The Cambridge Economic History of Modern Britain

INTRODUCTION

This chapter is concerned with material conditions, and, in particular, changes in the size distribution of income and changes in inequality and poverty over time. Money has no intrinsic value, but it does provide the means to access goods, services and activities that do have value. In consequence, the chapter uses income as a proxy for these, though well-being is not adequately captured in this way. Most people would agree that their standard of living is determined by more than the amount of income they have, or by how much money they receive relative to others. As Sen (1987: 1) points out, ‘You could be well off, without being well. You could be well, without being able to lead the life you wanted. You could have got the life you wanted, without being happy.’ Indeed, as we shall see at the end of this chapter, for the period for which data is available, there is discord between judgements based on the analysis of the available indicators of subjective well-being and evidence relating to the material progress of living standards.

The enumeration of poverty is often simply the outcome of a further small step in the analysis of changes in income inequality, as there is a view that the right way to define a poverty line is relative to a chosen percentile in the distribution of equivalised household income (a measure of income that takes account of differences in a household's size and composition). Piachaud (1988) and Glennerster et al. (2004) strongly advocate the use of such relative poverty measures. Current British official and quasi-official measures of poverty or deprivation also reflect this position and employ a measure based on the number or proportion of individuals who have less than 60% of equivalised median income.

From an historical perspective, however, it is clear that what it means to be ‘poor’, and what it means to be in ‘poverty’, have evolved as categorical terms as the nation has become more affluent. The World Bank tends to use ‘absolute’ or ‘bare subsistence’ poverty measures, such as their ‘a dollar a day’ standard, for international comparisons.