Summary
Monetary poverty is currently determined on the basis of the income situation of private households. In future, the poverty statistics are to be supplemented with an indicator based on households’ total financial means (income and assets). Various ways of integrating wealth in poverty measurement are discussed in a methods paper using provisional wealth data.
Description
The Federal Statistical Office (FSO) has been publishing regular information on poverty in Switzerland since 2001. According to the current definition, all persons who cannot afford to buy the goods and services necessary for a socially integrated life are considered poor. Conceptually, both income and assets have thus always been included in the FSO’s definition of poverty. Until now, however, only income from assets and letting (interest, dividends, rental income etc.) could be considered in Swiss poverty statistics, but not the wealth components themselves (e.g. account balances, value of financial investments, valuables and real estate).
In future, the poverty statistics are to be supplemented with an indicator based on households’ total financial means (income and assets). In Switzerland no wealth data are currently available that meet the substantive and quality requirements for such analyses. The FSO therefore integrated a pilot module on the topic of wealth in the survey on income and living conditions (SILC), which is also the basis of data for official poverty statistics. These data are provisional and not suitable for standard publication. On this basis, however, it was possible to conduct initial exploratory analyses on the integration of wealth in poverty measurement.
Procedure and objectives
While there is now broad consensus in academic circles that assets should be incorporated in poverty measurement, the way in which the additional poverty statistics are interpreted and communicated poses a certain challenge. For this reason, a first discussion paper on methodological issues was published in June 2020 in the context of the FSO's experimental statistics, and the users of the poverty statistics were asked for their feedback. The aim of the early publication of the methods and initial analyses was to incorporate users’ requirements into the development and consolidation of the methodology and thus to establish a broad base for the new FSO standard indicators on poverty measurement integrating wealth.
The observations and analyses in the methodology paper were revised and supplemented on the basis of the feedback collected. Significant innovations compared to the first version include a more detailed discussion of the unidimensional approach for the population of retirement age and an additional chapter on the topic of debt. Furthermore, the analyses were updated with data from the SILC-2020 module on wealth and expanded to include additional analyses.
Key findings and outlook
The inclusion of assets in poverty measurement allows for a better assessment of the economic potential of the households and supplements the poverty statistics with important additional information. The results are significantly influenced by conceptual and operational decisions, such as the choice of basic approach (unidimensional or two-dimensional), the reference period and the types of assets considered. However, the at-risk groups are similar in all variants and largely coincide with those for income poverty. An important exception are persons aged 65 or over who are often able to supplement a low income with financial reserves. The future standard tables of the FSO will be produced with the two-dimensional approach and reference periods of three to twelve months. If only the population of retirement age is considered, a longer period or the unidimensional approach should be chosen.
Limitations
The results primarily serve to test the chosen approach. In this form, they do not fulfil the high quality standards that the Federal Statistical Office usually applies and cannot be used as a basis for planning and management purposes.
