This paper focuses on standard official sources, which do not reflect the effect of the coronavirus pandemic. For more timely data on the effect of the pandemic on household finances, see the Library briefings Coronavirus: Impact on the labour market, and Coronavirus: Support for households finances.

How do we measure poverty?

This briefing paper focuses on poverty defined in terms of disposable household income, although poverty may be defined in different ways and there is no single, universally accepted definition.

Various poverty measures based on disposable household income are in common use and the trend can look quite different depending on the measure used. Two commonly used measures are:

people in relative low income – living in households with income below 60% of the median in that year;

people in absolute low income – living in households with income below 60% of (inflation-adjusted) median income in some base year, usually 2010/11.

So the ‘relative low income’ measure compares the households with the lowest incomes against the rest of the population in that year, while the ‘absolute low income’ measure looks at whether living standards at the bottom of the distribution are improving over time. A low income measure can also be combined with an assessment of whether households have access to key goods and services, for a measure of low income and material deprivation.

Income can be measured before or after housing costs are deducted (BHC or AHC). Poverty levels are generally higher based on income measured after housing costs, because poorer households tend to spend a higher proportion of their income on housing.

How many people are in poverty?

In 2018/19:

11.0 million people were in relative low income BHC (17% of the population), at a similar level to the year before.

14.5 million were in relative low income AHC (22%), also at a similar level to the year before.

Looking specifically at children:

2.8 million children were in relative low income BHC (20% of children), down slightly from the year before.

4.2 million were in relative low income AHC (30%), about the same as the year before.

Source: DWP Households below average income, 2018/19

Over the longer-term, there has been a reduction in poverty rates since the late 1990s for children, pensioners and working-age parents, although the likelihood of being in relative low income has increased for working-age adults without dependent children.

Who is in poverty?

Some groups are more likely than others to be in poverty.

Poverty rates are highest for people in households where the head of the household is from the Pakistani or Bangladeshi ethnic groups and lowest for those from White ethnic groups.

Around 38% of working-age adults in workless families were in relative poverty before housing costs in 2018/19, compared to 11% in families where at least one adult was in work.

43% of social renters and 37% of private renters were in relative poverty in 2017/18, compared to 15% of people who owned their home outright and 10% of those who have a mortgage.

The proportion of people in relative low income before housing costs (BHC) was 21% for families where someone is disabled, compared to 15% for people living in families where no one is disabled.

Other ways of thinking about poverty

This note discusses income-based measures of poverty, but there is debate about whether this serves as a relevant measure of poverty. The Social Metrics Commission (SMC) proposed a new based on the extent to which someone’s resources meet their needs. This accounts for differences among households such as costs of childcare and disability, savings and access to assets.

The SMC also provides detailed analysis of the nature of poverty including characteristics that impact the experience of poverty, using SMC poverty numbers, such as experiences of community, family finances, health, and labour market opportunity.