Radical Statistics Annual Conference, Hathersage, March 3 2006 Must Poverty be Politicised?

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Radical Statistics Annual Conference, Hathersage,
March 3 2006Must Poverty be Politicised?

• Jay Ginn
• Centre for Research on Ageing and Gender
• Sociology Department
• University of Surrey,
• Guildford, GU2 7XH, UK
• j.ginn_at_surrey.ac.uk

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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

• 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 Definition

• Main EU poverty threshold for individuals
• lt60 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  
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Revised figures
Source CEC 2003, Table 2, Joint Report by the
Commission and the Council on Adequate and
Sustainable Pensions
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Source CEC 2003, Joint Inclusion Report.
Statistical Annex
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Labour achieves huge reduction in poverty rate
in 1 year!

• Poverty rate for British population aged 65
• M W All
• 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 1
• Single 13 20
• Widowed 11 20
• Divorced 23 40

Arber and Ginn 2004, in Social Trends
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Assessing EU pension systems

• National Pensions Strategy Reports, 2002 and 2005
• Main indicators required by EU
• Risk of poverty age 65 (defined above)
• Relative income age 65
• (median equivalised income age 65 / lt65)
• 3. Replacement Rate (RR)
• (median income of retirees aged 65-74 / median
  earnings of those employed aged 50-59)
• Income inequality (top 20th percentile / bottom
  20th percentile)
• 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?

• Poverty rate 65 26
• Relative income 65/0-64 0.74
• 3. 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 replacement
• Market 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 scheme
• On average, a mother has 8yrs gap, 14yrs PT,
  18yrs FT. 42 women in OP
• We cannot check against actual RR
• Winter Fuel Allowance included

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Other spins on pensions

• 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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Public subsidy to private pensions

• Tax spending (net)
• 1979 1991 2000
• 1.2bn 8.2bn 13.7bn (2 GDP)
• Beneficiaries of tax spending
• Half -gt top 10 of taxpayers
• A quarter -gt 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 spins

• 2. Sustainability
• Apocalyptic demography ignores difference
  between age-based and employment-based support
  ratios
• Also ignores rising trend in productivity,
  historically gt1.8 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