Les dones a la Guàrdia Urbana

Note: Figures are presented for GB up until 2001–02 and then for the whole of the UK from 2002–03 onwards. The absolute poverty line is defined as 60% of median income in 2010–11.

Source: Authors’ calculations using Family Resources Survey, various years. 0% 5% 10% 15% 20% 25% 30% 35% 40% A bs o lute p o ve rty r ate BHC AHC

individuals have fallen sharply over recent years while the housing costs of lower- income individuals have been much more stable (see Figure 3.6b).63

Looking further back, Figure 4.1 makes clear that absolute poverty remains substantially lower than it was in the late 1990s. This is due to sharp falls between 1996–97 and 2004–05: from 28.8% to 17.0% measured BHC and from 33.9% to 19.7% AHC. The late 1990s and early 2000s was a period of rapid income growth across the income distribution, and those towards the bottom saw some of the strongest

increases.64 _{After that, growth in average incomes stagnated and falls in absolute}

poverty also slowed, or ceased altogether. Absolute poverty and inflation

As discussed in Chapter 2, a price index based on the RPI is used to adjust for inflation when comparing incomes across years in HBAI; but there are concerns that the RPI systematically overstates the true level of inflation.65 This matters for the measurement

of absolute poverty: we need to compare households’ incomes to a poverty line kept at a fixed real level.66 _{Overstating inflation implies raising the absolute poverty line too}

quickly in cash terms over time, and hence overstating rises (or understating falls) in absolute poverty.

An annex in the DWP’s HBAI publication shows the rate of absolute poverty (BHC) since 1997–98 using the headline HBAI measure as well as variants that use the RPIJ and CPIH to uprate the absolute poverty line over time (see Section 2.1 for further discussion of alternative inflation measures).67 _{It begins in 1997–98 because the RPIJ}

series does not go back beyond 1997. The CPIH series is available only from 2005.68

Between 1997–98 and 2012–13, absolute poverty fell from 28% to 17% using the official measure, but from 31% to 16% when using RPIJ. Similarly, using the CPIH since 2005–06, one would conclude that absolute poverty trends have been more favourable than according to the headline measure. Over short periods, the differences in trends tend to be considerably smaller, as differences in inflation measures have less time to accumulate.

63 _{The existence of housing benefit for low-income renters can also be important in this context. If rents} change for low-income households, housing benefit entitlements will mechanically change with them. The net impact on AHC income can therefore be small or zero, but BHC income will rise because it will incorporate the housing benefit increase while ignoring the rent increase. However, as real rents have been relatively stable in recent years (see Section 2.3), this is unlikely to have been the primary reason for different trends in AHC and BHC poverty of late.

64 _{See Cribb, Joyce and Phillips (2012).} 65 _{See, for example, Levell (2014).}

66 _{In contrast, the relative poverty line is 60% of contemporaneous median income in each year, so no} adjustment for inflation over time needs to be made.

67 _{Department for Work and Pensions, 2014.}

68 _{Only poverty measured BHC is considered, because the analogous alternative inflation indices excluding} housing costs are not available.

The big picture, however, is relatively robust to the choice of inflation measure. Absolute poverty fell rapidly in the late 1990s and early 2000s; fell much more slowly (or not at all) in the immediate pre-recession years; and continued to change little between the beginning of the crisis and 2012–13.

Absolute poverty by demographic group

The overall trends in absolute poverty mask large variation across demographic groups. This subsection separately examines the trends in the poverty rates of

pensioners (defined as individuals over their state pension age), children and working- age adults without dependent children (for whom we use the term ‘working-age non- parents’ or ‘working-age childless’69_).

There were no statistically significant changes in absolute poverty for any family type in 2012–13. Absolute poverty (measured BHC) among working-age non-parents fell by 1.1ppt, while the child and pensioner poverty rates were broadly unchanged. Measured AHC, the absolute poverty rate among children rose by 1.1ppt, while pensioner and working-age non-parent poverty were stable.

Figures 4.2a and 4.2b put this in longer-term context, displaying the absolute poverty rates since 1996–97. Since the recession began, trends in pensioner poverty have been the most favourable. Absolute pensioner poverty fell by 3.8ppt (BHC) between 2007– 08 and 2012–13 and was broadly unchanged measured AHC. At the same time,

absolute poverty fell by 2.0ppt (BHC) among children and rose by 1.5ppt (BHC) among working-age non-parents. Absolute poverty measured AHC rose among both groups. Looking further back, to 1996–97, reveals large differences in trends between groups. Pensioners and families with children have seen large falls in absolute poverty – mostly between 1996–97 and 2004–05 – while working-age non-parents have seen little overall change, with small falls up to 2004–05 and small rises since. Because

pensioners and families with children used to have substantially higher poverty risks than the working-age childless, this has resulted in a convergence in poverty risks between the major demographic groups. The ‘catch-up’ of pensioners has been

particularly dramatic: absolute pensioner poverty has halved since 1996–97 on a BHC basis and fallen by two-thirds on an AHC basis. When measured after housing costs, pensioners now have the lowest risk of poverty of all the groups.

In part, this reflects the continuation of even longer-term trends, discussed in detail in last year’s report.70 _{Pensioner incomes had already been catching up rapidly with those}

of the rest of the population for much of the period since the early 1970s, with rises in income from occupational pensions being a key factor. But since 1996–97, pensioners and families with children also both benefited from very substantial increases to their benefit and tax credit entitlements under the previous Labour governments. Research

69 _{This includes people who have offspring who are not their dependents (i.e. who live in a different} household or are now adults).

70 _{Chapter 6 of Cribb et al. (2013).}