Crying wolf too many times on poverty - The Centre for Independent Studies
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Crying wolf too many times on poverty

Yet another sensationalist headline on poverty in Australia appeared this week, indicating poverty rates in Victoria are as high as 13%, and more than one in 10 Victorians are ‘poor’.

The breathless report by the Victorian Council of Social Services (VCOSS) found “alarmingly” there is no corner of Victoria untouched by poverty. But this reporting is misleading at best and irresponsible at worst.

Firstly, the report did not measure absolute poverty, but what is known as relative poverty — a subjective measure of deprivation, obtained by comparing person A’s income to person B’s income. This means if person B is wealthy, person A could be relatively poor.

In Australia, relative poverty is generally defined as receiving less than half the national median household income.

The limitations of this measure are obvious. If the median income increases, more people could be classified as poor — even though their absolute level of deprivation remains unchanged (or may even have improved).

Secondly, many Australians go through periods of low income — which does not necessarily indicate material deprivation or socio-economic disadvantage.

The obvious example is university students. Even VCOSS admitted the 13% figure would have picked up thousands of students in the Melbourne area. In retrospect, it is certain that I would have been technically classified as poor when I was a student at Sydney University a decade ago.

In fact, this simply reflects life cycle factors. Most people’s earnings peak and ebb during certain stages of their lives.

Consequently, retirees are more likely to be counted as poor by having lower incomes in that stage of their lives. Similarly, pensioners can be picked up in measures of relative poverty by being asset rich and cash poor.

The risk of elevating relative poverty as a problem is that governments will become distracted from tackling real, persistent disadvantage in Australia.

There are about 700,000 Australians — roughly 3% of our population — who experience entrenched socio-economic disadvantage.

Our concern should be focused on those Australians, particularly on early intervention for vulnerable children who would otherwise be caught in an intergenerational cycle of poverty and disadvantage.

But unfortunately for VCOSS, a 3% poverty rate doesn’t make for a news-grabbing headline.