Radical Statistics Annual Conference, Hathersage, March 3 2006

Must Poverty be Politicised?

Jay GinnCentre for Research on Ageing and Gender

Sociology DepartmentUniversity of Surrey,

Guildford, GU2 7XH, UKj.ginn@surrey.ac.uk

Spinning pension poverty

• Are ‘objective’ poverty statistics possible?• What do we mean by ‘objective’?• Are the right questions being asked?• Are the assumptions reasonable?• Is the meaning of the statistics transparent?• Is the EU a guarantor of comparable poverty

statistics?

Spinning poverty figuresExample: Pensioners and pension systems

1. Info needed in pensioners campaigns• What % of 65+ are in poverty?• Is state pension spending sufficient?• Are better state pensions affordable and

sustainable?

2. Pension system and EU social objectives• Adequate for full participation?• Allows living standard to be maintained?• Promotes solidarity between generations?

EU Open Method of Coordination

EU member states agreed in 2001 on 11 objectives for pension systems, under the headings of adequacy, sustainability and modernisation to meet changing societal needs.

Indicators developed to compare and measure progress. Adequacy. Member states agreed to: • Ensure that older people are not placed at risk of poverty and can

enjoy a decent standard of living; that they share in the economic well-being of their country and can accordingly participate actively in public, social and cultural life; and– Indicator = Poverty rate

• Provide access for all individuals to appropriate pension arrangements, public and/or private, which allow them to earn pension entitlements enabling them to maintain, to a reasonable degree, their living standard after retirement - Indicator = Replacement rate

Pensioner Poverty: DefinitionMain EU poverty threshold for individuals

= <60% of national median income

• Based on household income shared equally among members

• Household income equivalised to adjust for household size

Some curious anomalies

Figures produced by Eurostat (2002) showed Britain with the highest pensioner poverty rate in EU - 39%

Figures were re-worked during 2002 at the insistence of the British government

Revised figures gave a reduced poverty rate

Rate also changed in some other countries:- reduced in Ireland - increased in Austria, Denmark and Finland

Source: Eurostat 2001, The Life of Women and Men in Europe. A statistical portrait. Based on ECHP 1998

 

% of men and women in poverty, age 65+, 1998

0 10 20 30 40 50

Sweden

Finland

Denmark

Germany

France

Belgium

Austria

Italy

Spain

Portugal

Greece

Ireland

Britain

%

Men

Women

% of those aged 65+ in poverty, 1998

0 10 20 30 40 50

Sweden

Finland

Denmark

Germany

France

Belgium

Austria

Italy

Spain

Portugal

Greece

Ireland

Britain

%

Source: CEC 2003, Table 2, Joint Report by the Commission and the Council on Adequate and Sustainable Pensions

Revised

figures

Source: CEC 2003, Joint Inclusion Report. Statistical Annex

% of men and women in poverty, age 65+, 2001

0 10 20 30 40 50 60

Netherlands

Sweden

Finland

Denmark

Germany

France

Belgium

Austria

Italy

Spain

Portugal

Greece

Ireland

Britain

%

Men

Women

Labour achieves huge reduction in poverty rate in 1 year!

Poverty rate for British population aged 65:

M W All

1998 32 45 ~ 39% (Eurostat)

1998 - - 21% (CEC 2003, revised figure)

2002 19 28 ~ 24% (CEC 2003)

Unequal risk of poverty among pensioners

% 65+ receiving income support, 2001

Men Women

Married/co 4 1Single 13 20Widowed 11 20Divorced 23 40

Arber and Ginn 2004, in Social Trends

Median individual income, age 65+, 2001

0 50 100 150 200 250 300 350

Married/co

Single

Widowed

Div/sep

Prof/mgl

Intermediate

Routine/manual

65-9

70-4

75-9

80-4

85+

£ per week

WomenMen

Assessing EU pension systemsNational Pensions Strategy Reports, 2002 and 2005Main indicators required by EU:

1. Risk of poverty age 65+ (defined above)

2. Relative income age 65 (median equivalised income age 65+ / <65)

3. Replacement Rate (RR)(median income of retirees aged 65-74 / median earnings of those employed aged 50-59)

4. Income inequality (top 20th percentile / bottom 20th percentile)

5. Theoretical replacement rates (simulated pension income at retirement / earnings in last year before retirement)

Actual Replacement Rate

Defined as:

Median income of retirees aged 65-74 / median earnings of employed aged 50-59

?????????????????????????

Simulated replacement rate

Assumptions to be used:

a) Base case • 40 yrs full time employment• Average earnings over working life• Retirement at 65, in 2005• Most common pension schemes• Single status

b) Variants must include broken career (30 years)

How did UK respond in 2005?

1. Poverty rate 65+ 26%2. Relative income 65+/0-64 0.743. Real RR Not stated

4. Income inequality ratio 4.03

5. Simulated RR a) gross 66% net 82% b) gross 50%

net 64%

Simulated RR: Optimistic assumptions by UK

a) Base case (40 yrs FT, av earnings)• 30 years in DB occupational pension scheme, giving

50% replacementMarket risk, job change and access, 39% of men in OP

b) Broken career (30 yrs)• Average earnings or what? Not stated• FT/PT? Not stated• 33% replacement from private pension, implies 20 years

in DB schemeOn average, a mother has 8yrs gap, 14yrs PT, 18yrs FT. 42% women in OP

We cannot check against actual RRWinter Fuel Allowance included

Other spins on pensions

1. Affordability

• Govt figures for ‘Pension spending’ usually include cost of means tested benefits

• They also ignore tax spending, cost of rebates and surplus in NI Fund.

Spending on state pensions and means tested benefits for pensioners,

projected, 2002 - 2050

0

1

2

3

4

5

6

2002 2010 2020 2030 2040 2050

YearSource: PricewaterhouseCoopers 2002

% o

f GDP

Pension Credit

MIG

SERPS/S2P

Basic pension

Public subsidy to private pensions

Tax spending (net) 1979 1991 2000

£1.2bn£8.2bn £13.7bn (~2% GDP)

Beneficiaries of tax spendingHalf -> top 10% of taxpayersA quarter -> top 2.5% of taxpayers

So subsidy is mainly to well-paid men – and fees and profits for pensions industry

Rebates cost about £8bn pa. NIF has surplus of nearly £35bn in 2006

Other spins2. Sustainability

• ‘Apocalyptic demography’ ignores difference between age-based and employment-based support ratios

• Also ignores rising trend in productivity, historically >1.8% pa The average worker will be 2x as productive in 2045, assuming 1.75% pa rise in productivity

Spinning pension poverty

• Are ‘objective’ poverty statistics possible? Depends

• Are the right questions being asked? No

• Are the RR assumptions reasonable? No

• Is the meaning of the statistics transparent? No

• Can EU promote comparable poverty statistics? Partly

Conclusions

Governments have an interest in:

• Reducing pensioner poverty figures• Legitimating actual cuts in state pensions, while• Implying pension spending is being maintained• Obscuring (regressive) tax and rebate spending • Using NI Fund for general spending, to keep

appearance of low taxes

Pension statistics are spun to achieve these aims, hampering campaigns for better state pensions