Welfare

The RSS “statistic of the year” is absolute bunk


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58 per cent!

This is the “statistic of the year” according to the Royal Statistical Society.

It is the share of those in relative poverty that are in working households. This statistic was entered into the RSS competition to find the statistic of the year by the Institute for Fiscal Studies.

There are two fundamental problems with this. First, this is based on a measure of poverty that is simply inaccurate.

The concept of relative poverty is measured as having an income below 60 per cent of contemporaneous median household income, equivalised in order to account for variations in household size.

The problem comes when you actually start to look at how those classified as in poverty describe their own financial situation. Using Understanding Society data and following the standard classification of relative poverty, my own analysis found that 84.7 per cent of those in “relative poverty” described their financial situation as at least “just about getting by” if not better. Only 6.2 per cent described their financial situation as “finding it very difficult”, with a further 9.1 per cent “finding it quite difficult”.

More people in “relative poverty” describe themselves as “living comfortably” – 18.8 per cent – than those who find things “very difficult”.

Moreover, 45.9 per cent of those classified in relative poverty said they were satisfied, to some degree, with their income.

Any measure of poverty where only a minority of those classified as in poverty report financial difficulty and nearly half are actually more or less content with their lot, is obviously an inaccurate measure of poverty. It follows that any claim as to the share of those in working households that is in poverty, based on this method, is without foundation.

In truth, what actually is being measured is low income relative to an arbitrary threshold imposed by statisticians remote from the people they are analysing. Such statisticians have little idea of what is actually sufficient to meet these people’s needs. Accordingly, misclassification will occur. This observation has been made by the American economist Thomas Sowell.

Which leads me to the next problem. According to Kelly Beaver of Ipsos Mori, one of the RSS’s judges of experts:

“This stark statistic really highlights one of the biggest issues facing the UK – in-work poverty. While it could be seen as positive that more people are in work, this figure shows that employment doesn’t necessarily mean an escape from poverty. Far from it, in fact.”

What Ms. Beaver either does not realise or neglects to tell you is that the statistic of 58 per cent is an aggregate of different types of households with different types of working arrangements, including households where just one partner is in employment. That is to say, it includes people who are not in work.

Households with no one in full-time work and just one or more in part-time work are included in this statistic.

Those households where all adults are in full-time work account for 10 per cent of those classified as in relative poverty. According to DWP figures, the relative “poverty rate” for this group is 8 per cent compared to 22 per cent overall. In households classified as “workless: one or more unemployed”, the corresponding statistic is 74 per cent. This would suggest the “statistic of the year” has more to do with not working than working.

It is simply wrong to make a judgement about the extent to which work pays by looking at among others, people who do not work.

The IFS has submitted a statistic which has little to do with reality. How could the RSS be so taken in? The panel of judges contains eminent statisticians such as Professor Sir David Spiegelhalter, a former RSS president, and Dame Jil Matheson, a former national statistician. They ought to know better. Other judges do not appear to have much by way of statistical expertise beyond a career in public affairs.

The RSS has lost its way in that it has not sought to critically evaluate the statistic supplied by the IFS. Note that that the IFS itself has done little by way of original statistical research itself. It has simply repackaged official statistics from the DWP to suit its own agenda. Judging from the tone of the RSS press release, it would seem the normative concerns of the organisation have taken precedence over its duty to promote statistical excellence. That it has chosen a highly dubious statistic as its “statistic of the year” ought to be a matter of scandal within the profession.

Matters are made even worse when you realise such erroneous and exaggerated claims are made as an invitation for greater intervention in the economy by third parties, which in practice will mean the government. Here is RSS judge and executive director, Hetan Shah:

“Policymakers have focused on work as the best route out of poverty, but our winning statistic shows that this will not be enough to eradicate the scourge of poverty in the UK.”

Mr Shah neglects to tell you many people “in poverty” are actually young and go on to earn more as they progress in their careers, improving their lot in life by themselves and without any need for policy intervention.

Any policy based on such profound misunderstanding of the facts will lead to inappropriate interventions and greater inefficiency.This will entail missed opportunities, jobs lost and greater costs handed down to the consumer. The biggest losers from this will be those who are poor. The worthies of the RSS judging panel will pay no costs for being wrong.

 

Dr Richard Norrie is a researcher who writes for All in Britain and Integration Hub. He holds degrees from the universities of Warwick, Oxford, and Cologne.


6 thoughts on “The RSS “statistic of the year” is absolute bunk”

  1. Posted 30/12/2019 at 13:42 | Permalink

    Another factor is that the figures for the lowest income decile are unrepresentative of the real situation of many people. This is because there is a proportion of low income households that are not poor at all because they have substantial assets even thought their income may be low.
    This is borne out by the fact that the lowest income decile consistently spend more than their income.

  2. Posted 30/12/2019 at 17:36 | Permalink

    You are right. I made a similar point last year when the IPPR trotted out a variant of this statistic. I also made the point that in-work poverty has assumed arithmetically greater significance simply because poverty amongst pensioners has fallen sharply.
    https://iea.org.uk/the-cold-hard-facts-about-in-work-poverty/

  3. Posted 01/01/2020 at 23:31 | Permalink

    I am a fellow of the Royal Statistical Society as it happens. In past years, a report like this would have been ridiculed in a special column that its monthly bulletin used to have on the misuse of statistics. The relevant figure is not the % of people in poverty who are in work but the probability of being in poverty if you are in work or out of work respectively. If there were only 10 people in the country out of work and all were in poverty and 50,000,000 people in work and 11 of them were in poverty you would, roughly speaking, get to the RSS stat.

  4. Posted 03/01/2020 at 01:52 | Permalink

    My economy strategy will boom the economy create jobs and save the public $4,000 – $12,000+ pa in 2 years time. In 12 years we can save $18,000 – $40,000 pa…READ BELOW!

    The EU & U.K have a carbon tax. The U.K carbon tax brings in $80 billion pa….Do below to go green then use the tax money to save the public money.

    The EU & UK can use the tax money and AU can reinstate the carbon tax and big biz tax and make $90b U.K & AU $45b dollars pa. Now we build that much money on safe underground nuclear power plants.

    Underground power plants can blow up and no radioactive crap gets in the air hurting us. A huge water pipe runs water down then huge pumps pump it up. We Can have safety back up water tanks underground in case the pump and 2 back up pumps fail. Have a empty tank on one side so it has the water to safety shut it down and store if pumps fail……Now going nuclear green is safe.
    Each nuclear power plant cost $6 billion dollars and only cost $40 million to replace the core every 18 months.
    The gov must spend in U.K $90 billion & AU $35 billion on nuclear power plants then self fund running cost and future rise in running cost like this below.

    First AU put $14 billion dollars in a banks safe interest fund that will make $900 million dollars pa. 5 big states need $40 million pa on running cost = $200 million leaving $700 million dollars leftover. The $700 million left over every year will make $42 million every year. Now each states power plant can have a $8.3 million dollar rise in running cost pa for life “or” $83 million dollar rise in cost every 10 years…..Self funded for life.

    Now the gov can’t sell the plant because power is free and future rise in cost is none.
    A carbon tax and big biz tax can now self fund public cost like water bills, rego, council rates and everything.

    In 12 years time the public would save $18 – $40+k pa.

    Self funding the power and water department save the poor public $4k in 2 years and rich that get bigger bills and more usage $4 – $10+k pa. House council rate go by house prices so once again the rich save more but poor save thousands more every year.

    In the end the banks getting the mass billion to bypass GDP debt at first spend the interest money on infrastructure projects also. After that we do this to pay back debt.

    Ok AU debt is huge at $600 billion dollars…..U.K debt is like $60 billion. After 6 years the public save $7k poor and mind and wealthy $14k. The fed gov does a one off tax of all that money for 2 years = 15 million *14,000 =? ” wealthy & rich” 12 million * $28,000 =? Debt paid back.

    After 12 years the gov starts a huge tax taking 50% of the saved money. Now work wages can be cut by $450+ dollars a week and we boom with jobs and boom with wealth.

    Any problems?

  5. Posted 09/01/2020 at 12:01 | Permalink

    I sent this email to the president of the Royal Statistical Society and have not received an acknowledgement or reply:
    Dear Professor Ashby
    I thought I would drop you a line to express my surprise about the RSS statistics of the year competition result (https://www.statslife.org.uk/news/4393-statistics-of-the-year-2019-winners-announced). For many years, when I was first a fellow, the RSS magazine had a column called “Forsooth” in which it ridiculed the mis-use of statistics by non-statisticians. I think that the RSS statistic of the year would have made an appearance in that column if it still existed.
    There is widespread discussion about the misuse of the “percentage in poverty who are in work” figure which tells you nothing about the percentage of people who are in work who are in poverty or the differential probabilities of being in poverty if you are in work or out of work. Yet is seems that the RSS competition result simply reflects misleading and widespread coverage of a statistic which in itself proves nothing.
    Putting aside the validity of the relative poverty measure which is certainly widely disputed, the 58 per cent figure (proportion of poor in households where somebody works) includes households with no one in full-time work and just one or more person in part-time work. Those households where all adults are in full-time work account for only 10 per cent of those classified as being in relative poverty. The crucial statistics are that 8 per cent of households were all adults are in full-time work are in relative poverty compared with 74 per cent where one or more person is unemployed: this is an enormous difference between the probabilities of being in poverty if your household is fully employed as compared with having one or more adult who is workless. This is the relevant comparison.
    RSS judge and executive director, Hetan Shah commented: “Policymakers have focused on work as the best route out of poverty, but our winning statistic shows that this will not be enough to eradicate the scourge of poverty in the UK.” This may or may not be the case, but the statistic certainly does not show this.
    What has happened since 1997 is that there has been a huge reduction in pensioner poverty (generally households with nobody in work) and a huge increase in households (especially single parent households) where some work rather than no work is done. Both of these are positive trends. The second of these trends has meant that the number of workless households containing people of working age has shrunk dramatically. The first of these trends has meant that the number of poor people in workless households above pension age has shrunk dramatically. The combination of these trends means that it is possible for the probability of somebody being in poverty if they are in a workless household of working age, to be hugely bigger than the probability of somebody being in poverty if at least one person is working full time whilst, at the same time, the proportion of poor people who are in households where some work is being done has increased significantly.
    This is the kind of analysis that I would have expected the RSS to have undertaken in the past when other groups publicised meaningless statistics (it probably obtained a reputation for being somewhat patronising for doing so!).
    I hope these comments on the competition are welcome as they are meant to be constructive. I do think it is important for the RSS to be unpacking statistics so that the public can get beneath the misleading impression given by the headlines. However, on this occasion the competition seems to have done the opposite.
    Best wishes
    Philip Booth

  6. Posted 09/01/2020 at 23:48 | Permalink

    I have now received an acknowledgement which was very constructive.

    Philip

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