The problem with 'transport poverty'

The RAC Foundation have been getting some good press coverage with their argument that we should be very concerned about the 'transport poverty' experienced by low-income households who own cars. Their preferred solution is a big cut in fuel duty, as merely "tinkering" with the rate would be akin to "rearranging the deck chairs on the Titanic" according to their chair Stephen Glaister.

The RACF's argument is based on these statistics from the ONS, showing that there are around 800,000 households in the UK who are in the poorest 10% of households according to disposable income and who own a car, and that these households spend an average of £45 a week on transport, including an average of £16 a week on motor fuel. As these households all have a weekly income of less than £168 (see the top row of the table) that means that many of them are spending more than a quarter of their income on transport. The RACF calls this 'transport poverty' and thinks the way to deal with it is to make fuel cheaper.

There are several problems with this argument. First, what the RACF don't tell you is that only 31% of households in the poorest tenth of the income distribution actually own a car, compared to 96% in the richest tenth (see p.9 here). So if 'transport poverty' due to fuel costs is a problem, it is a problem only for a minority of the poor.

Second, it is likely that many of those the RACF say are in transport poverty aren't really that poor after all. Households with very low reported incomes are often there because they have suffered a temporary drop in incomes, but they could still be otherwise reasonably well off. As these academics point out,

for some of those at the very bottom of the income distribution, a recorded very low income should not be taken as a sign of more general lack of resources... It might reflect the fact that some individuals experience very low income for a relatively short period of time, but that they maintain their spending at some sort of long-run level: for example, someone between jobs (who could have a 0 or very low income if measured over a sufficiently short period), or someone making a loss in their selfemployment business (which would count as a negative income).

So it is very likely that many of the low-income households who own cars are only temporarily low-income. But even if we accept that these households really are poor in the usual sense and that enough of them own cars for this to be an issue (no matter how contradictory those two statements might seem), there is a third big problem with the RAC Foundation's argument. The ONS figures they cite indicate that car-owning households in the poorest 10% spend around £13m a week on fuel (830,000 households with an average weekly spend of £16), compared to spending on fuel by all households with cars of around £640m a week (19.7 million households with an average weekly spend of £32.50).

That means the households in 'transport poverty' account for just two per cent of total motor fuel spending in the UK. By contrast, car-owning households in the top 10%, who all have disposable household incomes of over £57,000 a year, account for 21% of total motor fuel spending. So any cut in fuel tax aimed at reducing 'transport poverty' would overwhelmingly benefit the better off.

Cutting fuel duty would be an extremely bad way to reduce poverty, especially if the money has to come from elsewhere. If cuts in fuel duty were paid for reducing benefits then you would be directly transferring money from poor to rich. If the RAC Foundation are really interested in reducing 'transport poverty' then they would be better off arguing for reductions in the cost of transport modes used mostly by the poor (i.e. the bus). But the best and most tried-and-tested way to reduce poverty of any kind is to just give poor people more money.

Nicer inner cities might be a mixed blessing for people on low incomes

Ben Rogers, writing in the Standard, gets to the heart of dilemmas around aspirations towards 'mixed communities' in the face of economic forces that seem to be acting against them. Read the whole thing, but here is an extract:

As property prices go up, lower earners will be squeezed out. In the absence of a massive house-building programme in central London, the capital will become to feel more like Paris, with a rich centre and a poorer outer-ring. Rent policy can slow or hasten this process but not reverse it.

Should we care? Instinctively I want to answer "yes". I look on with misgivings as the Highbury street on which I live becomes steadily fancier - even though I know that I have contributed to that process and stand to gain from it financially.

It has been an article of faith among socially-minded reformers since the days of Joseph Rowntree and Ebenezer Howard that "mixed communities" are a good thing and income segregation bad. Yet the evidence in favour of mixed-income neighbourhoods is weak. Poor children from rich neighbourhoods do not seem to do any better in life than those from poor neighbourhoods. LSE economists Paul Cheshire and Henry Overman argue that there might even be benefits for poor people living in poor neighbourhoods: shops are cheaper and public services tailored to them.

The evidence on the impacts of mixed communities is indeed fairly mixed, and the point about costs is an important one, but I'm not sure it's the whole story. If the cheaper areas of the future are going to be in the suburbs then the cost of transport for the poor to get to city centre jobs is going to be higher. School quality and environmental amenity are also likely to be lower in cheaper areas - that's part of the reason why they're cheaper, after all.

So I think the benefits to the poor of being 'squeezed out' of affluent city centres are still fairly ambiguous, even leaving aside the very large transitional costs facing anyone who does make such a move (as demonstrated by the fact that the people affected by the cuts to housing benefit generally seem pretty unhappy about it).

More broadly I think these dilemmas highlight a very important shift in how our cities function. To simplify massively, in the past when cities had lots of dirty industry they had dirty environments as a result, particularly towards the centre. That encouraged richer people to move out of inner cities as soon as they could afford to and transport allowed. On the other hand, poorer people could save on transport costs by living in the centre, close to the jobs but also close to the pollution.

But over time, as incomes rose and as environmental regulation strengthened, cities lost most of their dirty industry (and associated crime, perhaps). Inner city environments improved drastically, which meant that the rich have started to come back in, lowering their transport costs at the same time. That pushes up housing costs in the centre. So the poor have to choose between staying put and paying higher housing costs, or moving out and paying higher transport costs. That's if the poor rent in the private sector, anyway. If they own their own place or live in social housing, they get to benefit from an improved inner city environment without higher housing costs. So there's an argument that inner city social housing is of increasing benefit to the poor as city centre environments improve. You can also see why it's of increasing interest to those who think we should sell it off.

Obviously that's a very broad sketch with quite a few simplifications and assumptions thrown in[1]. But I think the link between 'greener cities' and displacement of the poor is real enough.

[1] E.g. it assumes that the centre still has the lion's share of the jobs, which is the case in many European cities but not in some US ones.

Hard times

I've been reading 'Poverty and place in Britain, 1968-99', by Fahmy, Gordon, Dorling, Rigby and Wheeler. You'll need an academic subscription to access the whole article, but here's the summary:

To date, analyses of long-term trends in the spatial distribution of poverty in Britain have been frustrated by a lack of consistency in definitions, data sources and measures, as well as by changes over time in census and administrative geographies. This paper draws upon a series of national poverty surveys in order to derive methodologically consistent estimates of breadline and core poverty. These models are then applied to census data in order to describe the changing geography of poverty in Britain over the 1968 – 99 period. The primary concern is to reveal the changing spatial distribution of poverty that lies behind the headline figures. These analyses suggest that not only has poverty become increasingly prevalent amongst British households, it also became increasingly spatially concentrated between 1968 and 1999.

Yes, they found rising poverty between 1968 and 1999. Surprised? I was. Digging deeper, it seems they actually looked at two definitions of poverty, each of them different from the standard government measure: 'breadline' poverty and 'core' poverty.

The breadline approach is relative in that it "defines deprivation with reference to contemporary public perceptions of those items and activities constituting the material and social `necessities of life'". Using a series of four UK household surveys (from 1968/69, 1983, 1990 and 1999), "households can be identified as experiencing breadline poverty where they have both a low income and lack, because they cannot afford them, many of those items considered at each point in time by a majority of the British public to constitute contemporary necessities of life". Some complicated statistical techniques (which I'll come back to) are used to decide what really counts as a necessity at each point and how many of them you have to be lacking to count as 'breadline deprived'. This deprivation index is then combined with a measure of income poverty (defined, rather oddly I think, as an income lower than the mean of the non-deprived household income) to get a standard against which each household can be described as 'breadline poor' or not.

The core poverty approach is a more absolute measure in that it measures deprivation in each period against an unchanging list of necessities [1], and income against the more typical poverty line of 70% of the median household income of the time.

I have summarised the headline findings in the chart below:

That's quite a divergence - and note that one poverty rate goes up over the thirty-year period and the other goes down, which isn't really the impression given in the article's summary. The reasons start to become clear when you see what was counted as a necessity in each period.

By my count there are 18 'necessities' in 1968/69 and 40 in 1999. Bear in mind that these are not arbitrarily selected by the researchers but based on surveys into what ordinary people thought were necessities. I think it's fascinating to see what people didn't think of as necessities in the 1960s [2]: two meals a day, medicines prescribed by a doctor, toys for the children, being able to visit friends or family in hospital, a damp-free home. This makes sense when you think about it: the fact that we have so many more 'necessities' today is because there are so many things which most people can't imagine being without, even though previous generations might have regarded them as luxuries. In other words, in absolute terms we as a society are much less materially deprived than we were thirty or forty years ago. You can see these trends in the table below.

So how, then, do Fahmy et al come up with their picture of increasing breadline poverty? It seems to actually be a function of these same trends: the more 'necessities' there are, the easier it is to be deprived of some of them. But there is an extra twist: Fahmy et al did not use a consistent rule for 'breadline deprivation', such as lacking a particular number or proportion of necessities in each period. Instead, they seem to have derived 'optimal deprivation thresholds' for each period by comparing income poverty with material deprivation. The upshot of this calculation is that in order to be considered breadline deprived in 1968/69 you had to lack five or more necessities, in 1983 and 1990 three or more, and in 1999 just two or more. Again, this seems to be because in 1999 those who were 'income poor' tended to lack just a few material necessities, whereas in previous decades the income poor might have lacked quite a lot of necessities.

Now, to me this suggests that society in 1999 was better at ensuring the 'income poor' didn't lack necessities than society in 1968. But for Fahmy et al it shows that the 'optimal deprivation threshold' is lower in 1999 than in 1968/69. And what's more, when you remember that the list of necessities was growing all the while, it seems that it becomes easier and easier to be 'breadline deprived' - in 1968/69 it's measured as the proportion of households lacking any five of eighteen items, but in 1999 it's households lacking any two of forty items. When you factor in the very different income poverty measures used (for breadline poverty they use 'less than half the mean non-deprived household income', but for cover poverty they use the much more stringent definition of 'less than 70% of the total median'), it is no wonder that they find so much 'breadline poverty' in 1999 - their methodology, to my eyes at least, seems set up to generate more of it in more materially affluent societies.

The problem can be illustrated by comparing the 1960s to a few decades previously. There are many things which most people in the 1960s considered necessities which I think most people in the 1930s would probably not have: radios, washing machines, vacuum cleaners, maybe fridges. So by the methods followed in this paper you could not be 'deprived' for lacking these things in the 1930s, but you could in the 1960s. By the same logic, there will inevitably be things 30 years from now which people consider necessities but which we, if we have them at all, consider luxuries.

Perhaps you could argue that will make it very easy to 'feel poor' in the future. Personally, I think that's a bit of a stretch, and the same applies to the whole article by Fahmy et al. The relative deprivation approach to measuring poverty is a valid one, but it is not the only one. Conceptual problems abound when it comes to measuring poverty, and that is all the more reason to be circumspect in your conclusions, rather than making sweeping claims of the kind you find in their summary.

[1] These are: in arrears on rent/mortgage, utilities, or hire purchase; buys second-hand, not new, clothes; cannot afford meat, chicken, or fish every second day; cannot afford to keep home adequately warm; cannot afford to replace worn out furniture; cannot afford one week's annual holiday away from home; cannot afford to have friends/family for a meal once a month.

[2] Either because they didn't say so or because the question wasn't asked - from the way the article is written it's not clear to me which one actually applies.