tim's experiment

So much going on lately that I expect you missed, as I did, a meeting organised by the Commission on Poverty to analyze the situation of the local poor. I still don’t know what they got up to, but one of the media responses was quite stunning.

Here we have Raymond So, Dean of the School of Continuing Education at Hong Kong Baptist University, writing in the China Daily’s English version: “In Hong Kong, the poverty line is defined as half of the median household income. This definition was published by the commission in 2013, using the concept of ‘relative poverty’. Under this definition of poverty, no matter how hard the government is working on fighting poverty, there is always a class of people who will live in poverty because, by definition, there will always be people earning half the median household income.”

Readers who suspect at this point that Mr So is going to take a soothing, not to say complacent, view of the matter, will not be disappointed. From an academic point of view, he says in the next paragraph, poverty is “an inevitable thing”. I am not sure that being in charge of BU’s money-making machine qualifies Mr So to announce the “academic point of view” on anything. I must say though that, unaccustomed as I am to defending the Hong Kong Government or its off-shoots, his attack on the official definition of poverty is, with respect, nonsense.

Let us briefly consider what the median is. The usual way of summing up a lot of figures is the average, which academics, for some reason, prefer to call the mean. Add up the total income, say, and divide by the number of people in the group. This is useful for a lot of purposes but is occasionally misleading. Let us say we have ten people in a bar and their average monthly income is $10,000. Then Mr Li Ka-shing walks in. The average income in the bar has now shot up to several billion, but this figure is clearly meaningless from the point of view of most of the patrons, or from that of a Commission on Poverty looking for an idea of what income a person needs to get by. The median is obtained by ranking everyone in the bar in order of income, and then looking for the person who is in the middle of the list. In our bar we now have 11 people, so the median income will be that of number six, who has five people below him and five people above. It will probably be about $10,000, so this tells us a good deal more about the population in general than the mean or average does.

To return to Mr So’s opening paragraph, clearly “by definition” half the population will be earning less than the median, because that is what the median is. But there is nothing in that definition to justify his suggestion that there must always be people earning half the median. Let us return to our imaginary bar and suppose that the poorest of the drinkers – who is not Mr Li – earns only $4,000 a month. Clearly he is earning less than half the median. But there is nothing compulsory about this. If a benevolent government takes $2,000 a month from Mr Li and gives it to the needy patron he will now have a total income of $6,000 a month, which is more than half the median income, while the median income remains the same.

In short there is nothing statistically Sisyphian about the government’s target. The difficulties are certainly enormous but they are practical, not statistical. We have it on good authority that, in the King James version, “ye have the poor always with you”. But this quotation is commonly abused as an excuse for complacency or despair. Mr Christ’s audience would have picked up immediately that this was a reference to a passage in the Old Testament, which goes “Since there will never cease to be some in need on the earth, I therefore command you, open your hand to the poor and needy neighbour in your land.” We may have to accept that the complete elimination of poverty, however defined, is probably unattainable. There will always be some people who slip through the cracks and find themselves unable to achieve what most of us would regard as an acceptable standard of life. But that is no reason for not trying.

There is nothing wrong with recognising that poverty is a relative thing. This is a commonplace observation of behavioural economics, and for that matter of sociological journalism. If all your neighbours have a television, then not being able to afford one feels like poverty. I do not believe that having a relative target is a serious obstacle in itself to the Commission on Poverty achieving successful poverty reduction. A more serious problem is that in order to give poor people money you first have to take it from rich people, something our leaders find painfully difficult. Planting spurious statistical obstacles in the path to action is not helpful.