An editorial in Friday’s Scotsman complains:
“People are classified as being poor if their income is less than 60 per cent of the UK median. Given this is a relative, as opposed to absolute, measure, then we can say with mathematical certainty that the poor will always be with us.”
I gave some examples of similar muddles in a paper I wrote last year (Why refer to poverty as a proportion of median income?, Journal of Poverty and Social Justice, Volume 20, Number 2, June 2012 , pp. 163-175.) The researchers who introduced the measure explained that the test “does not mean that there will always be poverty when there is inequality: only if the inequality implies an economic distance beyond the critical level.” However, people don’t understand averages or distributions – and journalists usually get where they are by studying words rather than numbers.
There are problems with the use of 60% of the median, but the supposition that it invents poverty isn’t one of them. The main problems are that it compares poor people with incomes that are not much better, that it assumes it’s always impossible for more than half the population to be poor, and that it’s not well understood. The main defence is that it works, more or less, for Europe and for the OECD countries. 60% of the median is primarily a test of very low income, and in countries where income distributions are more equal, poverty is much lower.