In the Impact magazine of Winter 2007, Peter Davidson defines poverty in the following manner:
[The] poverty line… used by the OECD, is set at 50% of the median (middle) disposable income for all Australian households for a single adult.
Using this measure, Davidson (a researcher with ACOSS) concludes that in 2004, “1,935,000 or 9.9% of Australians, including 365,000 children, lived below the most austere poverty line widely used in international research.” Elsewhere in the article Davidson uses a “less austere” measure of 60% of median income, finding that “3,859,000 people, including 786,000 children, were found to be living in poverty in 2004. This represented 19.8% of all Australians.”
So, if we believe ACOSS, nearly 4 million people (out of a population of about 20 million) were living in poverty just a few years ago. Are we experiencing Third World conditions in spite of rising real incomes and economic growth?
The answer is… no. Because Davidson’s definition is the type that guarantees “poverty” will never be eliminated. For example, if the median income was $1 million, then people earning less than $500,000 (50/100 x 1,000,000) would be “living in poverty”. This shows that using the middle number in an ordered series as the threshold of poverty is silly. What Davidson is really measuring is not poverty, but the distribution of income, or relative poverty. The true extent of hardship in Australia is much lower. Certainly it is lower than 19.8%.
Even if the median income is difficult to live on, it’s important to get definitions right so that policies are evaluated correctly.
A more accountable measure is absolute poverty. This could be measured by taking a representative bundle of goods and setting a baseline. If a person is struggling to obtain a certain amount of food per week and a certain standard of housing, or obtain access to clothing and medical assistance, then they should be classified based on such facts.
(Peter Saunders says it better than me)