Intra-household allocation of resources: implications for poverty, deprivation and inequality in the European Union

Conventional indicators of being at risk of a low standard of living - household income below a given threshold, or household experiencing material deprivation - are imperfect proxies for individuals' achieved standards of living, because they rely on the assumption that all members of a household share its resources and hardships equally. This assumption has been rejected in previous studies. The same applies to measures of income inequality based on household income. Importantly, the degree to which these proxies are imperfect is likely to vary systematically by gender, age, and household composition, as well as by country, introducing biases into standard estimates of income inequality, poverty and deprivation in Europe.

Household composition varies dramatically across European countries. For example, in 2013, nearly 1 in 3 of the population in Greece lived in households containing three or more adults, compared to less than a fifth of the population in the UK and fewer than 1 in 10 people in France (Eurostat database, 2015). The equal sharing assumption is especially unlikely to hold in complex households, made up of more than one family unit, so conventional poverty, deprivation and inequality estimates in countries like Greece are less accurate than in countries like the UK or France.

This issue has come into sharp focus during the recent recession and 'austerity' programmes. Adopting shared living arrangements is one strategy to protect the living standards of vulnerable family members (for example, an elderly person coming to live with his/her adult offspring, or a young unemployed person remaining in the parental home). The countries of Southern Europe especially hard hit by the recession and austerity already had high levels of multi-generational households, and this may have increased further.

The proposed research will use micro-data from the European Union Statistics on Incomes and Living Conditions (EU-SILC) to examine the sensitivity of poverty, deprivation and inequality estimates across European countries to different assumptions about the intra-household sharing of resources, to identify the groups of people (especially as defined by sex, age and household type) for whom intra-household inequality may have the largest impact, and to consider the implications for our understanding of the impact of the economic crisis on poverty, deprivation and inequality in different countries and across the EU as a whole.

The project will:
- extend conceptual models of sharing to take account of mechanisms within complex households
- develop innovative methods for calculating the effect of different sharing assumptions on estimated standards of living
- provide new evidence on the relationship between individual and household deprivation; and on the implications of intra-household sharing in complex households for poverty and inequality estimates by age and gender;
- investigate potentially systematic, though unintentional, biases in the way existing inequality, poverty and deprivation statistics are calculated across Europe; and
- provide a re-assessment of the effect of the recession and austerity on standards of living.

We anticipate that these contributions will have potential non-academic impact of three kinds:
(1) on how deprivation, poverty and inequality are measured within countries and across the EU;
(2) on policymakers' understanding of which age and gender groups are the highest priorities for anti-poverty interventions; and
(3) on the factors that need to be taken into account when selecting tax and benefit policy instruments in pursuit of poverty prevention or relief, or with a view to reducing inequalities.

The 'end users' would be national statistics offices and national and EU policymakers, but our impact strategy recognises the significance of intermediaries such as NGOs, think tanks and media commentators in achieving end-user impact. We expect to have most leverage on pan-European organisations and on organisations based in the UK, although we will seek connections with national organisations in other countries wherever possible.

Target organisations for impact (1) include: Eurostat statisticians, national statisticians (especially ONS), and other major users of EU-SILC data such as Eurofound, and OECD.

For (2) and (3), priority end-users will be: European Commission DG Employment Social Affairs and Inclusion, OECD Employment Labour and Social Affairs Committee, European Central Bank, national government welfare departments and finance ministries (especially Department for Work and Pensions and HM Treasury in the UK). Priority intermediaries will include: European Social Observatory (Brussels think-tank), Alliances to Fight Poverty (group of campaigning NGOs across Europe), HelpAge International European Network, domestic NGOs campaigning on poverty and gender equality (especially Child Poverty Action Group, Joseph Rowntree Foundation, Fawcett Society, Women's Budget Group in the UK), and think-tanks (for example new economics foundation).

The Pathways to Impact document outlines our strategy for targeting these organisations.