has a fundamental right to a "decent" standard of living independent of their production or earnings and this standard is related to though not necessarily equal to the community average. Everyone has a right to share in the benefits and material well-being generated by the use of the resources of society. That share is not mere necessities but is properly linked to what people in general can reasonably expect to have. Whether it is motivated by compassion or entitlement, the relative definition of poverty based on the principle of equity has, without question, become the conventional approach. British sociologist, Peter Townsend, labels "Victorian" the physical needs approach to the measurement of poverty. He argues that "we are first and foremost social rather than physical beings" and that social needs are basic to human well-being. Townsend proposes a "deprivation index" which includes social "necessities" such as yearly vacations, having a refrigerator, inviting people to your house, birthday parties for children, etc. as well as basic physical needs as a (relative) measure of poverty. In Canada, the quintessential relative poverty line is that developed by the Canadian Council for Social Development (CCSD). They argue that a family of three is "poor" if its income is less than one half the Canadian average for a family that size. Adjustments from this base are used to determine the lines for families of different sizes. While the Townsend and CCSD methodologies are quite different, both are relative approaches to poverty because they are intimately linked to community average incomes or consumption patterns. The widespread acceptance of the relative approach to defining and measuring poverty is a major coup for the social welfare lobby. They have managed to persuade the media as well as many academics and politicians that poverty is properly defined as inequality. While objectors have been somewhat slow off the mark, there have emerged in recent years a number of very powerful and compelling criticisms of the relative approach. Poverty means insufficiency The understanding that most people retain of the term poverty, in spite of efforts to redefine it, is the traditional one. Poverty means a genuine deprivation of life's basic necessities. It means that people cannot obtain a nutritious diet, warm, dry and safe housing, clean clothing appropriate to climate, sufficient personal hygiene items and health care. The absence of one or more of these "necessities" compromises long term physical well-being. Most people, including some members of the social welfare community, hold this "necessities" notion of poverty. For example, well known Canadian feminist and social activist, Rosemary Brown, has stated "Poverty is, quite simply, not having enough money to meet the basic necessities of life." Defining poverty in this way permits us to determine how many in our society lack those basic necessities. By including as "poor" those who are merely "relatively less well off," we do a great disservice to the genuinely deprived. The threshold argument The relativists' claim that social needs are as important as physical needs is simply not credible. Maslow's (1954) research on human needs and his "hierarchy" of importance emphasizes the priority of physical requirements. This does not suggest that all physical needs are equally important nor does it mean that some people will not select some "non-necessity" before acquiring all basic necessities. It does imply, however, that in general we can expect that there is a "behaviour threshold" which is passed as we move from the satisfaction of physical needs to that of social needs. It is likely that behaviour patterns are driven to a much greater extent by anxiety and desperation when people lack physical necessities. To the extent that this threshold exists, the necessities approach is the appropriate mechanism for detecting this "natural" cut-off. What are social needs anyway? While it is possible to achieve some general consensus as to what basic physical needs are, no such agreement is likely in the case of social needs. Indeed it can be argued that there really are no social "needs" but rather only social "wants" or "desires." The social amenities that people choose are the result of a variety motivations tied in with self esteem, peer pressure, culture, religion, conscience, etc. To suggest that a given list of items could adequately represent the social needs and wants of all (or even most) human beings is more than a little presumptuous. Are people socially deprived if they reject much of the junk that our economy produces. What if they prefer walks in the park to a night out on the town? What if they prefer good books (borrowed free from any public library) and intelligent conversation to TV and movies? What if parents reject the tons of plastic toys that companies like to foist on our children and choose for them instead healthier and more environmentally friendly recreation? Is this social deprivation? Critics of relative notions of poverty do not accept that the absence of social amenities constitutes poverty. Not having alcohol, tobacco, a one week holiday at a cottage and costly recreation does not make one poor. The single mother struggling to find an affordable apartment or trying to plan healthy nourishing diets for her children might scoff at the suggestion that absence of such amenities means poverty. The fact is that, over the years, many lower-middle income households have foregone such social amenities until their finances improved. Defenders of the idea that social as well as physical deprivation should be part of the definition of poverty might argue that the actual list of amenities is less important than having income above that needed for physical needs. Poverty means a lack of choice about what one can acquire. Therefore, poverty lines should include a "buffer zone" above basic needs, permitting the acquisition of the non-necessities of the household's choice. Critics of the relative approach are not likely to object to a social deprivation index or a social "comfort" line which would explicitly or implicitly take account of social "needs." They would insist however that these concepts not be called poverty lines. What we want for the poor The fundamental problem with the relative approach is that it fails to distinguish the technical question: How many people cannot afford the basic necessities of life? from the political question: What do we want the poor to have? Relativists are either oblivious to the distinction or else reject that such a distinction exists. Absolutists are correct however in insisting that poverty can and should be measured as an interesting and important demographic fact quite independently of policy. The level of public assistance to the poor is a separate question entirely. It is not at all inconsistent to use a necessities approach to defining poverty yet argue strongly that policies should be developed enabling the poor to raise their incomes well above the poverty line. Economic growth versus income redistribution A frequently cited weakness of relativism is that economic growth, by itself, does nothing to alleviate poverty. For example, if over time, real incomes double across the board with no change in the distribution of income or population, according to the relative approach there will be absolutely no reduction in poverty. This is, of course, absurd. There will have been many individuals and families who, before growth could not obtain the basic necessities but after growth could not only cover all the necessities but some non-necessities as well. No matter! They are still classified as poor because they are relatively less well off than others and this will never change no matter how well off in absolute terms they become. Poverty then, can only be reduced by redistributing incomes and output and not by producing more. The fairy tale world of relativism reaches is zenith if we imagine a stagnant economy with a redistributionist government. Everyone lacks the basic necessities but no one is poor. Stein Ringen (1988) puts it succinctly:
But massive redistribution of income does not ensure the elimination of poverty using the relative approach. Even if every individual and family had exactly the same lifetime income (weak egalitarianism), as much as 20 percent of the population will still be classified as poor as will be shown in the Appendix. Thus, not only does an improved real standard of living fail to lift people out of poverty, but neither does an egalitarian systemthe dream of many relativists. To use the relative approach for the measurement of poverty is to guarantee the biblical prophecy that the poor will always be with us. International comparability An important test of the usefulness of a definition is its universality. If the same concept is used in a variety of situations, it must mean the same thing in each case. For example, the definition of the term "output per capita" is universal. It means the same thing in Japan and Bangladesh as it does in Canada. It doesn't matter that output per capita is greater in one country than another. The technical definition is the same. On these grounds a relative definition of poverty would not be useful. Imagine a location where the vast majority of the population are living at bare subsistence and therefore average income is only slightly above this level. The CCSD relative approach would classify no one as poor when, in fact, almost everyone is poor. As Power (1985) points out "nobody could live at half the average income in poor countries." Some relativists contend that poverty in underdeveloped countries cannot be compared to poverty in the developed world. The "mass" poverty of India and Somalia has different characteristics and different causes than the "individual" poverty in North America and Europe. Therefore, poverty should be defined differently in each case. This argument must be challenged. People living in poverty suffer wherever they are located. Is a Canadian family that is unable to obtain the basic necessities such that their long term physical well-being is compromised less miserable than an Indian family in the same circumstance? There well may be proportionately more families in India without basic necessities. This does not justify changing the definition of the problem. Indeed the very fact that poverty exists everywhere makes it crucial that there be a universal definition. International comparisons of socioeconomic problems are interesting and useful to a variety of academics, institutions and policy makers but are impossible unless we use the same standard. Vested interests It is possible to view the development and promotion of relative poverty lines quite cynically. By the mid-1960s, the social welfare lobbya loose knit fraternity of social activists, social workers, academics, bureaucrats and politicians had begun to take shape as a significant force in Canadian politics. It is not surprising that they embraced the issue of poverty and made it their own. After all, most of them made a rather handsome living off the poor. The problem was that impressive economic growth in the post-war period was significantly reducing the number of people who were unable to obtain the basic necessities. Poverty, as it had traditionally been understood, was quickly disappearing putting at risk the comfortable livelihoods of many in the poverty "business." They reacted in much the same way as troubled corporations. They did what they could to increase the demand for their product. Specifically, they redefined poverty as inequality and in doing so were able to demonstrate that the number of poor were, if anything, increasing. It was a brilliant manoeuvre and one that went largely unchallenged. It was a straightforward functional response to the threat of extinction. It was not compassion but old fashioned self interest at work. Relative poverty lines satisfied another unrelated aim of many social activists. Now poverty could only be alleviated if there were a more equal distribution of income. While a socialist policy of redistribution may have been difficult to sell, the same end could be accomplished with a more acceptable "anti-poverty" policy. Graham Riches (1986) points out that if you believe "that poverty is generated by structural inequalities built into the fabric of capitalist society, you will favour a relative deprivation approach." Poverty versus inequality Critics can argue, successfully I believe, that relative definitions don't really tell us about poverty but rather about inequality. The two are not the same. While there is unquestionably overlap, each has a separate place on the roster of important socioeconomic concepts. Poverty is trivialized if it is equated with inequality. The use of the relative approach may serve other goals but it does not help the poor nor does it contribute to our understanding of poverty. As Donnison (1988) has stated, "to ask your readers to believe that any evidence of inequality is proof of povertyas too many authors have doneis a lazy and dishonest procedure. It is arguable that inequality is a bad thing and that it should be reduced; but the argument should be advanced frankly, not concealed within a case for abolishing poverty without demonstrating the link between them." Absolute poverty The notion that poverty is properly defined as the lack of all basic physical necessities has much to commend it. It does correspond more closely to the traditional understanding of the term. It does lend itself to a constant standard by which progress can be measured. It permits us to determine an interesting and important demographic fact quite independently of the issue of what we will do about it. In spite of these and other advantages, there are a number of difficulties with this approach. The term "absolute" implies a rock bottom level of subsistence and this impression is emphasized by its critics. As Ross (1989), in his rejection of the notion of absolute poverty, states,
In comparison to this version, any other approach, even one which is badly flawed, would be infinitely preferable. The straw man that Ross sets up by no means does justice to the absolute approach. Nevertheless, the "frugal" and "inhumane" tag is difficult to shake. Perhaps more to the point is the concern by many in the social welfare community that governments will use poverty lines derived using the "necessities" approach to justify low rates of social assistance. Governments may, as well, reduce efforts to eliminate poverty if, according to the necessities approach, the problem is not that severe. Defenders of the absolute approach would argue that we cannot concoct non-credible and inflated poverty lines just because we want more for the poor. First and foremost, we must tell the truth about poverty. We must determine, as a priority, the number in our society who cannot afford the basic physical necessities. The policy issue of what to do is quite separate and to confuse the two is not appropriate. Another problem has to do with arbitrariness. Every operational definition of poverty, absolute or relative, must make some arbitrary assumptions. With the absolute approach and the use of a budget standard measure, the list of basic necessities will involve some degree of subjective judgement. This is inescapable regardless of the likelihood of a broad consensus on what physical necessities are. It doesn't matter whether the list is devised by the researcher, by an expert panel or by social consensus (i.e., Gallup poll), the arbitrariness remains. Finally, there is some doubt as to whether the necessities approach can be used for international comparisons. Is it possible to devise a simple list that will be universally applicable? To use an obvious example, a private, indoor flush toilet is regarded as a basic necessity in Canada but perhaps not in Somalia. Similarly with facilities such as telephones, transportation and even some articles of clothing. What about the problem of the quality of each item, something a simple list cannot address? There have been few attempts to operationalize the necessities approach and no effort, as far as I am aware, to measure the incidence of poverty using this approach. This is undoubtedly due in part to a reluctance of supporters of the approach to become immersed in what would be a controversial debate. It is due, perhaps to a greater extent, to the absence of any reliable methodology. Footnotes
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