The UK is one of the richest countries in the world, and it can be hard to imagine that there could be any real poverty here. There’s no doubt that there is poverty, but how much there is can vary depending what measures are used. (Don’t worry – I’m not going to start spouting statistical terminology and ask you to remember your high school maths!). Every year the UK government publishes data about households with below average income (HBAI). The average income is the median average – if you ranked all incomes in order from biggest to smallest, the median would be the one in the middle. Nice and simple, right? Where the household income is less than 60% of the UK median average, that household is deemed to be in poverty. With me so far? Good.

So let’s take a stroll through the most common measures of poverty, and see what their strengths and weaknesses are.

Absolute poverty

In the UK, this is defined as having a household income below 60% of the median average as it was in 2011. One advantage of this approach is that it gives a standard figure to measure against – it doesn’t change year to year, and it means that poverty can be measured against a particular standard. Unfortunately the value of money changes as time passes, and inflation means that something that cost £10 in 2011 would have cost £12.46 in 2020¹. This means that the same amount of money will buy less as time goes on, and this is why absolute poverty figures tend to underestimate the extent of the problem.

Relative poverty

This is defined as having a household income below 60% of the median average from the same year. So instead of measuring 2018 household income against the 2011 median as you would with absolute poverty, it’s measured against the 2018 median; 2019 is measured against the 2019 median, and so on. This means that as the average income moves, the poverty line moves with it. This is seen as both its strength and its weakness – some people feel that constantly changing (and usually increasing) the income level where poverty begins is misleading.

Minimum income standard

This is a way of measuring poverty according to what the UK public believes is required to have the minimum socially acceptable standard of living:

“A minimum standard of living in the UK today includes, but is more than just, food, clothes and shelter. It is about having what you need in order to have the opportunities and choices necessary to participate in society”².

Although the minimum income standard (MIS) isn’t strictly speaking a way of measuring poverty, it’s worth noting that most households below the poverty line do not reach this standard. Critics of the MIS point out that it includes such non-essential items as birthday gifts for others, and leisure activities, rather than focusing on the minimum requirements for survival.

Before housing costs vs after housing costs

Some statisticians prefer to measure poverty according to household income before housing costs (BHC) – that is, the whole income before anything is paid for. Others prefer to use household income after housing costs (AHC) since money that has to be spent on rent, mortgages etc isn’t available to the household. Poorer households also tend to have higher housing costs as a percentage of their income.

How do these different measures affect the 2019/2020 poverty figures³?

Absolute poverty before housing costs: 14% of the UK population

Absolute poverty after housing costs: 18% of the UK population

Relative poverty before housing costs: 18% of the UK population

Relative poverty after housing costs: 22% of the UK population

Minimum income standard 2020 (single person): £19,200⁴

Minimum income standard 2020 (couple with 2 children): £18,700 each

(It’s interesting to note that the national median average income per household in 2020 was £29,900, putting the poverty line (60% of the median) at £17,940 per household. As mentioned briefly above, this is less than the minimum income standard).