1. 1 Measuring poverty, hardship and living standards in New Zealand: a brief overview Bryan Perry Ministry of Social Development, NZ 2nd Peter Townsend Memorial Conference Bristol, January 2011

2. Bryan Perry, Jan 2011Bristol Introduction New Zealand does not have an official measure of poverty or material hardship … the Ministry of Social Development reports on: –income distribution and income poverty using a range of measures –material hardship and deprivation using non-monetary indicators Statistics New Zealand sends NZ income distribution and income poverty information to the OECD involvement by state agencies is relatively recent –Brian Easton –NZ Poverty Measurement Project

3. Bryan Perry, Jan 2011Bristol Introduction (cont’d) MSD also publishes an annual ‘Social Report’ –includes income distribution and poverty information … –but it has a wider scope - 10 domains, 43 indicators some limited use of ‘social inclusion’ / ‘social exclusion’ discourse … some on ‘social cohesion’ … more about ‘social and economic wellbeing’ some use of an ‘underclass’ notion by current PM the major data gap in NZ is for the dynamics of poverty and hardship … social mobility

4. Bryan Perry, Jan 2011Bristol Outline active promotion of a common language and understanding around poverty and hardship using HH incomes –relative and fixed (anchored) poverty lines –an illustration of the limitations of the incomes approach (older NZers) using non-monetary indicators to construct more direct measures of material wellbeing –the ELSI measure – its development, properties and value –addressing some of ELSI’s limitations –international comparisons –next steps?

5. Bryan Perry, Jan 2011Bristol Active promotion of the big ideas idea of ‘poverty’ in richer nations –we use the EU’s high level conceptualisation income poverty & deprivation – different constructs poverty and hardship are multi-dimensional … even more so if ‘causes’ and ‘consequences’ are included … but we try to keep an uncluttered focus on the goods, services and opportunities that money can buy cannot avoid judgment in setting thresholds … but some thresholds are much more plausible / defensible than others

6. Bryan Perry, Jan 2011Bristol HH income Living standards Income and living standards

7. Bryan Perry, Jan 2011Bristol Current income (eg last 12 months) Living standards Previous income Assets + + Contributions to budget not picked up in ‘current income’ eg HH production, help from outside the HH + Govt services & subsidies + Special demands on budget eg unexpected bill health/disability costs high housing costs support for others o/s HH _ expected future income Access to other services & amenities +

8. Bryan Perry, Jan 2011Bristol Current income (eg last 12 months) Living standards Previous income Assets + + Contributions to budget not picked up in ‘current income’ eg HH production, help from outside the HH + Govt services & subsidies + Special demands on budget eg unexpected bill health/disability costs high housing costs support for others o/s HH _ preferences & wants? expected future income Access to other services & amenities +

9. Bryan Perry, Jan 2011Bristol Trends in HH incomes and income poverty, 1982 to 2009

10. Bryan Perry, Jan 2011Bristol Median HH income ($2009), 1982-2009, NZ

11. Bryan Perry, Jan 2011Bristol Income poverty rates, 1982 to 2009, NZ

12. Bryan Perry, Jan 2011Bristol Income poverty rates, 1982 to 2009, NZ

13. Bryan Perry, Jan 2011Bristol The limitations of relying on an incomes approach alone: the case older New Zealanders (65+) NZ has a two-tier system of retirement income provision –NZ Superannuation - a universal pension, neither income nor asset tested –private provision by citizens –no earnings-related component around half of older NZers have incomes of NZS plus less than $100 pw from other sources

14. Bryan Perry, Jan 2011Bristol Income poverty rates using different thresholds, by age group, 2008

15. Bryan Perry, Jan 2011Bristol Using NMIs: our general approach information from individual items is useful … but need multiple items working together for a robust picture we don’t directly use the ‘socially defined necessities’ approach with, say, a 3+ lack defining ‘deprivation’ we use the ‘enforced lack’ notion … … but are very conscious of the impact of ‘adaptive preferences’ deprivation (and material living standards more generally) is conceptualised as a latent variable reflected in the pattern of association between a number of observable indicators

16. Bryan Perry, Jan 2011Bristol Using NMIs: our general approach (cont’d) the indicators or survey items cover the ‘necessities’, ‘desirables’, and ‘(common) luxuries’ categories –development of a full range living stds index (low to high) –reality of consumption decisions within HHs – even the relatively poor have some ‘desirables’, even a few ‘luxuries’ no explicit attempt to derive an income poverty line using NMIs … –but we use the steepening of the gradient of the core necessities vs income curves to provide credibility for the thresholds we do use

17. Bryan Perry, Jan 2011Bristol Can the ‘enforced lack’ NMI approach to measuring hardship be extended to cover a wider range of living standards, from low to high?

18. Bryan Perry, Jan 2011Bristol Extending the enforced lack NMI approach to cover a wider range of living standards? the development goal candidate items to use in the extension the model and the model fit (CFA) a user-friendly version (ELSI and ELSI levels) validation point in time findings using ELSI a closer look at the underlying conceptualisation of living standards for ELSI implications of this for measuring changes over time next steps

19. Bryan Perry, Jan 2011Bristol

20. Bryan Perry, Jan 2011Bristol

21. Bryan Perry, Jan 2011Bristol Wider range of items in addition to the usual ‘necessities’ and ‘near necessities’, we needed some items that generally reflected higher living standards tried various consumer durables … such as a dishwasher (too much variation across groups...) overseas holiday once each 3 years (ie no EL) economising items (‘not at all’) eg –cut back on local trips to visit friends and relatives –put off buying new clothes as long as possible –bought cheaper or less meat than wanted to self-rated material standard of living

22. Bryan Perry, Jan 2011Bristol The first model Ownership ELs Participation ELs Economising Financial hardship Housing problems SR material LS SR income adequacy Material living standards

23. Bryan Perry, Jan 2011Bristol The first model Ownership ELs Participation ELs Economising Financial hardship Housing problems SR material LS SR income adequacy Material living standards

24. Bryan Perry, Jan 2011Bristol The current model Ownership ELs Participation ELs Economising SR material LS SR income adequacy Material living standards SR satisfaction with LS Added to stretch the top end more

25. Bryan Perry, Jan 2011Bristol Extending the NMI deprivation approach …. CFA analysis for a five factor model reflecting a single latent variable - model fit very good reliability also very good (Cronbach of 0.79) we created a user-friendly version of the scale, with scores ranging from 0 (low) to 60 (high living standards) –correlation of 0.98 with generic scale –‘ELSI’ (the Economic Living Standards Index) –for presentation purposes, created 7 ‘levels’ from very low to very high living standards –Levels 1 and 2 – clear hardship zone –Level 3 – hardship?

26. Bryan Perry, Jan 2011Bristol Distribution of ELSI scores by ELSI level whole population, 2008

27. Bryan Perry, Jan 2011Bristol Validity? to what degree can we trust an instrument to be measuring what it claims it measures? requires a careful marshalling of evidence from different sources – cumulative, never ‘final’ * * * * * * * * * -items … close examination - not covered today -internal structure - CFA and reliability -relationship with other variables - next section -consequences in practice - later -re-examination of underlying construct - later

28. Bryan Perry, Jan 2011Bristol Non-ELSI items: negative association with ELSI

29. Bryan Perry, Jan 2011Bristol Non-ELSI items: negative association with ELSI

30. Bryan Perry, Jan 2011Bristol Non-ELSI items: positive association with ELSI

31. Bryan Perry, Jan 2011Bristol Non-ELSI items: positive association with ELSI

32. Bryan Perry, Jan 2011Bristol Using ELSI for point in time comparisons

33. Bryan Perry, Jan 2011Bristol ELSI levels by age group, 2008

34. Bryan Perry, Jan 2011Bristol ELSI levels by family income source, 2008

35. Bryan Perry, Jan 2011Bristol ELSI levels by family type (under 65), 2008

36. Bryan Perry, Jan 2011Bristol ELSI levels by tenure, 2008

37. Bryan Perry, Jan 2011Bristol Children’s items by family ELSI level, 2008

38. Bryan Perry, Jan 2011Bristol Children’s items by family ELSI level, 2008

39. Bryan Perry, Jan 2011Bristol Different worlds …

40. Bryan Perry, Jan 2011Bristol Children: cumulative disadvantage ELs –friends to birthday party –waterproof coat –separate bed –separate bedrooms for children of opp sex (10+) –all school uniform required Economising ‘a lot’ –continued with worn out clothes/shoes –postponed visit to doctor –did not pick up prescription –unable to pay for school trip –went without music, dance, kapa haka, art, swimming, etc –involvement in sport had to be limited Distribn of children across the LS levels (%)  lower to higher LS  121018 41 % with 4+ deps 3511200

41. Bryan Perry, Jan 2011Bristol ELSI is very useful as is, but it is still a work in progress Respondent burden –40 items –have a ‘short-form’ of 25 items, but need to reduce further Compression in upper half of the scale –need for more items for modest to high living standards –potential with some ‘quality’ items, two new economising items, and one about ‘no restrictions’ for making an ‘unplanned purchase’ of around GBP125 –would like to reduce reliance on global self-ratings Underlying conceptualisation of living standards –what does ELSI actually measure?

42. Bryan Perry, Jan 2011Bristol What does ELSI actually measure? ELSI scores reflect the degree of financial restriction (freedom) that respondents report about consumption relative to desired consumption from a list of basics and non-basics … … that have been shown to reflect a common underlying or latent variable Representative list of basics and non-basics (O & P) Have Don’t have Want, don’t have because of cost (= enforced lack) Want, don’t have for other reasons Don’t want Score1011

43. Bryan Perry, Jan 2011Bristol Implications for monitoring changes in material living standards over time ‘Our living standards are higher today than 20 years ago’ usually means that consumption is higher / more people have access to more of the goods and services considered out of reach 20 years ago. ELSI is about changes in consumption relative to desired consumption, not changes in consumption per se If expectations about consumption rise in step with rising living standards, then the average ELSI score is likely to show little or no change over time.

44. Bryan Perry, Jan 2011Bristol Implications for monitoring changes in material living standards over time (cont’d) This is what we found from 2000 to 2004 to 2008 – no change in avg ELSI scores The way people respond to global self-ratings of living standards is consistent with ELSI’s ‘relative to desired consumption’ conceptualisation –viz if a person’s living standards rise in rough step with those of their ‘reference group’ then their self-rating will remain much the same The ELSI conceptualisation of living standards is internally consistent … but there is a marketing challenge !

45. Bryan Perry, Jan 2011Bristol FRILS? We have experimented with a ‘Fixed Reference Index of Living Standards’ (FRILS) –O and P items: have it / don’t have it –E items: economise a lot ≡ don’t have –SR items: omitted Representative list of O, P and E basics and non-basics Have Don’t have Want, don’t have because of cost (= enforced lack) Want, don’t have for other reasons Don’t want ELSI 1011 FRILS 1000

46. Bryan Perry, Jan 2011Bristol ELSI and FRILS compared: point-in-time rankings rankings for the usual population groups are much the same for ELSI and FRILS main exception is for those aged 65+, esp singles … FRILS produces similar hardship rates but a much lower proportion with higher living standards ‘adaptive preferences’ for the 65+, esp the singles? compared with younger adults they report fewer ELs for a given number of lacks, and also satisfaction with less: –to maintain dignity and/or sanity by saying they’re OK even when just getting by and ‘overstating’ self-ratings? or –having found that that is a ‘better’ way to live?

47. Bryan Perry, Jan 2011Bristol ELSI & FRILS compared: hardship rates ELSIFRILS Overall 13 Age group 0-1719 18-2411 25-441413 45-641211 65+43 Ethnicity European109 Maori2627 Pacific3331 Other14

48. Bryan Perry, Jan 2011Bristol Avg ELSI & FRILS scores compared

49. Bryan Perry, Jan 2011Bristol ELSI & FRILS compared: ‘doing OK’ rates ELSIFRILS Overall 5051 Age group 0-173643 18-244546 25-444751 45-646263 65+7150 Ethnicity European Maori Pacific Other

50. Bryan Perry, Jan 2011Bristol ELSI & FRILS compared: ‘doing OK’ rates ELSIFRILS Overall 5051 Age group 0-173643 18-244546 25-444751 45-646263 65+7150 Ethnicity European Maori Pacific Other

51. Bryan Perry, Jan 2011Bristol ELSI and FRILS compared: tracking changes over time major difference for 2000 to 2004 to 2008 –no change in ELSI mean –noticeable rise in FRILS mean using FRILS – there was an increasing proportion with higher scores (better living standards) … not so using ELSI % with higher LSindex: 2000 = 100 ELSIFRILSELSIFRILS 2000 3129100 2004 3235104120 2008 3241104140

52. Bryan Perry, Jan 2011Bristol The current model Ownership ELs Participation ELs Economising SR material LS SR income adequacy Material living standards SR satisfaction with LS

53. Bryan Perry, Jan 2011Bristol Possible next model Ownership ELs Participation ELs Economising – few new ones SR material LS Ability to purchase non- necessities ‘at will’ Material living standards Quality of kitchen, furniture, other durables ?

54. Bryan Perry, Jan 2011Bristol International comparisons Return to deprivation indices Great value in having an internationally comparative NMI scale – EU 9 items, with all its limitations

55. Bryan Perry, Jan 2011Bristol Hardship rate for population, EU index EU + NO, IS and NZ, 2008

56. Bryan Perry, Jan 2011Bristol Hardship rate for those aged 65+, EU index EU + NO, IS and NZ, 2008

57. Bryan Perry, Jan 2011Bristol Hardship rate for children (0-17), EU index EU + NO, IS and NZ, 2008

58. Bryan Perry, Jan 2011Bristol

59. Bryan Perry, Jan 2011Bristol Next steps further index development –improving ELSI for middle to high living standards –more thorough development of FRILS –deprivation indices – dimensions –understanding drivers of low living standards? revised item list for SNZ surveys using the 25 item budget an official set of measures of poverty and hardship for NZ