Veritas propter investigationem [Truth through research]
TitleThe Heart of Poverty – matching passion with precision
AuthorsKieran Madden
InstitutionMaxim Institute
TopicsPoverty rates amongst elderly
 Living standards
CountryNew Zealand
Date Published2014
Date posted on PR27 Jun 2015
Madden, K, (2014). The Heart of Poverty – matching passion with precision Maxim Institute,

PensionReforms’ summary and comments

The state’s objective in delivering a public, age-related pension should be to alleviate or even eliminate poverty amongst the old.  The old-age group is not the only one affected by poverty-related issues but it is the target group for age-based pensions.


The report explains what different measures of ‘poverty’ look like.


“Poverty has many faces; it is complex and multi-dimensional.  Given this context, it is unlikely that a “silver bullet” solution exists.  Before coming up with the equally complex and multi-dimensional responses needed to tackle poverty, we first need to understand, define and measure it better.”


The report says it wants to be used as a “starting point” for a debate about poverty in New Zealand.


“Poverty is multi-dimensional; it has both physical and emotional aspects, and at its core is about unacceptable hardship.  Poverty is unacceptable.”


The report acknowledges “serious disagreement about the nature of poverty” it suggests there is greater agreement about what is needed to “participate in society”.


So, what is ‘poverty’ in a developed country like New Zealand?


“A serious point of contention arises between those who consider poverty to be absolute and those who consider it relative—between the “less-well-off” in richer nations and the “life-and-death” struggles found in developing countries.”


This necessarily means that ‘poverty’ can be measured only by reference to the standards of the local community and can, in that context, be both absolute and relative.  There are some things that all would agree are universal needs (for all humans) and that cross local considerations of “unacceptable hardship”


And then there is the relative measure: “…different societies in different times impose different needs upon people that must be met in ways specific to their society and time.”


The report than attempts a definition:

“Following this relationship between needs and resources, we define poverty as: an unacceptable situation where a person’s way of life falls below a decent minimum standard of a particular society at a particular time, and a lack of resources to rise above that situation.”


It’s then vital to measure ‘poverty’ and to track those data over time.  Again, there is no universally accepted measure of poverty.


“There are two main theoretical approaches to measuring poverty: income thresholds and living standards.  Income thresholds focus on inputs: income as a resource available to avoid hardship.  Living standards on the other hand focus on outcomes: actual experiences like lacking a raincoat or two solid meals a day.”


The report’s analysis suggests that these different measures arrive at similar proportions of New Zealand’s population living in poverty (about one fifth) but the make-up of the affected groups differs – not all ‘low-income’ households are in ‘poverty’ and the ‘deprived’ are not necessarily ‘income-poor’.


“We have canvassed eight distinct approaches to measuring poverty under the two traditions of poverty line studies (average income threshold, consumption expenditure, budget standards, component and multiplier, subjective measures and benefit-based/statutory measures) and living standards (material deprivation indices) and a combination of the two (multi-dimensional measurement of poverty, deprivation or social exclusion).”


The report says that the different measures  “[a]ll tell related yet distinct stories” and more than one “…should be used together and where possible tracked across time to paint a more comprehensive picture of poverty than a single measure ever could.  Qualitative research can complement these measurements to help capture what it means to be poor.”


PensionReforms suggests that the suggested definition of ‘poverty’ is almost too general to be useful but acknowledges the difficulty involved in having something that applies to all groups.  As the report notes, income mobility blurs the distinctions at younger ages but that is probably less significant at the oldest ages.  Someone who is poor at retirement is unlikely to move out of poverty during retirement.


Regardless, PensionReforms agrees that better data and understanding of these issues is a necessary part of understanding whether retirement income policies, for example, are actually working.  Without a clear understanding of the measures and good, long-term data, debate on poverty issues tends to be political rather than practical.  (File size 1.1 MB; 44 pp) 728