Radical Statistics Annual Conference, Hathersage, March 3 2006 Must Poverty be Politicised?
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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, [email protected]
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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?
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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?
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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
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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
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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
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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
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% 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
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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
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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)
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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
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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
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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)
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Actual Replacement Rate
Defined as:
Median income of retirees aged 65-74 / median earnings of employed aged 50-59
?????????????????????????
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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)
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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%
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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
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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.
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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
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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
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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
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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
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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