INFLATION, PENSIONER LIVING STANDARDS AND POVERTY*
| Published date | 01 May 1983 |
| Author | Russell Harvey,Richard Hemming |
| DOI | http://doi.org/10.1111/j.1468-0084.1983.mp45002004.x |
| Date | 01 May 1983 |
INFLATION, PENSIONER LIVING STANDARDS AND
POVERTY*
Russell Harvey and Richard Hemming*
I. INTRODUCTION
In Britain it is common practice to define a household as poor if its
resources are below what would be received if that household had to
rely on supplementary benefit (SB). SB is a means-tested benefit which
makes up the incomes of those not in full-time work to a needs level
which depends upon family composition (the scale rates) and includes
full housing costs. The scale rates are now at roughly twice their real
value of 1948, when national assistance (renamed SB in 1966) was
introduced. National assistance was initially set at subsistence level;
SB provides for more than mere subsistence, having become increasingly
generous as general living standards have improved in post-war Britain.
A household is typically regarded as living in poverty if its nominal
income, after allowing for all taxes paid and benefits received, less
housing expenditure, is below the appropriate SB scale rate. Beckerman
and Clark (1982) have estimated that over the period 1974-76 there
were 912,000 poor households in Britain. These households contained
1.67 million individuals, and around 765,000 of these were retirement
pensioners. Over the same period there were roughly 8 million retire-
ment pensioners. A large proportion (9.6 per cent) of the retired were
poor, and a much larger proportion (45.8 per cent) of the poor were
retired. The reason that so many of the retired are poor, despite the
fact that they will often be entitled to SB, is that the take-up of SB
among retirement pensioners, at only slightly over 50 per cent, is low.
If take-up were improved then poverty in retirement would be corres-
pondingly reduced. However, this would only be true if the use of SB
as a poverty standard can be defended.
Poverty estimates of the type reported above are widely criticized.
The most commonly heard objection is that SB scale rates are simply
inadequate; SB will only support a living standard which by current
conventions should be regarded as quite intolerable. We are not going
to consider this issue. Instead, attention is to be focused on another
shortcoming, suggested by Beckerman and Clark. They accept that
*IFS research on the indexation of social security benefits was financed by SSRC Grant
No. HR7128. We are grateful to the Editors for detailed comments on an earlier version of
this paper.
195
To continue reading
Request your trial