Some issues on poverty measurement: a critical approach to the Eurostat at-risk-of-poverty measure

José António Pereirinha and Elvira Pereira

No 2022/77, Working Papers GHES - Office of Economic and Social History from ISEG - Lisbon School of Economics and Management, GHES - Social and Economic History Research Unit, Universidade de Lisboa

Abstract: The official measurement of monetary poverty in the EU countries is made using the relative at-risk-of-poverty (AROP) measure, which currently accounts for different monetary income levels among EU countries but faces limitations in some relevant dimensions of poverty measurement. This paper is addressed to some of such limitations as a relative poverty measure: the scope of economic resources used by the households to face human needs (monetary vs total disposable income), the equivalence scale used to weight differently the household members to obtain the household economic size (OECD modified equivalence scale vs a MIS equivalence scale, supported in a consensual evaluation of the adequate household income), and the nature of the immediate material needs that should account to measure and to monitor poverty (total expenses vs total minus housing costs, as a contracted and inescapable need, with great regional variability). Additionally, the comparison of household economic resources with household needs can be made using, instead, an absolute approach, trough the elaboration of reference budgets and the estimation of household MIS (minimum income standard) (60% median equivalized income vs household MIS). The estimation of poverty incidence for Portugal using these alternative approaches with EU-SILC data (*) for the income reference period 2013-2019, elucidate about the “core” poor, that is, those that always account as poor whatever the approach used in measurement. A hybrid approach, combining absolute and relative approaches, will be considered, and a discussion of policy implications.

Keywords: relative poverty; absolute poverty; AROP; equivalence scales; minimum income standard. JEL classification: I32 (search for similar items in EconPapers)
Date: 2022
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