The imperfect science of delineating poverty

July 20th, 2011 by Philip Brasor & Masako Tsubuku

If you live here, it's got to mean something

You’re as poor as you feel, but economists demand a criterion that’s more exact. One way is the “relative poverty” index, which the Organisation for Economic Cooperation and Development (OECD) uses. The poverty line is set at about one-half a country’s median individual income. If your income falls below that line, you are considered poor.

The Ministry of Health Labor and Welfare recently released the relative poverty statistics for Japan as of last year, and found that 16 percent of Japan’s population falls below the poverty line, which is calculated as being about ¥1.12 million in annual income for one person. This is 0.3 percentage points higher than it was the last time the survey was taken, in 2007, and 4 percentage points higher than the figure found during the first survey in 1985. On the other hand, the average population portion living below the poverty line for all 30 countries in the OECD is 10.6 percent, which is 0.4 percentage points lower than three years ago. (The only other OECD country with a higher poverty rate than Japan’s is the U.S., at 17.1 percent.) For reference, the average household income in Japan is ¥5.49 million.

The ministry cites various factors that have contributed to the rise in relative poverty. One is the higher number of “non-regular” employees. The other is the aging population, meaning more people on fixed incomes. For the first time ever, the number of households with at least one member over the age of 65 rose above the 10 million line, representing 21 percent of all households. Of the households in which at least one member was “taking care” (kaigo) of another ill adult member, in 47 percent the ill member was over 65 and in 12 percent the sick person was over 80; 63 percent of kaigo households had an over-60 member taking care of another over-60 member, and 25 percent had an over-75 member taking care of another over-75 member. In 70 percent of all kaigo cases the caregivers were women.

There was also an increase at the other end of the age spectrum. Child poverty has increased by 4 percentage points over the past 24 years: 15.7 percent of Japanese under the age of 18 are now officially poor, meaning they live in a home where the income of the breadwinner is below the relative poverty line. However, the poverty rate for single-parent households has actually decreased from 63 percent in 1997 to 50.8 percent last year, despite the fact that the average yearly salary for single mothers (the vast majority of single parents in Japan are women) has remained the same over that period, between ¥2 and ¥3 million a year.

The reason seems to be a matter of arithmetic. As non-regular employment has increased over time, the median income has dropped, meaning the threshold for the relative poverty rate has also dropped. Consequently, since the average income for single mothers has stayed the same, their average relative poverty rate has decreased, even if their living situations are the same.

Obviously, using the relative poverty rate has its limitations, but there doesn’t seem to be a reliable index for absolute poverty either, at least not in Japan on an official level. So maybe feeling is the way to go. The ministry’s survey also asked people if they considered their economic situation “difficult,” and 59 percent answered “yes,” a new record. That may not qualify as “poor,” but it’s got to mean something.

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