THE MISMATCH BETWEEN INCOME MEASURES AND DIRECT OUTCOME MEASURES OF POVERTY

Abstract

A key finding of recent poverty research is that there is a significant mismatch between poverty measured using an income approach and poverty measured directly in terms of observed deprivation or other indicators of unacceptably low living standards. The mismatch is substantial and is typically in the range of 50% to 60%. This paper takes this mismatch as a springboard for discussion on the conceptualisation and measurement of poverty. A key purpose of the paper is to identify the relevant international literature and report on some of the findings, including some comparisons for New Zealand using data from the 2000 Living Standards Survey. The findings are set out in the context of a general framework for understanding the mismatch and lead to a discussion of the implications for the conceptualising and measurement of poverty, and for reporting on poverty trends. The paper advocates the use of a suite of measures rather than a single measure to better capture the multi-dimensional nature and complexity of poverty, and especially to assist with the understanding of the factors and processes that contribute to the exclusion of citizens from a minimum acceptable way of life in their own society because of inadequate resources.