20/02/2007 10:12:36 am
Inequality, Not Poverty. The EU Commission has released a so-called social inclusion report. One main conclusion is that 16 per cent of Europeans live below the poverty line. Interesting.

But even more interesting is that the report is not about poverty at all. It is about income inequality, which is something totally different. The definition of "poverty line" is 60 per cent of the median income. But 60 per cent of a high median income, surely, might be better than 90 per cent of a low median income?

Of course. In a society where everyone have very low incomes - however the same level for all - by this definition, there would be no poverty. It might be of interest to know about income inequality too, but it is something different. Poverty should be measured not relatively but with a fixed income level. After all, it is with a certain income that people afford certain standards of living.

This is important. Most everyone want to fight poverty. But if this is defined relatively, it would be equally important to make the rich poorer as it would be to make the poor richer. And that would, in turn, likely decrease growth and increase the real poverty.

By defining poverty this way, the EU Commission doesn?t only describe reality wrong. It might also lead policy in a destructive direction.

Read about the report here - >