Title: Principles and practicalities in measuring child poverty Miles Corak Measuring child benefits: measu
1Principles and practicalities in measuring child
poverty - Miles CorakMeasuring child benefits
measuring child poverty - Michael Mendelson Sid
Frankel
- Lars Osberg
- Economics Department
- Dalhousie University
- Low Income, Poverty, and Deprivation
- A Workshop sponsored and hosted by
- Statistics Canada and the University of Toronto
- June 5/6 2006
2Different Focus Agreements, Disagreements
Omissions
- Agreements
- Poverty is relative to social norms of
deprivation - Focus
- Identify Poor Administration or Evaluation ?
- Type I Type II errors of classification
- Disagreements
- Market Basket or of Median Income ?
- Word Picture to motivate criterion ?
- Summarization rate gap ?
- Omissions
- Time Risk, Human Rights Link
3Poverty economic deprivation - want of the
necessities of life
- not only those things which nature, but those
things which the established rules of decency
have rendered necessary to the lowest rank of
people - Adam Smith (1776)
- poverty is an absolute notion in the space of
capabilities but very often it will take a
relative form in the space of commodities or
characteristics - Amartya Sen (1983)
- MM MC agree
4Capabilitiest Fit (commoditiest)
- Poor - If Capabilities lt Minimum Necessary
- Social Standards of time gt Minimum _at_ time t
- Fit F (household size composition, location,
health, disability, life skills, etc.) - Commodities alternative measures
- Actual consumption or potential consumption
(income) or specific necessities - Minimum Capabilities / Deprivation ??
- Ambiguity of citizenship
5Issue - to identify the poor or the number
deprivation of the poor ?
- MM What is an adequate maximum child benefit
for families with low incomes? - MMs issue administration of a particular
program Canada Child Tax Benefit - implies
specific information set (Xi) - Type I and Type II errors both matter
- Good Predictor of need at individual level
needed for effectiveness - Other Programs supposed to take care of
special needs, adults
6MC aim to define measure child poverty,
compare internationally define credible poverty
targets for society
- Issue given all programs, macro cycle,
demography, etc., how big is the problem? - Rate, average gap inequality of gaps
- Note If Type I error Type II error, total is
OK - Identification of deprivation of specific person
not the issue - Statistical agency information set ?
Administrative sets - Different criteria for success
- MC objective to Minimize Type I Type II
- MM objective to Minimize Type I Type II
- MM Much discussion of classification errors
7Practical Issues in Poverty Measurement
- MM MC agree on dimensionality
- accounting period year,
- recipient unit family / household
- measure after tax transfer money income
- supplementation by specific item deprivation
- MM MC disagree on poverty line
- Relative Poverty or Budget based / Absolute
? - Implications for Initial Level and for Updating
- LO Missing Issues
- Summarization
- Spell Durations
- Human Rights link
8MM1 Market Basket Budget
- MM all relevant measures of low income or
poverty are relative to contemporary living
standards - Historical evidence - absolute poverty lines
market basket budgets increase over time with
average incomes - Non-transparent but appearance of objectivity?
- Details of construction buried deep
- wide range e.g. 18,342 to 30,402 for 4 in
Toronto 1992 - Major political plus iff source is credible
- Major minus if change is suspiciously timed
- Implicit link to norms, occasional, idiosyncratic
- Not directly comparable across nations, time
9MM2 reverse regression ???
- MM proposes regressing the sample of families,
with income as the dependent variable and the
deprivation indicators as the independent
variables, for families of different structures - Yi a0 a1D1 a2D2 ß1X1 ß2X2 ei
- But complains With current techniques, we know
only that renters have lower incomes than owners - Better estimate Prob(D1,D2 Yi ,X1,, X2 )
- BUT no escape from arbitrary choice of minimum,
necessary Probability of (D1,D2)
10MC Explicitly Relative Poverty Line
- Ho Established rules of decency change as
society changes - Transparent link to current distribution of
income - LIS standard ½ median equivalent income
- European Union 60 median equivalent income
- Explicitly transparent, standardized, comparable
over time across countries - huge plus for policy evaluation
- Two issues initial level updating
- Choice ½ or 60 - ?
- Rapid change in median can imply
counter-intuitive changes - Update for price changes OR Update for median
real income changes ? - Moving average can diminish volatility
11When does the choice of updating method matter ?
- Polling data since 1946 - social norms track
median earnings - IF median real incomes change, updating method
matters sometimes has been historically
important - Canada 1960s, 1970s, USA in late 1990s, Ireland
1990s - BUT since 1981, not much change in median real
incomes in Canada
12Absolute or Relative Poverty Line ? Not much
change in real median incomes !
13How best to motivate choice of initial level of
poverty line ?
- MM general word picture of standard of living
at poverty line should drive number - How to change specific items over time?
- How to defend general criteria as non-arbitrary?
- MC ratio of potential consumption to median
household income implies number - less than half deprivation
- LO ½ has intuitive meaning
- 50/50 equity norm ( solution to ultimatum
game) - Individuals always apply Reality check
- number drives examples, which drive credibility
- Comparisons drive Concern
- Over time is poverty getting worse ?
- Across countries do other nations do better ?
-
14Item Deprivations An Increasingly Important
Complement to povline
- Communicable to Public
- Human Rights Perspective gt specific goods
- Convention on the Rights of the Child - includes
health and nutrition, clothing, housing, and
other goods, services and opportunities necessary
for normal physical, mental and social
development - Can see behind within family allocation of
resources - to children, elderly, women.
- Legal recognition of social norm of minimum
- literature now emphasizes multi-dimensionality
- Sens Capabilities Perspective
- Social Exclusion Agenda
- Social Wage or Cash purchase ? who cares?
- Comparable across differing public-private policy
mix
15LICO orphan methodology
- Relatively little discretionary income
- LICO based on 20 E (food clothing house
share of expenditure income, family size,
rural/urban) - Year to year updating on CPI as per absolute
- Rebased occasionally to community norms as per
relative - Long time series useful !!!
- for research politics
- BIG MISTAKE to terminate until any replacement
methodology has acquired credibility
16MC - Principles for Measurement
- (1) use income based measure of resources
- (2) complement with small set of specific
indicators - (3) draw poverty lines with regard to social
norms - (4) establish a regular monitoring system and
update poverty lines within a five year period - (5) set a both a backstop and a target by using
fixed and moving poverty lines - (4) (5) less important if real growth in median
is small - (6) offer leadership and build public support for
poverty reduction. - Explicit Link to Human Rights Agenda would be
useful
17LO1 Annual Income ?
- Year compromise accounting period
- immediate needs are much more short term
- long term impacts may be multi year
- Implicit Assumption income is perfectly
substitutable within period but zero between
period substitutability - Consumption Income
- smooth consumption despite low income ?
- Borrow?
- Beg from relatives ??
- BUT credit access for most low income households
is very poor families may be poor /or alienated
18Why does poverty duration matter?
- long-term poor are materially worse off than
short-term poor - Income-based measures imperfect indicator of
resources - Low current income but buffers access to
credit, run down consumer durables, obtain
transfers - long spells exhaust buffers to consumption
- Psychological/Social impacts may increase with
- individual duration
- Social stereotypes may depend on the distribution
of durations - High turnover/short spell process means more of
nonpoor have been there
19Why does immediate need matter ?
- No groceries no credit no income immediate
need in a week or less - Transitory child poverty can imply events
- Events can have long run impacts
- Eviction from housing ?
- Forced mobility school attainment ?
- Family stress gt Family breakup? Abuse ?
- Traditional Welfare State agencies recognized
- But new HK paradigm has firmly long run
perspective - Much higher incidence (3x in SIPP) than in annual
poverty measures
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21LO2 Poverty Gap matters too !!Why not measure
Poverty Intensity ?
- Sen-Shorrocks-Thon (SST) Index.
- P (RATE ) (GAP ) (1G (X )).
- Empirically inequality of poverty gaps 1G
(X) is very nearly constant. - SST volume of Box, one dimension nearly
constant. - Changes over time, differences across
jurisdictions can be approximated by. - RATE x GAP FGT index (a 1)
- Poverty Box in 2 dimensions.
- Poverty Intensity proportional to area RATE X
GAP.
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23Variation over time mostly in rate, but misses
recent trend in poverty gap
24Qualitative Conclusions Re Poverty Trends Often
Differ if consider gap
- Relative poverty in early 1990s ?
- Canada, UK, Sweden poverty rate gap disagree
- US Germany indices agree
- UK Absolute poverty line - poverty rate and
poverty intensity change in opposite directions
every time - 1974/79/86/91/95
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30Communicability ?
- The whole point of measuring poverty is to
influence the policies that might affect poverty - A poverty index not used or understood by the
public by policy makers is pointless - Humans not very good at deriving accurate
relative size information from large tables of
numbers. - Quite good when presented as area proportionate
graphs
31Equivalence scale - a matters