Poverty Research and Poverty Measurement

in Finland

2nd Peter Townsend Memorial Conference22.1.2011

BristolVeli-Matti Ritakallio

University of Turku, Finland

Short history of Finnish poverty (research)

• 1960s to mid-1980s welfare optimism– Almost no poverty research– Urbanisation, industrialisation, transition to dual earner family model,

rapid continuous economic growth and strong growth of the welfare state– Old forms of poverty were disappearing (large families in small farms

and old-aged with extremely low pensions)

• Early 1980s: new's from Great Britain and Sweden– Poverty exists also in affluent societies– New ways to conceptualitze poverty (Peter Townsend's 1979

contribution was well known)– Social exclusion, particularly men, urban poverty

Short history of Finnish poverty (research) 2

• In 1990s single contributions by social scientists:– Matti Heikkilä (1990) Poverty and Deprivation in a Welfare State. A

Study of Poverty and Welfare Deficits in Finland (income (fixed threshold))

– Veli-Matti Ritakallio “Poverty in Finland” (1994) Poverty in Finland. A Study of Effects of Income Transfers (income (50% threshold), expenditure (50% threshold) and social assistance approaches)

• Since 2000 more activity, because of EU OMC?!• Statistics Finland (semi-official (European) poverty rates):

– Low income (poverty) rates 50% poverty line since 1996– Low income (poverty) rates 60% and 50% poverty line since 2001

Early 1990s economic downturn and poverty (measurement)

• In 1995 professor Olli Kangas and Veli-Matti Ritakallio started Finnish poverty and social exclusion survey project, which still continues. During the project has been done in Finnish conditions large survey data collections at 1995, 2000, 2005 and 2010. This allows reliable analysis of trends of poverty in Finland.

• Surveys have approached multidimensionally poverty related issues.

• Starting point of the project was the strange results produced by income poverty measures during the 1990s economic crisis. See next figure

0

5

10

15

20

25

1990 1991 1992 1993 1994 1995

Gini-coefficient, GDP in Finland 1990-2009 tens of billons €, 2009 prices, Income poverty (60% Md Poverty line), Basic unemployment allowance/labour market subsidy beneficiaries during the year % of persons aged 17-64,Social assistance recipients (during a calendar year) % of population

Income differentials, GDP, Low income poverty, Unemployed with minimum compensation and Social assistance recipiency

in Finland 1990-1995

Gini

GDP

Income pov.

Unempl with min compensation

Soc.ass.

+bankruptcies, overindebtedness, soup-kitchens etc.

Four national representative surveys 1995, 2000, 2005 and 2010

• To study poverty in Finland by several parallel measures• University of Turku• Effective sample sizes and response rates: • 1995 1858 65%• 2000 2400 61%• 2005 2391 60%• 2010 2068 52%

Parallel indicators of poverty

• RELINC: Relative income poverty: current oecd equivalent self-reported DPI is less than 50% of the national median income

• SCARCITY: Economic hardship: respondent’s subjective evaluation of problems in making ends met (feeling that its highly difficult to make ends meet) together with continuous troubles in paying bills (rent etc.).

• CONSE: Cumulative deprivation: all those who lack at least three commodities regarded as necessary by the majority of the whole population are poor.

• DEBTS: Subjectively felt overindebtedness

• SOC.ASS.: Recipiency of last resort social assistance

• CUMULATIVE/RELIABLE/DUAL CONDITION: Poor according to at least two of the five indicators presented above.

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4

6

8

10

12

14

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Relinc Scarsity Conse Debts Soc.ass Cumulative

1995

2000

2005

2010

Poverty by Different Indicators in Finland

1995, 2000, 2005 and 2010, %

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4

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8

10

12

14

16

Relinc Conce Scarsity Reliable

1995 2000 2005 2010

Poverty by Different Indicators in Finland 1995, 2000, 2005 and 2010, %

0

5

10

15

20

25

30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Gini

GDP

Income pov.

Unempl with min compensation

Soc.ass.

Gini-coefficient, GDP in Finland 1990-2009 tens of billons €, 2009 prices, Income poverty (60% Md Poverty line), Basic unemployment allowance/labour market subsidy beneficiaries during the year % of persons aged 17-64,Social assistance recipients (during a calendar year) % of population

Income differentials, GDP, Low income poverty, Unemployed with minimum compensation and Social assistance recipiency

in Finland 1995-2009

Poverty risks by the source of income 2010, %

0 10 20 30 40 50 60

All

Income support

Min unempl. compensation

Earnings rel. unempl. compens.

Student

Pension

Farmer

Self empl.

Wage-earner

Series1

Indicator: Reliable poverty

Poverty profile by the source of income 2010, %

(Income support 40% of all poor)

0 5 10 15 20 25 30 35 40 45 50

Min unempl. compensation

Earnings rel. unempl. compens.

Student

Pension

Farmer

Self empl.

Wage-earner

Reliable

Poverty risks by household type in Finland 2010, %

0 10 20 30 40 50 60 70 80

Total

Other

Tw o adults, w ith children

Tw o adults, no children

One adult w ith children

One adult

Reliable

Poverty risk by age 2010, %

0 2 4 6 8 10 12

All

above 65

55-64

45-54

35-44

25-34

19-24

Conclusions so far

• Huge increase in income differentials• Extent of poverty 1990-2010 has rather decreased than increased• Who are in the highest risk?

– Long-term unemployed– Single parent families– Those relying on minimum social security – Students– Renters

• Employed and those on earnings-related benefits are not likely to live in poverty

• Latest 2008 recession didn’t hit Finns very badly

• Relative position of those on minimum benefits has deteriorated (next slide!)

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200

400

600

800

1000

1200

1400

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

€ p

er

mo

nth

, 2

00

9 p

ric

es

Basic amount of social assistance 1991-2009vs. 60% Md poverty line, in euros (2009 prices)

Pov. line

Soc. ass.14€/day!

Income poverty (60%) and Economic Hardship (Great difficulties to make ends meet) in European countries at 2005, %

Source: EU-SILC, own analysis

0 10 20 30 40 50 60

Poland

Lith.

Portugal

Ireland

Spain

Creece

Latvia

Italy

Estonia

UK

Cyprus

Belgium

Hungary

Slovakia

Germany

Lux.

France

Austria

Slovenia

Denmark

Finland

Norway

Netherlands

Czech republik

Iceland

Sweden

%

Economic hardship

Income poverty

Peter Townsend 1979, p. 31

• "Individuals, families and groups in the population can be said to be in poverty when they lack the resources to obtain the amenities which are customary, or are at least widely encouraced or approved, in the societies to which they belong. Their resources are so seriously below those commanded by the average individual or family that they are, in effect, excluded from ordinary living patterns, customs and activities."

Several choices and choices matter!• How to operationalize the following:

– Lack the resources• Incomes• Enforced expenditures (housing costs, health care costs, child care costs etc.)?• Equivalence scale (oecd, mod-oecd, square root, concensual)?!

– Resources are so seriously below the average• 40%/50%/60%?!

– Societies to which they belong• Nation state!• Province they live?!• EU?!• Age standardizations?!

– Excluded from ordinary living patterns, customs and activities• Cumulative enforced lack of necessities (how to define?)

– Dual/triple condition: • Low economic resources+ subjective statement+ (cumulative) lack of necessities?

Thank you! 19.5.2004Turku New's