Small-area measures of income poverty

Some of the difficulties of measuring poverty at the small-area level have been highlighted in a new paper from the LSE's Centre for Analysis of Social Exclusion. The paper's author cautiously suggests a system of proxies based on benefits data as the most promising way forward.

The paper is the latest from the 'Social Policy in a Cold Climate' research programme, examining the effects of the major economic and political changes in the UK since 2007 – particularly on the distribution of wealth, poverty, inequality and spatial difference.

Key points

  • The two broad approaches described in the paper, proxies and modelled or simulated estimates, tend to satisfy some performance criteria well and others poorly. But the use of proxies based on benefits data appears to be the most feasible way to produce measures from public sources on a sufficiently timely basis.
  • The 2011 Census will be the first opportunity to evaluate the accuracy of the small-area population estimates, produced by ONS and GROS, that are used as denominators in local poverty measures.
  • Taking into consideration various potential sources of error, it would be 'unwise' to conclude that a difference of less than 5–10 per cent in a poverty proxy rate between two small areas in a single year demonstrates a significant difference in the underlying poverty rate.
  • Nonetheless, the paper concludes, the proxy is an 'adequate, albeit imperfect' tool for investigating changes in intra-urban distributions of poverty.

Note: there are currently in Britain no direct observations of poverty among all people from which rates for small areas can be directly derived. Existing small-area poverty statistics employ one of two broad approaches to dealing with this absence: proxies and modelled estimates. With a proxy, an observed characteristic is used to stand for another that is not observed but is of interest. An alternative is to estimate the actual prevalence of income poverty in small areas by combining information from surveys and administrative data.

Source
: Alex Fenton, Small-Area Measures of Income Poverty, CASEpaper 173, Centre for Analysis of Social Exclusion (London School of Economics)
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Publication date: 
May 20 2013