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Rich and poor: what’s in a number? New measure for poverty from the Social Metrics Commission

18th Sep 2018

Today sees the publication of new proposals from the Social Metrics Commission. Its report sets out a new measurement framework for poverty in the UK.

It’s surprisingly tricky to get a group of experts – or the general public – to agree who is rich and poor, let alone what to do about it. If the proposed measure is adopted, this new consensus would help shape action and policy to transform the lives of those in most need.

You can get another glimpse of how difficult it is to agree on rich and poor from Bobby Duffy’s just released book, The Perils of Perception.

We previously teamed up with Bobby Duffy, then at Ipsos MORI, now at King’s College London, at BX2015 to compare people’s estimates of the prevalence of various behaviours – such as cheating on tax or saving enough for pensions – with the reality. It showed how people generally dramatically overestimate bad behaviours, but not good behaviour – unfortunate given the power of declarative social norms.

The Perils of Perception brings together many more such examples, from how often we think others have sex (men are especially wrong) and how happy we think other people are (much less than they actually are).

What happens when we look at public estimates of poverty and wealth? In short, we seem to overestimate the most salient of both. For example, across countries, people overestimate unemployment levels typically by three to five-fold. In the UK, for example, the average guess is 24% (versus 7% at the time of survey). In Germany, people estimated 20% (versus 6%); the USA 32% (versus 6%); and in Italy people estimated an astounding 49% (versus 12%)!

Similarly, when asked ‘what proportion of the total household wealth do you think the wealthiest 1 percent own?’ people generally overestimate. Public estimates in the US were 57% (versus 37%); Germany 59% (versus 30%); Sweden 42% (versus 32%). Curiously, Bobby Duffy’s figures suggest the country with the biggest estimation-reality gap is the UK, with the public estimating the top 1 percent own 59% of wealth (versus 23%).

Duffy’s interpretation of these estimates is that they have more to do with what people feel than what they think. He calls it ‘emotional innumeracy’ – though perhaps we might more diplomatically call it emotionally motivated estimation. Most people feel that unemployment is too high and are worried about it, so they give a high-sounding number. Similarly, they feel the rich have too much, so they give a very high estimate for how much they have.

Does this matter? I think it does. Why support aid programs if you think it’s all a waste of time? Publics across the world overwhelmingly think that the numbers in poverty across the world are going up: more than twice as many think that poverty has doubled over the last decade than think it has halved. Yet World Bank stats show it has more than halved. Similarly, if you think a tiny proportion of the rich have more than half the wealth in your country, you almost certainly think that very top end taxes should be raised – probably just above where your own wealth lies. And if you think poverty is concentrated in one group but not another, this affects where you think extra money should go.

Returning to the Social Metrics Commission, it concluded that our current official estimates of who is poor is wrong. In particular, the Commission concluded that previous measures have not done a good enough job of factoring in unavoidable costs, such as from housing, childcare, or managing a particular disability.

The Commission’s revised overall numbers for how many in the UK are living in poverty – 14.2 million – is pretty close to current numbers, but those captured within the refined definition have changed dramatically. For example, the number of pensioners defined as poor falls, whereas the number with a disability rises markedly – in fact, nearly half of those 14.2m in poverty live in families with a disabled person.

The Commission does not offer policy solutions about how to reduce poverty. It is not clear that the Commissioners themselves would agree on this, let alone the public or political parties. But at least we might now be in a better place to target our efforts if we have a mental model, and official statistics, that have a closer match with objective reality.

Download the full SMC report

David Halpern served as one of the Commissioners on the Social Metrics Commission