Using Household Expenditure to Develop an Income Poverty Line, by Peter Saunders, Jonathan Bradshaw and Michael Hirst

Social Policy and Administration, vol.36, no.3, June 2002, pp.217-234.

Income and expenditure measures are commonly used to establish poverty lines representing, respectively, the availability of cash resources and the standard of living approaches to measuring the extent and composition of poverty in the UK. Using UK data (and also Australian data) the researchers compare these two measures and find that while the overall poverty rates are similar whichever measure is used, the relativities they imply for different types of household differ considerably. They find that there is little overlap between income and expenditure poverty, and that very few households are both income- and expenditure-poor.

The authors define their own concept of poverty as constraint on choice or constrained expenditure, and identify its presence by discovering where there is absence of spending on durable goods and luxury items. They then derive income thresholds for observed levels of constrained expenditure for different types of household. They assume that in such households all income is spent, and they are thus able to define poverty lines below which expenditure is severely constrained. Income support rates are then compared with these poverty lines.

The article draws attention to the limitations of the Family Expenditure Survey data, identifies future research needs, shows the value of exploring the links between income and expenditure, and makes suggestions as to how new poverty measures might be calculated by employing both income and expenditure data; but its longer term importance surely lies in its definition of poverty as constrained expenditure. If this is to be the definition of poverty, then it will be essential to include in the definition of poverty a household’s ability and opportunity to increase its income. If there are significant barriers to a household increasing its income then expenditure will be more constrained over time and poverty will be deeper, and if there are fewer barriers to a household increasing its income then expenditure will be less constrained over time and poverty will be less deep. This necessary factor in the calculation of poverty will require such barriers to be quantified.

It is to the quantification of the barriers to a household increasing its income that the research agenda must now turn.