Measures of material deprivation provide a complementary perspective on poverty to that provided by conventional income measures. Material deprivation refers to the inability for individuals or households to afford those consumption goods and activities that are typical in a society at a given point in time, irrespective of people’s preferences with respect to these items. Indicators of material deprivation are available through household surveys for several OECD countries, though income-based measures of poverty are available for more countries.
Earnings inequality can be assessed using a variety of statistics. The indicator used here is the "decile ratios", which is obtained by comparing earnings in the top and the bottom deciles of the distribution (the 10% of workers with the highest and lowest earnings) to median earnings (the earnings level which divides employees into two groups of equal size). In this section, D9 denotes the upper limit of the 9th decile of the earnings distribution (which is equal to the lower limit of the top decile), D1 is the upper limit of the bottom decile while D5 denotes median earnings.
Gender Wage Gaps
Gender differences in wages provide an indicator of the degree to which men and women do or do not receive equal incomes from paid work. The "gender wage gap" is measured here as the difference between male and female median full-time earnings expressed as a percentage of male median full-time earnings. It is also measured at low and high earnings levels (the 20th percentile and 80th percentile respectively).
Intergenerational mobility is defined as the extent to which some key characteristics and outcomes of individuals differ from those of their parents. Different strands of analysis have focused on different types of indicators. The economic literature has mainly focused on movements between income (or earnings) classes or percentiles of the distribution. The sociological literature has mainly focused on movements between occupations ranked according to their prestige or social class.
Public Social Spending
Social support to individuals and households in need is provided by a range of people and institutions (relatives and friends, public and private entities) through a variety of means. In developed market economies, much of this support takes the form of social expenditures, which comprises both financial support (through cash benefits and tax advantages) and "in-kind" provision of goods and services. To be included in social spending, benefits have to address one or more contingencies, such as low income, old age, unemployment and disability. Programmes regulating the provision of social benefits involve either redistribution of resources across households or compulsory participation.
Total Social Spending
A comprehensive account of the total amount of resources that each OECD country devotes to social support has to account for both public and private social expenditures, and the extent to which the tax system alters the effective amount of support provided. To capture the effect of the tax system on "gross" (i.e. before tax) social expenditures, account has to be taken of the government "clawback" on social spending through the direct taxation of benefit income and the indirect taxation of the goods and services consumed by benefit recipients. Moreover, governments can pursue social goals by awarding tax advantages for social purposes (e.g. child tax allowances). From the perspective of society, "net" (i.e. after tax) social expenditure, from both public and private sources, gives a better indication of the resources used to pursue social goals. From the perspective of individuals, "net social expenditure" reflects the proportion of an economy’s production on which benefit recipients lay claim.
Poverty persistence can be measured by looking at those individuals whose income is below a fixed threshold (usually a proportion of median disposable income) over a three-year period. This measure is computed on the basis of special tabulations from surveys that follow individuals over time. A number of different definitions of persistent poverty are possible. One is to measure the share of individuals who are always poor over the three years (i.e "the persistent poor"). Others include how many people are poor in two out of the three years ("recurrent poor") and how many are poor only once over this period ("poor only once"). The income concept used is that of yearly disposable income (i.e. after transfers and payments of income taxes and social security contributions) of households, where each person is attributed the "equivalised" income of the household where he or she lives, based on a commonly used factor to adjust for differences in household size (the squared root elasticity).
Housing costs are critical determinants of the living conditions of individuals and households. The main indicator of housing costs used below is the share of household income that is devoted to housing, based on data from the annual national accounts of OECD countries. Housing expenditures of households, as defined in national accounts, include actual and imputed rents (the rent-equivalent that home owners would pay for a house with similar characteristics to the one the own), spending on housing maintenance and repairs, as well as the costs for water, electricity, gas and other fuels. They exclude the interest and repayments on loans for home purchases as inclusion of these alongside imputed rents would amount to double counting. Imputed rents are a better measure of "true" housing costs, as some part of mortgage repayments should really be seen as household savings. Because of the long delays in data collection and dissemination, national account data on housing costs presented here only extend to 2003 for most countries.
Old-Age Pension Replacement Rates
The old-age pension replacement rate is a measure of how effectively a pension system provides income during retirement to replace earnings which were the main source of income prior to retirement. The indicator shown here is the expected pension benefit for a full-career, single worker in the private sector entering the labour market at age 20. It includes all mandatory parts of the pension system, both public and private, while excluding voluntary pensions, which are important in some countries. This indicator aims to show the long-term stance of the pension system and takes account of all changes in rules and parameters that have been legislated; phased-in legislated changes will thus be fully in place by the time of retirement. Parameters are those for a person entering the labour market in 2004. A standard set of economic assumptions is used for each country.
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