Dead Men Left

Friday, April 08, 2005

The poorest 10%: worse off under Labour?

It's a mixed bunch that have picked up on the "bottom 10% losing out under New Labour" story: The Business, the Adam Smith Institute, Socialist Worker, me, and Jim at Our Word is Our Weapon. The story seems to have completely slipped under the radar of the general media, however; perhaps odd, given the fuss that has been attached to a similar statistical wobble appearing in the same set of figures.

I say "statistical wobble": as Jim comments,

So, is there any truth to the claim? Not very much, and really not enough, because the survey results aren't robust enough to support it. If you open these spreadsheets and go to table A2, you'll see that the weekly real income after housing costs of the poorest 10% apparently fell from £90 in 2002/03 to £88 in 2003/04. Case closed? Well, no. Looking at Table A1 we see that estimates of changes in the incomes of the poorest 10% are 'particularly uncertain', probably mostly due to small sample sizes - the best guess is that their incomes grew by 11% between 1996/97 and 2003/04, but we can be no more than 95% sure that they grew more than 7% and less than 20%. Basically this means that a drop of £2 in a single year is within the margin of error, i.e. not significant.

This is all true: for the most part, the incomes of the poorest 10% have risen under New Labour - but not, if you scan down Jim's piece to the graph - as much as the other 90%, and by considerably less than the richest 10%.

What is important about the DWP figure, however, is that just because we cannot claim beyond reasonable statistical doubt that a decline in incomes has taken place, we cannot claim that they have risen. This is important: after year-by-year increases in the poorest 10%'s weekly earnings since 1997, we now cannot confidently say the trend has continued. Even if each year-on-year increase was not itself statistically significant, the trend was clear. That is not the case at present.

Something is clearly amiss. The IFS blame the absence of children amongst the very poorest, and thus their deliberate exclusion from government anti-poverty schemes:

Andrew Shephard, an analyst at the IFS and joint author of its Poverty and Inequality in Britain report released last week, said the poorest 10% of the population are getting poorer because they tend to be childless - and have no scheme to help them.

"If you look at the policies of this government, they are about helping parents and pensioners," Shephard told The Business. "The groups most favoured by these policies tend to be in the second-lowest income category," he said.