Material Deprivation Luke Sibieta What s coming up

Material Deprivation Luke Sibieta

What’s coming up? • Introduction to Material Deprivation Indicator • Falling levels of material deprivation since 2004 -05 • Reflects growth in living standards, but not “catching up” • What else can it teach us about living standards of families with children? • Relationship between income and material deprivation • How severe is “severe poverty? ”

Rationale for Material Deprivation Indicator • HBAI statistics based on “snapshot” of household income • Unlikely to accurately represent living standards of those with volatile incomes, e. g. self-employed • Government has chosen to use three indicators of child poverty for 2010 target 1. 2. 3. Relative low Income Absolute low Income Combined Indicator of material deprivation and relative low income • Defined as being “materially deprived” and household income below 70% of contemporary median (BHC)

Construction of Material Deprivation Indicator • Based on 21 questions about level of deprivation experienced by adults and children • e. g. Two pairs of all weather shoes for each adult, keep house warm, have a birthday party, go on school trips • Families lack items if they say they “wanted, but could not afford them” • Said to identify “enforced hardship” • Scores range between zero (lack nothing) and 100 (lack everything) • Materially deprived if they have a score greater than 25

Distribution of Material Deprivation Scores 4. 8 m have score of zero 3. 1 m have score above 25 2. 0 m also have incomes below 70% of contemporary median 12. 8 m children in the UK in 2006 -07 Source: HBAI data

Reflecting on the indicator (1) • Indicator of the number of “necessities” that a family can’t afford • BUT… • Can conflate living standards with family preferences • e. g. Mckay (2004) shows that families who said they could not afford “necessities” chose to buy “luxuries. ” • Sensitive to exact threshold • Absolute Measure • Does NOT say whether the living standards of poor families with children are keeping up with average living standards • Potentially better indicators available • e. g. expenditure

Summing up trends since 2004 -05 • Fall in official indicator of material deprivation • 100, 000 per year • Sensitive to exact choice of threshold • No fall in “relative” material deprivation • Living standards of poor families with children are rising year-on-year • But not faster than average living standards • They are NOT catching up

UK Trends since 2004 -05 Relative Absolute Child Poverty 1998– 99 (Baseline) Material Deprivation 3. 4 m 2. 6 m 1. 7 m 1. 3 m 2004 -05 2005 -06 2006 -07 Target for 2010 Source: HBAI data

UK Trends since 2004 -05 Relative Absolute Child Poverty 1998– 99 (Baseline) 3. 4 m 2004 -05 2. 7 m 1. 7 m 2005 -06 2. 8 m 1. 6 m 2006 -07 2. 9 m 1. 7 m Target for 2010 1. 7 m Material Deprivation 2. 6 m 1. 3 m Source: HBAI data

UK Trends since 2004 -05 Relative Absolute Child Poverty Material Deprivation 1998– 99 (Baseline) 3. 4 m 2. 6 m 2004 -05 2. 7 m 1. 7 m 2. 2 m 2005 -06 2. 8 m 1. 6 m 2. 1 m 2006 -07 2. 9 m 1. 7 m 2. 0 m Target for 2010 1. 7 m 1. 3 m Source: HBAI data

Sensitive to choice of threshold Low Threshold (15) Current Threshold (25) High Threshold (35) 2004 -05 3. 4 m 2. 2 m 1. 5 m 2005 -06 3. 4 m 2. 1 m 1. 4 m 2006 -07 3. 4 m 2. 0 m 1. 3 m Source: HBAI data

No fall in “relative” material deprivation Constant Threshold (25) Relative Threshold (mean) 2004 -05 2. 2 m 2. 8 m 2005 -06 2. 1 m 2. 8 m 2006 -07 2. 0 m 2. 8 m Source: HBAI data

What else can material deprivation teach us? • What is the relationship between income and material deprivation? • Do those said to live “severe poverty” have very low living standards? • Are the risk factors for income poverty and material deprivation different?

Fuzzy relationship between income and material deprivation Source: HBAI data

How severe is “severe poverty? ” Incomes below 40% of contemporary median (BHC) 6. 2% of children in 2006 -07 Incomes between 40% and 60% of contemporary median (BHC) 16. 1% of children in 2006 -07 Source: HBAI data

Different risk factors? • Disagreement over who is poor between indicators • Disagreement over risk factors? • Analyse which factors are associated with income poverty and material deprivation • Hold constant all other observable factors • Factors: • Region, Number of Children, Family Type, Economic Status, Ethnicity, Housing, Disability

Regional Results Source: HBAI data

Disability and Family Type • Disability (adult) • Less likely to be in income poverty (-2. 3 ppts) • More likely to be in material deprivation (+9. 4 ppts) • Extra state benefits for higher needs • Family Type/Economic Status • Working lone parents are LESS likely to be income poverty than couples with one worker (-9. 1 ppts) • But are MORE likely to be in material deprivation (+15. 1 ppts) • Do equivalence scales give enough weight to needs of lone parents? • Might undermine of the arguments for higher WTC for couples

Conclusions • Falling levels of material deprivation since 2004 -05 • Reflects growth in living standards, not catch up • Those in “severe poverty” are less deprived than others in income poverty • “severe” is probably the wrong term • Different risk factors • Reversal of regional rankings, case for regional prices? • Disabled adults more likely to experience material deprivation