Poverty: What does it really mean?

23^rd April 2013

Welfare measure targeting the nation’s poor must tackle its multiple levels, lest it should fail, argues ResPublica’s Lorena Papamanci

The social and political agenda in the UK has been polarised over the past several weeks on the issue of welfare reform, with the Government supporting work-centred measures as a method of poverty relief, while different organisations and societal actors argue that these proposed measures would push even more people into poverty. This debate begs the question – what definition of poverty do the two parts uphold? And even more so, what definition should they uphold to increase welfare policy efficiency?

For the past two decades the international community has, quite rightly, taken an increased interest in the issue of poverty. In September 2000, world leaders adopted the United Nations Millennium Development Goals (MDGs), the first of which being a firm commitment to halve world poverty and hunger by 2015. Furthermore, this Spring the UK and other developed countries have renewed their commitment to alleviating the world’s poorest, whilst the Government’s Welfare Reform agenda sets out to tackle poverty in our own country.

In order to evaluate the programmes and efforts involved thus far, however, policy-makers and academics alike have yet to establish the proper method of understanding and measuring poverty. Scholars define the concept of poverty through numerous mechanisms, which focus primarily on basic human needs and individual access to the goods and services that ensure them. Consequently, indicators have been developed according to three leading theories: income-based, consumption-based and capabilities-based.

Income is universally accepted as an objective measure of poverty and it is generally understood that the level of income in a household determines its degree of wealth. Academics also argue that income is one-dimensional and thus allows for precise calculations and estimates. But despite the important advantages of computability and objectivity, income-based indicators are eminently abstract and do not reflect the reality of those living in poverty. Such measures provide only a number where a more personable understanding and empathy is needed. Consequently, welfare measures directed solely at increasing household income will never solve the issue, but rather postpone its solution.

On the other hand, the World Bank (WB), endorsed by the UN as ‘official poverty scorekeeper’, uses the poverty-line index corroborated with the Purchase Power Parity (PPP). This ‘line’ describes the minimum amount an individual has to spend daily in order to ensure basic human needs, based on the least costly basket of goods the poor report in their consumption (both food and non-food spending). By counting households where consumption per person is below this poverty-line, thereby obtaining a ‘headcount index’ of poverty. Focusing on consumption rather than income, this indicator reveals a much deeper understanding and therefore a more reliable estimation of poverty, understood as low quality of life, through limited access to consumer goods and services.
This rationale is particularly prominent in the case of in-kind benefits, where the Government attempts to improve access to goods serving basic human needs, by offering free meals or food stamps. Nevertheless, these measures still resemble income-based policies. They do not provide the cure to the social illness of poverty, but merely offer pain killers, which temporarily alleviate hardship but also, in time, create dependency – the very welfare dependency the current government is trying to tackle. But most importantly, these two measurements of poverty only consider its economic level, disregarding the other numerous shortcomings of living in poverty, such as access to proper education, housing, personal security, employment opportunities and the possibility to participate in public policy debates.

The only long term solution to understanding (and then eradicating) poverty is looking at its multiple dimensions, roots and ramifications. This complexity argument is developed by Nobel Prize laureate, economist Amartya Sen, who changed the terms of debate in welfare by giving more emphasis to subjective well-being and the social, rather than the economic side of poverty. Sen sees possessions as important not in themselves, but in terms of what they enable people to do and to be; in other words, the capabilities that a person can generate from these goods and services. For example, the ability to live to old age, engage in economic transactions, or participate in political activities – social, unquantifiable means of wellbeing, which people value together with economic and material means.

Other dimensions, further diversified by Sabina Alkire, of the Oxford Poverty and Human Development Initiative, include quality of employment, empowerment, physical safety of person and property, dignity, freedom from humiliation and the ability to go about without shame, psychological and subjective well-being, and general satisfaction.

It was Sen’s work that lead to the creation of the Human Development Index (HDI) and inspired the WB to extend its definition of poverty in 2010, when assessing the progress of the Millennium Development Goals. The World Bank’s recognition that poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity to better one’s life represents a major breakthrough in development studies. It creates the necessary context to move from simple income-based measures to wider, comprehensive policies that address poverty in all of its underlying dimensions. By achieving ‘human development’ rather than income growth, the welfare policy would also tackle poverty in the subjective understanding of the concept, suggested by Sen.

Translating these definitions and means of measurement into welfare policy-making, one must look back to 1942, when Lord Beveridge highlighted the five key problems of the country’s poor and prescribed the government’s cure for them: adequate income, adequate health care, adequate education, adequate housing and adequate employment. The poor need education, good health, homes and jobs, not just benefits, to be able to escape the poverty trap and the government must do just that – equip them with the ‘capabilities’ they need to improve their living standards and fight poverty. It is this type of measures that the current debate around welfare should be aiming towards – the ones that could tackle the roots of poverty, not just its symptoms.