"The purpose of this paper is to use poverty gap analysis to explore the depth of poverty experienced by children of low-income families in the UK. Measures set out in the Child Poverty Act1 and in the National Child Poverty Strategy2 are based on poverty headcounts, i.e. you are either below or above a certain poverty threshold. The most commonly used measure is the 60 per cent relative poverty measure, defined as individuals living in households with incomes below 60 per cent of the median income. The National Strategy, published in April 2011, introduces a new measure on severe poverty, defined as individuals living in households experiencing material deprivation and with incomes below 50 per cent of the median income.
The head count does not distinguish between those with incomes just below the poverty line and those deeper in poverty. Policies which improve incomes for those at the bottom of the income distribution will not lead to a fall in measured income poverty, unless incomes are raised sufficiently to cross the chosen poverty threshold, and yet reducing these families’ depth of poverty is highly likely to improve living standards.
This paper supplements the headcount measures with analysis of the ‘poverty gap’ for UK children. The poverty gap measures ‘How poor are the poor’ i.e. the extent of poverty for those who are below the relative poverty threshold. With this measure, an improvement in incomes for those in poverty which is not sufficient for them to escape poverty, is nevertheless captured as a drop in measured poverty. In practice, for each poor individual we measure the poverty gap by calculating the shortfall in their income from the poverty line, and expressing this as a percentage of the poverty line. For example, if the poverty line was 100 and the income was 25 then the poverty gap would be 75 per cent (100 minus 25 equals 75; 75 divided by 100 is 75 per cent). A poverty gap of 75 per cent can be interpreted as an income that is 75 per cent below the poverty line" - page 1
