Wednesday, October 8, 2014

Butchering poverty statistics

In The Irish Times today there is an article that compares some measures of poverty in Ireland to the EU average.  It makes a meal of it.  There is a large amount of poverty in Ireland but it would help if it was described accurately.  This piece features this confusing chart.

The panel on the left says the 2012 at-risk-of-poverty rate in Ireland is around 30 per cent; the panel on the right puts the very same measure at around 16 per cent.  The piece suggests that the difference is because:

Ireland’s Central Statistical Office measures poverty and deprivation in a slightly different way to Eurostat

They do not.  They measure them precisely the same.  In fact, the figures reported by the CSO come from a standard survey that is carried out under its remit from Eurostat across the EU (and in a small number of non-EU countries.) It is the European Union Survey on Income and Living Conditions or EU-SILC.  When describing the survey the CSO say (emphasis added):

This survey will be conducted throughout the European Union as the European Council and the Commission has given high priority to fight against poverty and social exclusion. The European Union requires comparable and timely statistics to monitor this process.

The difference between the left and right panels is not differences in definitions; it is because the data used represent different things.  They are different because they are different.

The panel on the left has data on “at-risk-of-poverty or social exclusion” while the panel on the right just relates to “at-risk-of-poverty”.  It is the inclusion of measures of social exclusion in the data used the left panel that results in the difference not any inconsistency in how poverty is measured. 

We have looked at this measure of “at-risk-of-poverty or social exclusion” before (see here) and discussed some of the reasons why Ireland fares very badly under this metric.  Some of the points made there are important in the context of the article published by The Irish Times today but rather than make them again here are a few additional ones.

This is a table a piece comparing at-risk-of-poverty rates in Ireland and the EU should use.  It shows proportion of the population who have an equivalised disposable income of less than 60 per cent of the median.  This is the standard definition of “at-risk-of-poverty”.

AROP Ireland and EU

Ireland’s at-risk-of-poverty rate is below the EU average and has not deteriorated significantly during the crisis.  Yes, it is a relative measure but that is how it is done.  Further, here is a related table from Eurostat that tells an important story.


The 2012 figures for Ireland were not available when Eurostat created the table but the outcomes were:

  • 2012 At-risk-of-poverty rate before social transfer: 39.3%
  • 2012 At risk-of-poverty rate after social transfers: 15.7%

Ireland’s at-risk-of-poverty rate in 2012 was below both the EU28 and EA17 average which were both at 17.0 per cent.

What is notable is that Ireland has the HIGHEST at-risk-of-poverty rate in the EU before social transfers are included.  This is disposable income before receipt of all social transfers except pensions (public and private). This is mainly primary or market income.  Ireland has the most unequal distribution of market income in the EU.

Ireland is not just above the EU average we are above the next highest country by some distance.  Ireland is 39.3 per cent; the second highest country is the UK at 30.5 per cent; the EU28 average is 26.3 per cent. Ireland would be considered an extreme outlier.

Introducing a wealth tax and increasing transfer payments will not fix this.  Ireland has the most successful tax and transfer system at reducing poverty in the EA.  It brings us from worst in class to below the EU average.

When looking at at-risk-of-poverty rates in Ireland the stand-out feature is not the headline rate.  That is below the EU average and is lower than it was from 2003 to 2007.  The standout feature from the EU-SILC about Ireland is this.

VLWI Eurostat

As we have said before, Ireland is almost “off the scales” and is more than 2.5 times the EU average.  Maybe we should try and fix this.  Not a word about that today’s article though.


  1. "Maybe we should try and fix this. Not a word about that today’s article though."
    Not a word in yours either.

  2. Jesus, that work intensity chart is highly disturbing.

  3. AROP is not the same as AROPE. It is a bit confusing.

  4. A very interesting post as always Seamus.

    The point about the very successful tax and transfer system is well made. However the disparity between pre- and post-transfer income may not be as stark as it seems.

    Ireland's tax system is progressive, with high income earners paying high marginal rates. However the incidence does not fall completely on the taxpayer, some falls on employers. High marginal rates encourages workers to bid up wages more than they would with lower rates. This probably increases inequality of market income.

    Working-age income supports in Ireland are relatively high and extend for a considerable duration by international standards. One can quibble about the precise impacts but lower working-age income supports would probably encourage the creation of more low-paid employment. This would probably decrease market income inequality.

    People respond to incentives. The large inequality in market income may well be partially a function of the tax/benefit system that tries to reduce it. Any attempt to increase or reduce the degree of redistribution of this system could well serve to amplify the underlying inequality it seeks to address.

    Disclaimer: I am not the same anonymous poster as either of the first two.

    1. That is an interesting point about the tax system but I think it is accounted for in the income measure used to give the 39.3 per cent figure for Ireland. This is disposable income after taxes and social insurance contributions so higher gross wages to account for higher taxes would in effect offset each other.

      It would be a relevant factor if the measure was say the gini coefficient for market economic. Unsurprisingly Ireland is also a (bad) outlier on this measure.

      And as for "people respond to incentives". I couldn't agree more!