Ethics @ Work: The many (statistical) faces of poverty

Commission makes progress on poverty

March 13, 2008 22:13
4 minute read.
Ethics @ Work: The many (statistical) faces of poverty

Business ethics 88. (photo credit: )

It is very common, perhaps universal, among industrialized countries to publish poverty statistics - what fraction of households, or citizens, live below some poverty "line". It is also nearly universal to evaluate poverty by household income - a household is poor if its income is low. The majority of countries, including Israel, use a relative poverty measure; a family is poor if its income is below some fraction of average income. In Israel, a family is currently defined as poor if its monthly income is less than half of the median income, adjusted for household size. This measure has many inadequacies; a family can have low income but high resources, or high income but special needs; poverty will tend to grow when median income goes up even if the poorest families are better off; families may have limited economic resources but not be distressed because they have good coping skills or coping resources (such as extended families or supportive communities). Some months ago I reported on the work of a governmental commission charged with recommending changes in the way poverty is measured in Israel, mentioning also my own suggestions. The commission has finally published a report summarizing its work and its recommendations. Since poverty and inequality are ethical issues of the highest importance, and measuring them is a helpful way of finding policies to influence them, this publication is of some importance. I will briefly review here the most important recommendations of the committee, as I see it. Most of the omitted items are highly technical. The first recommendation suggests publication of the standard of living of each quintile. This is important because poverty can increase even though the standard of living of the poorest Israelis is improving - or vice versa. That's because poverty is a relative measure. This means on the one hand that alarming statistics about rising poverty may hide a reality where living standards are improving for the poor; it can also mean that static poverty statistics can lead to complacency when the depth of poverty is increasing and the poor are getting worse off. The publication of supplemental figures is another recommendation by the commission. My recommendation to the committee was to measure poverty via consumption level, not via income. Poverty is about our standard of living, not our short-term cash flow. Two committee members recommended this change, but it was not accepted. However, the committee does recommend that the government publish the fraction of poor families with consumption above the poverty line. If we accept that the poverty line represents some minimum acceptable standard of living, we should know what fraction of families actually do not attain that standard. This is a useful recommendation, but the problem is that if we evaluate poverty in terms of standard of living, then setting the poverty line in terms of income may set the line too low. The committee put emphasis on showing international comparisons. This will be a humbling exercise, because Israel's poverty rate is far higher than that of most peer countries at a similar level of development. In fact, most European countries define poverty as being 60% of median income, not 50%. Even though their poverty line is relatively higher, tending to exaggerate the extent of poverty, they still have much lower levels of income poverty than Israel. The display of statistics on non-economic social ills is also included in the recommendations. As we have discussed many times in this column, the European Union decided years ago to go past accounting of mere economic inequality and to create in addition measures of "poverty and social exclusion". This is partly out of a desire to include additional and more informative measures of misery. However, in my opinion an equally important factor in this decision was the realization that many programs meant to reduce economic poverty (low income) actually augmented other kinds of social dysfunction, by discouraging work and study and generally leaving poor people out of the social mainstream. This is a classic example of how so-called "left-wing" considerations - the government should take a hands-on interest in the total well-being of citizens - and so-called "right-wing considerations" - the government should stay small and prevent dependency of citizens - can dovetail. Looking at the total picture of deprivation may show the hidden costs of welfare programs in terms of social exclusion. In my opinion, this suggestion will tend to show Israel in a favorable light. A very large fraction of Israel's poor are the ultra-Orthodox (haredi) Jews. While their economic status is quite low, they are far from a "problem community". The supposed consequences of poverty include crime, drug use, family breakdown, and general misery; but incidence of these social ills is actually much lower among the haredi public. The number and variety of these suggestions reminds us that poverty and misery have many dimensions and aspects and are to a large extent subjective. We must continue to study and fight poverty, but we need a broad perspective on the problem in order to do a good job. Asher Meir is research director at the Business Ethics Center of Jerusalem (, an independent institute in the Jerusalem College of Technology.

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