Setting a governmental minimum income standard – the next steps
The Government aims to have eradicated child poverty in twenty years' time – but how can it establish the minimum household income that would require? John Veit-Wilson examines the complexities surrounding governmental minimum income standards.

In 1992 the European Commission recommended member states to set governmental minimum income standards (MIS) at levels to reflect human dignity in the fight against social exclusion.[footnote 1] Two years later, the Commission on Social Justice's booklet, Dignity not Poverty, invited the then Conservative government to respond by adopting the 'half of average household incomes' (HBAI) measure, which it was already using to document inequality, as a provisional MIS target (see Poverty 87).[footnote 2] Now, to its great credit, the New Labour Government has accepted this commonly-used statistical measure as a provisional proxy for the child poverty it hopes to abolish within the next twenty years.[footnote 3]

But is this the right measure for New Labour to use? This government is committed to attacking the causes of poverty, which it sees as a complex of deprivations and social exclusions. The poverty of inadequate household cash incomes may only be one cause, among others, of peoples' deprivations and social exclusions. Deficiencies in the labour market and in the collective supply of goods and services, whether public or private, as well as environmental diswelfares, are also significant causes of these social evils. But having too little money to buy your way out of deprivations and exclusions -- which is what poverty is at heart -- remains one of the most important causes, and it is both fatuous and objectionable to deny it.

While the Government must therefore raise personal disposable incomes both from low-paid work and from social security, the question is, by how far? The HBAI target is a statistical measure of inequality; it is not an adequacy standard because it says nothing about how much money one needs not to be poor, or how well (or badly) one can live on it. Research from a number of studies suggests that half the average household income is too little to get people out of deprivation and social exclusion. To help achieve the New Labour Government's aim of abolishing the poverty of deprivations and social exclusions caused by lack of income, it must necessarily go beyond its purely statistical target to an evidence-based standard set at the household income at which these deprivations and exclusions can be avoided -- that is, what is needed to achieve a minimally decent participatory level of living in the UK today.

Research into how the governments of ten other countries do this [footnote 4] showed that they used a variety of ways of discovering and expressing their governmental minimum income standards. The variety depended on the dominant ways in which people there thought about poverty and what government should do about it, and also on differing government responsibilities in the income maintenance system. It also depended on whether the government was setting adequacy standards good enough for 'We The People' or only for 'They The Poor'. These are questions which the New Labour Government must also face. For instance, is setting minimum wage rates -- to which all other parts of the income maintenance system ultimately relate -- to be left to what the labour market will bear without any thought being given to the minimum needs of the employees and their dependants, as in the Low Pay Commission's 1998 report? [footnote 5] Or is the old fairness principle to operate, that if one responsibly does a week's work, one deserves to be rewarded with sufficient pay for decency, meaning above the poverty line and not needing public supplementation? Currently, the Living Wage Movement in the USA is achieving widespread city contract compliance on this basis. But in spite of the UK government's emphasis on the responsibility to work, it has no plans to implement the other side of the fairness principle.

So how can the Government find out what better target to choose? Here we have to emphasise the clear distinction between:

• the evidence produced by scientific research, which is reliably probable but may not apply exactly to any one instance; and
  
  
• the measures needed by politicians, which have to be exact in each instance but may not be reliable there.

The first of these produces evidence of the relations between income levels and the deprivations and exclusions that the Government wants to abolish. Such scientific methods can be used to find out how far the relationship is causal, and whether there are clear boundaries between adequate and inadequate incomes. For instance, research by Mack and Lansley [footnote 6] showed that there was a boundary between low incomes closely and causally related to multiple deprivations and exclusions, and higher incomes at which there were still one or two socially-defined deprivations but unrelated to income level. That boundary is a real 'poverty line', and no amount of political opposition can alter the scientific evidence.

What governments need, by contrast, is a politically credible standard -- one which reflects the government's idea of the minimum level of decent living, without major deprivations or exclusions, and the income level which gives access to it. That is what is meant by a governmental minimum income standard. At the same time, we also have to be clear that such a political MIS may be higher or lower than the levels at which a government pays its various benefits on the different tiers of the income maintenance system. To preserve incentives and reflect decency principles, these tiers range from:

1. minimum wage rates at the top, intended to keep people wholly out of poverty, via
   
2. the tax threshold, which has to be below minimum wages so that everyone can be seen to pay their taxes but without dragging them into poverty.
   Parallel with these, often lower (though they need not be) are:
   
3. long term social security benefits, such as pensions, which the government aims to guarantee at a decency level, thus above the poverty standard, and finally
   
4. short term social assistance (income support in the UK) at the bottom of the scale. Even that must be enough to live on decently for short periods, supplemented for special needs if required.

The ten-country study showed that different governments chose a range of these actual 'benefit' levels as the basis of their MIS, or based it on other evidence, depending on how the political culture saw the role of government. In some countries, the government set the minimum wage and used that as its MIS, and the other tiers of income maintenance were then related to or compared with that. In others, wages were collectively negotiated elsewhere, but government set the minimum pension level annually through widespread political consultation, and this was then used as the MIS, with which benefits such as social assistance were aligned. A third approach in countries where both wages and pension levels were set elsewhere was that the government made its recommendations for social assistance levels, and this was taken as the national MIS -- though the local authorities so guided did not use it as a template but merely guidance, testable in the courts for its reasonableness in meeting the criterion of human dignity. And some countries used budget methods in some form to construct what that culture took to be a minimally adequate set of household incomes as a MIS, and these were then used to guide the range of income maintenance benefits for which government or other official bodies were responsible. In each case, the actual construction of the MIS was often a complex matter, but whatever the method it had to be publicly and politically credible. By contrast, the UK still has no such method at all.

While the adequacy of governmental minimum income standards are reflections of a government's values, ideology and electoral considerations, the levels of the actual cash benefits are political considerations of feasibility and costs. These three measures -- scientific poverty findings, MIS, income maintenance benefit levels -- are conceptually distinct, but they are often wrongly confused with each other, for instance when the level of income support is called an 'official poverty line'. Instead, they must be firmly distinguished.

Governments may rightly be suspicious of any one answer to the question of where to set the MIS. Obviously it must reflect society's views about deprivations and the income levels required for decency -- ever since Beveridge, governments have asserted that social assistance was 'enough to live on at all times' but the public experience, reported in Poverty for over thirty years, has always disproved the claim (and governments always knew this was so). [footnote 7] But the precise income levels required for decency remain a matter for argument. The Government therefore needs to amass as much evidence as it can and see how far it points the same way. This is known as 'triangulation', where the use of a variety of methods can help to establish if the findings hold robustly across methods, or if they are just the outcome of a single method alone and vary by method.

There are several research methods and bodies of current evidence to help the Government in the choice of a MIS. Scientific poverty research makes use of at least four different methods, and in addition there is a variety of official sources of information about deprivations and exclusions which can be studied to see at what income levels people on average suffer from the evils the Government wants to abolish:

• Population surveys to discover what society defines as necessities which no one should be without (a lack means deprivation and exclusion), and then by statistical analysis the household income levels at which people actually are deprived or excluded.
  
  
• Public opinion surveys to discover the average disposable income levels which people report their households need 'to make ends meet'.
  Focus group research to discover what people see as the minimally decent levels of living and the disposable income levels at which they can be achieved.
  
  
• Scientific budget studies using the evidence of actual levels of living and public opinion about necessities to construct modest but adequate or low cost but acceptable (or other) budgets for households of a variety of sizes and compositions.
  
  
• Nutritional surveys. For decades governments have collected data on UK households' consumption of foodstuffs and income levels. Now they should study the levels of income at which household members fail on average to achieve the levels of nutrient intake which government scientific advisers recommend, because it is an important causal element in individual health status.
  
  
• Health surveys. Similarly, official studies of variations in life expectancy and premature mortality should be analysed for evidence of the correlation with low income, to seek evidence of the income levels at which people do not suffer from these evils that the Government wants to abolish.
  
  
• The range of regular government surveys of household incomes and expenditures can be analysed for evidence of the correlation between income levels and deprivations and exclusions which concern the Government.
  
  
• Educational surveys. A variety of aspects of children's poor educational experience concern the Government and evidence exists which relate many of them to the poverty of their parents. What is the correlation?

This list includes rich sources of information the Government needs, but there is no prior reason to expect all these approaches to give exactly the same answers. The point is, they can help the Government to see the part which low income plays in different aspects of deprivation and exclusion, and give guidance for the political judgement at what level to set the MIS. And even if personal disposable incomes were raised to the levels suggested by these findings, naturally those deprivations and exclusions which are not based simply on personal expenditures may continue. The Government must use a variety of methods to abolish them; what it must never do is deny the part money plays and the need for a MIS. Nor must it assume that if it followed the guidance of the MIS and raised one part of the benefit system, such as child benefit, that would be enough to abolish deprivation, if it did not also raise the incomes from work or social security of the other members of the household. The levels of living of members of families or households are generally closely interdependent, and it is the living unit's level of living which must be supported by an adequate disposable income.

Next steps?
Leaving the poverty abolition target as HBAI is not a rational option for the New Labour Government, which will be assessed on how far it has achieved its promises of abolishing child poverty, guaranteeing a decency pension and of attacking deprivations and exclusions. Nor is evasion of the money issue politically credible any longer. The current flow of scientific findings from the Family Budget Unit and the social science researchers at the Townsend Centre for International Poverty Research demands to be triangulated against the flow of data from official surveys and sources. The Secretary of State for Social Security has emphasised the importance of working in partnership with the experts.[footnote 8] The time is ripe for a joint working party to set the UK's governmental minimum income standard.

Footnotes

1. EC (1992), 'Council Recommendation of 24 June 1992 on common criteria concerning sufficient resources and social assistance in social protection systems (92/441/EEC)', Official Journal of the European Communities 245, pp46-48 [back to text]
2. Veit-Wilson, J (1994), Dignity not Poverty: a minimum income standard for the UK, Institute of Public Policy Research [back to text]
3. Tony Blair, the Beveridge Lecture, 18 March 1999 (reprinted in Walker, R (ed), Ending Child Poverty, The Policy Press, 1999), and Hansard, 31 March 1999, col 717 [back to text]
4. They were Australia, Belgium, Finland, France, Germany, The Netherlands, New Zealand, Norway, Sweden, USA and their methods were studied in 1992/94. See Veit-Wilson, J, Setting Adequacy Standards: how governments define minimum incomes, The Policy Press, 1998; see also summary 'How governments set benefits adequacy standards', Benefits 23, pp10-13 [back to text]
5. Low Pay Commission (Department of Trade and Industry) (1998), First Report, chapter 6 'Choosing the rate' [back to text]
6. Mack, J and Lansley, S (1985), Poor Britain, Allen and Unwin [back to text]
7. See Veit-Wilson, J (1992), 'Muddle or Mendacity? The Beveridge Committee and the poverty line', Journal of Social Policy 21(3), pp269-301; (1994), 'Condemned to Deprivation? Beveridge's responsibility for the invisibility of poverty', in Hills, J, Ditch, J and Glennerster, H (eds), Beveridge and Social Security: an international retrospective, Clarendon Press; (1999), 'The National Assistance Board and the 'Rediscovery' of Poverty', in Fawcett, H and Lowe, R (eds), Welfare Policy in Britain: the road from 1945, Macmillan [back to text]
8. Alistair Darling, 'Foreword' in Opportunity for All: tackling poverty and social exclusion, Department of Social Security (1999), Cm 4445, TSO [back to text]

John Veit-Wison
Poverty 105, Winter 2000