Minimum Income Standard

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The Minimum Income Standard (MIS) is a research method developed in the UK, and now applied in other countries, to identify what incomes different types of households require to reach a socially acceptable living standard. The term has also been used to describe political criteria used openly or implicitly by some governments to assess the adequacy of income levels. [1] MIS is the basis for the calculation of the UK living wage. [2]

Contents

Origins

MIS was originally funded, in 2006, under the title of a Minimum Income Standard for Britain, by the Joseph Rowntree Foundation, and carried out in partnership by the Centre for Research in Social Policy (CRSP) at Loughborough University and the Family Budget Unit at the University of York. The research is now fully carried out by CRSP. MIS represents a budget standard in its specification of the level of disposable income households need in order to achieve an adequate standard of living. MIS may also be referred to as a reference budget, as it provides a costed list of items that households need to buy.

Unlike some other kinds of reference budget that draw heavily on expert input, [3] MIS is informed by budget lists drawn up by members of the public, checked by experts, and approved by final ‘check-back’ groups of members of the public. The use of consensual focus groups was developed at CRSP in the 1990s, [4] while the FBU focused on expert-based standards. MIS brought these two approaches together. Detailed research with members of the public takes forward work by Peter Townsend (sociologist) on relative poverty and low income, which argued that living conditions must be seen in the context of widely held expectations of the resources that members of a society should have. The first MIS orientation groups were tasked with setting a definition of MIS, which continues to be used to define the Minimum Income Standard for the United Kingdom: ‘a minimum standard of living in Britain today includes, but is more than just, food, clothes and shelter. It is about having what you need in order to have the opportunities and choices necessary to participate in society’.

The original research was carried out in Britain in 2007 and the findings presented in 2008 were costed using April 2008 prices. Every July, new MIS figures are published, updated to April of the same year. The updates take on board inflation and changes in minimum needs.

The most recent Minimum Income Standard Report in 2017, funded by Trust for London, found that 39% of Londoners have an income below the Minimum Income Standard. This is higher than the rate of 30% in the UK as a whole. [5]

Method

MIS researchers facilitate a sequence of deliberative Focus groups, all of which have detailed negotiations to come to a consensus about the things a household would have to be able to afford in order to achieve an acceptable living standard. Three waves of groups identify and check which items are to be included, with each successive group either corroborating or amending the decisions of previous groups.

Groups are made up of people from a mixture of socio-economic backgrounds but all participants within each group are from the type of household under discussion. For example, pensioner groups decide the minimum for pensioners.

The MIS method develops negotiated consensus through projection, whereby group members are asked not to think of their own needs and tastes but of the needs of hypothetical individuals or case studies. Participants are asked to imagine they are in the home of the individuals under discussion and to explain what items they would need in their everyday life to reach the living standard set out in the definition of MIS. Where groups fall short of consensus, subsequent groups help to resolve differences.

Experts check that these specifications adequately fulfil needs relating to nutrition and fuel consumption and, in some cases, feed information back to subsequent research groups that check and amend the budgets.

UK Variations

In identifying things that everyone should be able to afford, MIS does not attempt to specify extra requirements for particular individuals and groups: for example, those resulting from living in a remote location or having a disability. So, not everybody who has more than the minimum income can be guaranteed to achieve an acceptable living standard. However, someone falling below the minimum is unlikely to achieve such a standard.

MIS was originally calculated as a minimum for Britain; subsequent research in Northern Ireland in 2009 showed that the required budgets there are all close to those in the rest of the United Kingdom, so the national budget standard now applies to the whole of the UK. This standard was calculated based on the needs of people in urban areas. Further projects [6] [7] [8] have looked at how requirements differ in rural areas and in London, respectively.

CRSP has also carried out research to further understanding of additional costs of living for households with additional needs. Research that produced minimum budgets for people with visual impairment and people with hearing loss was conducted in 2015 and 2016. This was funded by Thomas Pocklington Trust.

UK Applications

The calculation for the Living Wage is based on MIS and is used by the Living Wage Foundation to accredit Living Wage Employers. The uprating of the Living Wage figure each year takes account of rises in living costs and any changes in what people define as a ‘minimum’. The present system, using MIS to calculate living costs separately for London and the rest of the UK, was designed in 2016 under the supervision of the Living Wage Commission, to replace the previous systems in which the London and out of London rates had been set using different methods. The Commission distinguished the independent, accredited Living Wage from the so-called "National Living Wage" (a higher statutory minimum for over-25s introduced by the UK Government in 2016), as follows:

The defining feature that differentiates the independent Living Wage rates from the statutory wage floors is that they are based on analysis of the specific goods and services that employees and their families need to meet a minimum acceptable standard of living. It is important that this basket of goods is regularly updated, based on the views and experiences of ordinary people across all four nations of the UK about what is required to fully participate in society, and how social norms and needs change over time. The Living Wage Commission currently views the Minimum Income Standard research carried out by the Centre for Research in Social Policy at Loughborough University as the best available source for this basket of goods. [9]

MIS has been used in evidence in a landmark High Court ruling on asylum seekers’ benefits [10] and in evidence put to the Welfare Reform and Work Public Bill Committee about reforming child poverty targets. [11] The Scottish Government has used evidence from CRSP to encourage all Scottish employers to pay the Living Wage, and the Scottish Government itself has committed to paying the Living Wage as part of its public sector pay policy. [12]

The Minimum Income Calculator is an online tool that can be used by members of the public to calculate the minimum budget for their own household.

Development in Other Countries

Outside the United Kingdom, the CRSP team has applied the method in Guernsey [13] and supported studies in other countries. Projects adopting the MIS method have been undertaken in the Republic of Ireland, [14] France, [15] Japan, [16] Portugal and Austria. Exploratory projects in Mexico and South Africa have been supported by CRSP.

MIS and Poverty

MIS is relevant to the discussion of poverty, but does not claim to be a poverty threshold. This is because participants in the research were not specifically asked to talk about what defines poverty. However, it is relevant to the poverty debate in that almost all households officially defined as being in income poverty (having below 60 percent of median income) are also below MIS. Thus households classified as in relative income poverty are generally unable to reach an acceptable standard of living as defined by members of the public.

Related Research Articles

Standard of living is the level of income, comforts and services available, generally applied to a society or location, rather than to an individual. Standard of living is relevant because it is considered to contribute to an individual's quality of life. Standard of living is generally concerned with objective metrics outside an individual's personal control, such as economic, societal, political and environmental matters – such things that an individual might consider when evaluating where to live in the world, or when assessing the success of economic policy.

Poverty threshold Minimum income deemed adequate to live in a specific country or place

The poverty threshold, poverty limit, poverty line or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by finding the total cost of all the essential resources that an average human adult consumes in one year. The largest of these expenses is typically the rent required for accommodation, so historically, economists have paid particular attention to the real estate market and housing prices as a strong poverty line affect. Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, etc. The poverty threshold may be adjusted annually. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries.

Guaranteed minimum income (GMI), also called minimum income, is a social-welfare system that guarantees all citizens or families an income sufficient to live on, provided that certain eligibility conditions are met, typically: citizenship; a means test; and either availability to participate in the labor market, or willingness to perform community services.

Living wage Minimum income to meet a workers basic needs

A living wage is defined as the minimum income necessary for a worker to meet their basic needs. This is not the same as a subsistence wage, which refers to a biological minimum. Needs are defined to include food, housing, and other essential needs such as clothing. The goal of a living wage is to allow a worker to afford a basic but decent standard of living through employment without government subsidies. Due to the flexible nature of the term "needs", there is not one universally accepted measure of what a living wage is and as such it varies by location and household type. A related concept is that of a family wage – one sufficient to not only support oneself, but also to raise a family.

National Energy Action (NEA) is a fuel poverty charity that works to eradicate fuel poverty and campaigns for greater investment in energy efficiency to help those who are poor or vulnerable gain affordable heat.

Working poor Working people whose incomes fall below the poverty line

The working poor are working people whose incomes fall below a given poverty line due to low-income jobs and low familial household income. These are people who spend at least 27 weeks in a year working or looking for employment, but remain under the poverty threshold.

The basic needs approach is one of the major approaches to the measurement of absolute poverty in developing countries. It attempts to define the absolute minimum resources necessary for long-term physical well-being, usually in terms of consumption goods. The poverty line is then defined as the amount of income required to satisfy those needs. The "basic needs" approach was introduced by the International Labour Organization's World Employment Conference in 1976. "Perhaps the high point of the WEP was the World Employment Conference of 1976, which proposed the satisfaction of basic human needs as the overriding objective of national and international development policy. The basic needs approach to development was endorsed by governments and workers' and employers' organizations from all over the world. It influenced the programmes and policies of major multilateral and bilateral development agencies, and was the precursor to the human development approach."

Poverty in Australia deals with the incidence of relative poverty in Australia and its measurement. Relative income poverty is measured as a percentage of the population that earns less in comparison to the median wage of the working population.

Affordable housing Housing affordable to those with a median household income

Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and a number of forms that exist along a continuum – from emergency homeless shelters, to transitional housing, to non-market rental, to formal and informal rental, indigenous housing, and ending with affordable home ownership.

A significant portion of the population of the United Kingdom are considered to be in poverty under some measures of poverty.

Energy poverty is lack of access to modern energy services. It refers to the situation of large numbers of people in developing countries and some people in developed countries whose well-being is negatively affected by very low consumption of energy, use of dirty or polluting fuels, and excessive time spent collecting fuel to meet basic needs. It is inversely related to access to modern energy services, although improving access is only one factor in efforts to reduce energy poverty. Energy poverty is distinct from fuel poverty, which focuses solely on the issue of affordability.

Asset poverty is an economic and social condition that is more persistent and prevalent than income poverty. It is a household’s inability to access wealth resources that are sufficient to provide for basic needs for a period of three months. Basic needs refer to the minimum standards for consumption and acceptable needs. Wealth resources consist of home ownership, other real estate, net value of farm and business assets, stocks, checking and savings accounts, and other savings. Wealth is measured in three forms: net worth, net worth minus home equity, and liquid assets. Net worth consists of all the aspects mentioned above. Net worth minus home equity is the same except it does not include home ownership in asset calculations. Liquid assets are resources that are readily available such as cash, checking and savings accounts, stocks, and other sources of savings. There are two types of assets: tangible and intangible. Tangible assets most closely resemble liquid assets in that they include stocks, bonds, property, natural resources, and hard assets not in the form of real estate. Intangible assets are simply the access to credit, social capital, cultural capital, political capital, and human capital.

Poverty in Canada refers to people that do not have "enough income to purchase a specific basket of goods and services in their community."

Poverty in the United States State of people in the US who lack a certain amount of material possessions or money

Poverty in the United States of America refers to people who lack sufficient income or material possessions for their needs. Although the US is a relatively wealthy country by international standards, poverty has consistently been present throughout the United States, along with efforts to alleviate it, from New Deal-era legislation during the Great Depression to the national War on Poverty in the 1960s to poverty alleviation efforts during the 2008 Great Recession.

The Centre for Research in Social Policy (CRSP) is a self-funding research centre based within the Department of Social Sciences at Loughborough University in the market town of Loughborough, Leicestershire, in the East Midlands, England.

Poverty in Japan Overview of poverty in Japan

In Japan, relative poverty is defined as a state at which the income of a household is at or below half of the median household income. According to OECD figures, the mean household net-adjusted disposable income for Japan is US$23,458, higher than the OECD member state average of US$22,387. Unlike several other modern countries, Japan has no official poverty line, making it difficult to get accurate figures on those suffering impoverished conditions. It was estimated in 2006, using the Employment Status Survey, that 8.2% of regular employees made little enough to be considered working poor. In October 2009, Japan's Labor Ministry released a report which stated that almost one in six Japanese, which would be 22 million people, lived in poverty.

Poverty in Poland Overview of poverty in Poland

Poverty in Poland has been relatively stable in the past decades, affecting about 6.5% of the society. In the last decade there has been a lowering trend, as in general Polish society is becoming wealthier and the economy is enjoying one of the highest growth rates in Europe. There have been noticeable increases in poverty around the turns of the decades, offset by decreases in poverty in the years following those periods.

The Resolution Foundation is an independent British think tank established in 2005. Its stated aim is to improve the standard of living of low- and middle-income families.

The National Living Wage is an obligatory minimum wage payable to workers in the United Kingdom aged 23 and over which came into effect on 1 April 2016. As of April 2021 it is £8.91 per hour for those aged 23 and over, £8.36 for those aged 21–24, £6.56 for ages 18-20. Minimum wage for 16-17 is currently £4.62 It was implemented at a significantly higher rate than the preceding national minimum wage rate, and was expected to rise to at least £9 per hour by 2020. The consultation document issued by the Low Pay Commission in 2019 indicated that this target would not be met, instead proposing a figure of £8.67 per hour for the over 25 rate.

The Living Wage Foundation is a campaigning organisation in the United Kingdom which aims to persuade employers to pay a living wage. The organisation was established in 2011, publishes an annual Living Wage figure and accredits employers who pay the wage. From 15 November 2021, the Living Wage rate is £9.90 per hour outside London and £11.05 per hour within London.

References

  1. ↑ John Veit-Wilson (4 July 2013). "Minimum Income Standards". In Tony Fitzpatrick; Huck-ju Kwon; Nick Manning (eds.). International Encyclopedia of Social Policy. Routledge. p. 1301. ISBN   978-1-136-61003-5.
  2. ↑ Torry, M. (2016). The Feasibility of Citizen's Income. Exploring the Basic Income Guarantee. Palgrave Macmillan US. p. 212. ISBN   978-1-137-53078-3 . Retrieved 13 September 2018.
  3. ↑ Warnaar, Marcel; Luten, Albert, eds. (December 2009). "Handbook of Reference Budgets" (PDF). The Netherlands: Nibud. ISBN   978-90-8904-030-5.
  4. ↑ Robert Walker (1987). Consensual Approaches to the Definition of Poverty: Towards an Alternative Methodology. Journal of Social Policy, 16, pp 213¬226 doi:10.1017/S0047279400020389
  5. ↑ "Minimum Income Standard London 2017". Trust for London. Retrieved 8 February 2018.
  6. ↑ "A minimum income standard for rural households | JRF". jrf.org.uk. Retrieved 10 October 2016.
  7. ↑ "Highlands and Islands Enterprise". hie.co.uk. Retrieved 10 October 2016.
  8. ↑ Padley, Matt; Marshall, Lydia; Hirsch, Donald; Davis, Abigail; Valadez, Laura. A Minimum Income Standard for London (PDF). Trust for London (Report). Centre for Research in Social Policy Loughborough University. Archived from the original (PDF) on 17 August 2016.
  9. ↑ http://www.livingwage.org.uk/sites/default/files/The%20Living%20Wage%20Commission%20Sept%202016%20report..pdf [ dead link ]
  10. ↑ "Current Students and Staff". lboro.ac.uk. Retrieved 10 October 2016.
  11. ↑ "News Archive | CRSP Sept -15 | Loughborough University". lboro.ac.uk. Retrieved 10 October 2016.
  12. ↑ "Living wage for public contract bidders – BBC News". BBC. Retrieved 10 October 2016.
  13. ↑ "www.gov.gg/CHttpHandler.ashx?id=5654&p=0". gov.gg. Retrieved 10 October 2016.
  14. ↑ Collins, Micheál A.; Mac Mahon, Bernadette; Weld, Gráinne; Thornton, Robert. "A Minimum Income Standard for Ireland" (PDF). The Policy Institute at Trinity College Dublin.
  15. ↑ ONPES (Observatoire National de la Pauvreté et de l’Exclusion Social) (2015) Les Budgets de Référence: Une Méthode d’Evaluation des Besoins Pour Une Participation Effective à la Vie Sociale. Paris: ONPES
  16. ↑ "Comparing the Minimum Income Standard in the UK and Japan: Methodology and Outcome | Cambridge Core". cambridge.org. Retrieved 10 October 2016.
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