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Greek pension reform has been a major stumbling block in the prolonged negotiations between the Greek government and its creditors, and the plight of Greek pensioners is one the most commonly cited arguments against the demands of the troika. At the same time the relative generosity of the Greek pension system compared to those in several poorer EU countries who are involved in the bail-out is a source of acerbity entrenching the hardliner’s negotiating positions. The situation is confounded by political calculations, nationalism and moral grandstanding, none of which diminish the fact that the elderly are as a group particularly vulnerable to poverty, and not just of the income variety, but on multiple dimensions such as poor physical and mental health, social exclusion and disempowerment.
But, of course, there is no time for analysing the complex minutiae of the Greek pension system or a nuanced exploration of the social, economic and political impacts of the current negotiations – instead we make do with a media digest of the most salient facts and hope we’re getting at least a semi-balanced picture. Resigned to this fate, there was still one particular factoid making the rounds that caught my attention: the claim that 45 % of Greek pensioners (or nearly half) now live under the poverty line. On the face of it this is a shockingly high figure. So much so, that I could not let it go – so here is my attempt at figuring out where this statistic comes from and what it really means.
The first thing that needs elaboration is what is meant by poverty line or poverty threshold. The above mentioned sources cite the figure of €665 per month and/or refer to it as the poverty line defined by the EU. It is not entirely clear to me where this number comes from, but let’s first tackle what is usually meant by the poverty threshold. A widely agreed upon measure of relative poverty – used both in the EU and further afield – sets it at 60 % of the national median income. This is also called the at-risk-of-poverty rate. This is of course an arbitrary cut off point, but it allows for longitudinal and cross-country comparisons. The threshold is therefore country specific and takes into account the local income distribution and – as opposed to absolute measures of poverty – moves together with the national average income [1].
According to Eurostat the national median income in Greece in 2014 was €7,680 (the mean was €8,883) per year, which translates into a relative poverty threshold of €384 per month. Furthermore the Eurostat database also reports the relative poverty rates for Greek pensioners in 2014 as 13.1 % and the rate for the population as a whole as 22.1 % (the numbers for the UK in 2013 are 17.5 % and 15.9 % respectively) [2].
Reconciling these numbers with the “nearly half” of Greek pensioners living in poverty figure is not completely out of the question. It could simply be a matter of different definitions. Or it could be a matter of Eurostat and Greek statistical agencies (the one, the other or both) having political reasons for manipulating and exaggerating the figures. I am of course being facetious, but only slightly. Recall the case of Andreas Georgiou who was brought in to head Elstat (the Greek equivalent of the ONS) at the height of the crisis in 2010, where he found the books to be cooked and revised the budget deficit upwards by over 2 percentage points? He is being prosecuted by the Greek authorities (who have escalated the case under the new government) for manipulating the data in the interest of Greece’s creditors (he was a former IMF employee) and could face charges of treason…
But let’s return to the question of definitions. Even if the 45 % rate and the figure of €665 come from a different definition of poverty, there is one thing all of these measures have in common. The precise definition of the Eurostat measure is actually 60% of the median equivalized household income. The equivalized household aspect of the measure is an attempt (however imperfect) to take into account different compositions of households and make income (or poverty) levels comparable between them. It means for example that the poverty threshold for a couple is not simply twice the level for a single person household. There are several versions of equivalence scales, but the Eurostat one would use a factor of 1.5 instead of 2 in this case.
This is crucially important in this story, because as far as I can trace the earliest sources of the figure, they in fact refer to 44.8% of pensioners receiving pensions below €665. Which is not the same as saying 44.8 % of pensioners live on less than €665 of equivalized household income. Unless of course all of them lived in single households. But (again according to Eurostat) only about a quarter do, while 45 % are in couples living without children or other dependants and the rest live in other types of non-single households. Eurostat does not break down the poverty rate statistics enough, but it does have data to show that single people over 65 have around double the poverty rates of couples where at least one person is over 65. Based on this information alone it is difficult to estimate how many of the 44.8 % of pensioners actually live under the poverty line, but it is virtually certain that many of them, in fact, do not.
Of course this is not to say that the people of Greece, and pensioners in particular, are not facing extreme hardship. These sort of figures – whether collected by Eurostat, or by Elstat, whether misreported by the media or dissected here by me – cannot account for the complex reality on the ground. For example intergenerational transfers are known to be an important (if understudied) factor affecting people’s economic well-being. While they are in large part culturally determined, it would not be surprising if sudden institutional and economic changes, such as the ones Greece has been experiencing in recent years, have had a big effect on the size and direction of their flows. With an unemployment rate of over 25 % there is increasing anecdotal evidence of pensioners financially supporting their children or grandchildren who do not live in the same household, something that a poverty measure like this simply cannot capture.
The source of the €665 threshold still eludes me, but it really is not important for the point I am trying to make. It may be a level determined by the Greek authorities and it probably is an absolute level as opposed to a measure of relative poverty discussed above. And both are legitimate ways to measure poverty, and can reasonably be used to make a point about Greek austerity. But, as a general rule (and especially in situations that are as politically charged and acrimonious as the ongoing Greek debt negotiations), throwing around numbers without clear definitions and meaningful frame of reference is a bad idea. It is uninformative at best and misleading at worst.
For all the faults of different ways to measure of poverty, of different statistical agencies using incompatible definitions, of datasets being difficult to access, published with significant time lags or based on indecipherable methodologies, there are just as many genuine attempts at standardization, cross-country comparability, open data access and transparent methodology. And however flawed a statistic is, it always has some meaningful (albeit not necessarily useful) interpretation. But there seem to also always be more ways of unconsciously misrepresenting it or even consciously manipulating it. And that’s a shame. But hopefully being more aware of this fact should go a long way towards revising the oft cited trope to “Lies, damned lies and not understanding statistics”.
The figure below summarizes the available Eurostat data for Greece (and the UK for comparison) on three types of poverty measures (the full definitions are given below). The focus is on the over 65 age group, but the rates for the total population are also plotted with dotted lines. The third measure (right-most) is particularly interesting; it uses the 2005 relative poverty rate as a starting point and then adjusts for inflation – but not for changes in the income distribution – every year. It can therefore be seen as tracking the proportion of the population who cannot afford a basket of goods that would have been considered on the relative poverty threshold in 2005, and clearly shows the effect of the falling average income that is invisible in the first (left-most) measure. The latest value for Greeks over 65 is 39 %, which is very close to the discussed value of 44.8 %. The poverty threshold in the anchor year 2005 was €430 and according to the GRCPI the inflation over the period was 23.35% making it equivalent to €580 in 2014. Which is not that far off from €665. One might assume that the 44.8 % figure is simply more up to date than the Eurostat numbers and corresponds with extrapolating the trend in the right hand side figure. But there has in fact been considerable deflation in the last couple of years in Greece, so the anchor year threshold today stands at €480, meaning that the current poverty levels by that measure are probably already lower than 39%.
The full Eurostat definitions of the measures are as follows:
- At risk of poverty: the share of persons with an equivalized disposable income below the risk-of-poverty threshold, which is set at 60 % of the national median equivalized disposable income (after social transfers).
- At risk of poverty or social exclusion: the share of persons who are: at risk of poverty or severely materially deprived or living in households with very low work intensity. At risk-of-poverty is defined above. Severely materially deprived persons have living conditions severely constrained by a lack of resources, they experience at least 4 out of 9 following deprivations items: cannot afford i) to pay rent or utility bills, ii) keep home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein equivalent every second day, v) a week holiday away from home, vi) a car, vii) a washing machine, viii) a colour TV, or ix) a telephone. People living in households with very low work intensity are those aged 0-59 living in households where the adults (aged 18-59) worked less than 20% of their total work potential during the past year.
- At risk of poverty anchored in 2005: the percentage of the population whose equivalised disposable income is below the ‘at-risk-of-poverty threshold’ calculated in the standard way for the base year, currently 2005, and then adjusted for inflation.
The data is from Eurostat, EU Statistics on Income and Living Conditions [2005-2014], accessed 28.6.2015. The responsibility for all conclusions drawn from the data lies entirely with me.
1. When incomes are rising in a country the relative poverty line moves up and the poverty rate is an indication of how well the poorer households are keeping up with the rest. Conversely when incomes are falling, so does the poverty line and the poverty rate tracks the relative impact of the falling incomes across the income distribution. It is therefore not uncommon for relative poverty to fall during a recession, indicating that the poorer households are experiencing a smaller proportionate fall in their incomes.
2. To be completely precise: the rate of 13.1 % cited above applies to retirees over the age of 65, while the rate for all retirees is 11.5 % (over the age of 18). Regardless of their pension status, people over the age of 60 have a poverty rate of 15.2 % and over the age of 65 it is 14.9 %. A broader measure of risk of poverty and social exclusion, which also includes people who are severely materially deprived or living in households with very low work intensity, regardless of their income poverty, is reported as being 23 % for people over the age of 65.
About the Author
Dr Maja Založnik s a demographer currently working on a joint project of the Oxford Institute of Population Ageing and the Oxford Martin Programme on the Future of Food.
Opinions of the blogger is their own and not endorsed by the Institute
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