This report considers alternative measures of poverty that allow for the fact that low-income households may experience a rate of inflation higher or lower than the average in any given year.
Official measures of changes in poverty implicitly assume that price changes affect all households equally. If this assumption fails then conventional analyses may over- or understate changes in living standards at different parts of the income distribution. This report considers the extent to which official statistics may have under- or overstated changes in poverty and income inequality since the early 2000s.
The report includes:
- analysis of inflation rates for low- and high-income households over time;
- discussion of measures of both absolute and relative poverty that account for the fact that inflation may vary across households; and
- discussion of the feasibility and implications of tailoring increases in benefits to the inflation experiences of low-income groups.