Skip to main content

Advertisement

Log in

The Truly Vulnerable: Integrating Wealth into the Measurement of Poverty and Social Policy Effectiveness

Social Indicators Research Aims and scope Submit manuscript

Abstract

There is a burgeoning literature on wealth in the rich world. It mainly focuses on the top. This paper shows that assets can also matter for the analysis of poverty and financial vulnerability. We introduce the concept of triple precariousness, afflicting households that not only have low income but also very low or non-existent assets to draw on for consumption needs, especially liquid assets. We ask whether these households—whom we might call the truly vulnerable—have different characteristics from those that we identify as poor or needy on the basis of income based metrics. This study looks in detail at Belgium, a country that represents a particularly interesting case because households are known to have levels of household wealth that are among the highest in the Eurozone, especially around and below the median, and yet it also has a comparatively high poverty rate, measured using disposable household income, as is commonly done in poverty studies. Drawing on HFCS data, we show that households with a reference person that is young, unemployed, low educated, migrant, single, and above all a tenant are especially financially vulnerable. By contrast, our assessment of the extent and depth of financial need among the elderly—a segment of society that is at a relatively high risk of income poverty—also changes. A substantial share of income poor elderly households own significant assets. We draw out some tentative consequences of these findings for anti-poverty and redistributive policies.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Source: own calculations based on HFCS

Fig. 2

Source: own calculations based on HFCS

Similar content being viewed by others

Notes

  1. Wealth and net worth are used interchangeably throughout this paper.

  2. Results of this validation exercise are not included in this paper, but are available upon request.

  3. According to this definition the reference person is determined based on the following sequential steps:

    one of the partners in a registered or de facto marriage, with dependent children.

    one of the partners in a registered or de facto marriage, without dependent children.

    a lone parent with dependent children.

    the person with the highest income.

    the eldest person.

    (HFCN 2013a, pp. 16–17).

  4. It is worth noting that the largest share in total assets highly depends on where the household’s main residence and other real estate property are classified because they typically constitute the largest shares of net worth. Indeed, we find for all households that non-liquid assets have the dominant share in total assets. However, our results remain robust even when real estate is not included.

References

  • Ackermann, B., & Alstott, A. (1999). The stakeholder society. New Haven: Yale University Press.

    Google Scholar 

  • Ackermann, B., & Alstott, A. (2004). Why stakeholding? Politics & Society, 32(1), 41–60.

    Article  Google Scholar 

  • Alcock, P., & Pearson, S. (1999). Raising the poverty plateau: The impact of means-tested rebates from local authority charges on low income households. Journal of Social Policy, 28(3), 497–516.

    Article  Google Scholar 

  • Alvaredo, F., Atkinson, A. B., Piketty, T., & Saez, E. (2013). The top 1 percent in international and historical perspective. Journal of Economic Perspectives, 27(3), 3–20.

    Article  Google Scholar 

  • Ando, A., & Modigliani, F. (1963). The ‘life cycle’ hypothesis of saving: Aggregate implications and tests. American Economic Review, 53(1), 55–84.

    Google Scholar 

  • Arrondel, L., Roger, M., & Savignac, F. (2014). Wealth and income in the Euro area. Heterogeneity in households’ behaviours? ECB working paper no. 1709.

  • Atkinson, A. B. (2015). Inequality. What can be done?. Cambridge, MA: Harvard University Press.

    Book  Google Scholar 

  • Atkinson, A., Cantillon, B., Marlier, E., & Nolan, B. (2002). Social Indicators: The EU and social inclusion. Oxford: Oxford University Press.

    Book  Google Scholar 

  • Azpitarte, F. (2012). Measuring poverty using both income and wealth: A cross-country comparison between the U.S. and Spain. Review of Income and Wealth, 58(1), 24–50.

    Article  Google Scholar 

  • Bi, L., & Montalto, C. P. (2004). Emergency funds and alternative forms of saving. Financial Services Review, 13(2), 93–109.

    Google Scholar 

  • Brandolini, A., Magri, S., & Smeeding, T. (2010). Asset-based measurement of poverty. Journal of Policy Analysis and Management, 29(2), 267–284.

    Article  Google Scholar 

  • Brzozowski, M., Gervais, M., Klein, P., & Suzuki, M. (2010). Consumption, income and wealth inequality in Canada. Review of Economic Dynamics, 13(1), 52–75.

    Article  Google Scholar 

  • Campbell, J. Y. (2006). Household finance. Journal of Finance, 61(4), 1553–1604.

    Article  Google Scholar 

  • Cowell, F., Nolan, B., Olivera, J., & Van Kerm, P. (2017). Wealth, top incomes and inequality. In K. Hamilton & C. Hepburn (Eds.), National wealth: What is missing, why it matters (pp. 175–206). Oxford: Oxford University Press.

    Google Scholar 

  • Cowell, F., & Van Kerm, P. (2015). Wealth inequality: A survey. Journal of Economic Surveys, 29(4), 671–710.

    Article  Google Scholar 

  • Cramer, R., Sherraden, M., & McKernan, S.-M. (2008). Policy implications. In S.-M. McKernan & M. Sherraden (Eds.), Asset building and low income families (pp. 221–237). Washington D.C.: The Urban Institute Press.

    Google Scholar 

  • Cunha, M. R., Lambrecht, B. M., & Pawlina, G. (2011). Household liquidity and incremental financing decisions: Theory and evidence. Journal of Business Finance & Accounting, 38(7&8), 1016–1052.

    Article  Google Scholar 

  • De Decker, P. (2011). Understanding housing sprawl: The case of Flanders, Belgium. Environment and Planning—Part A, 43(7), 1634–1654.

    Article  Google Scholar 

  • Eurosystem Household Finance and Consumption Network. (2013a). The Eurosystem Household Finance and Consumption surveyMethodological report for the first wave. ECB statistics paper no 1, p. 112.

  • Eurosystem Household Finance and Consumption Network. (2013b). The Eurosystem Household Finance and Consumption surveyResults from the first wave. ECB statistics paper no 2, p. 112.

  • Fehr, H., & Uhde, J. (2013). Means-testing retirement benefits in the UK: Is it effcient? Working paper, University of Wuerzburg.

  • Friedman, M., & Savage, L. J. (1948). The utility analysis of choices involving risk. Journal of Political Economy, 56(4), 279–304.

    Article  Google Scholar 

  • Gouskova, E., Juster, F. T., & Stafford, F. P. (2006). Trends and turbulence: Allocations and dynamics of American family portfolios, 1984–2001. In E. N. Wolff (Ed.), International perspectives on household wealth (pp. 295–326). Cheltenham: Edward Elgar.

    Google Scholar 

  • Jäntti, M., Sierminska, E., & Smeeding, T. (2008). The joint distribution of household income and wealth. Evidence from the Luxembourg wealth study. OECD social, employment and migration working papers No. 65. Paris: OECD Publishing.

  • Jäntti, M., Sierminska, E., & Van Kerm, P. (2013). The joint distribution of income and wealth. In J. C. Gornick & M. Jäntti (Eds.), Income inequality. Economic disparities and the middle class in affluent countries (pp. 312–333). Palo Alto, CA: Stanford University Press.

    Chapter  Google Scholar 

  • Jäntti, M., Sierminska, E., & Van Kerm, P. (2015). Modelling the joint distribution of income and wealth. Research on Economic Inequality, 23, 301–327.

    Article  Google Scholar 

  • Kontbay-Busun, S., & Peichl, A. (2014). Multidimensional affluence in income and wealthA cross-country comparison using the HFCS. ZEW discussion paper 14–124.

  • Kus, B., Nolan, B., & Whelan, C. T. (2016). Material deprivation and consumption. In D. Brady & L. M. Burtin (Eds.), The Oxford handbook of the social science of poverty (pp. 577–601). New York: Oxford University Press.

    Google Scholar 

  • Kuypers, S., & Marx, I. (2016). Social concertation and middle class stability in Belgium. In D. Vaughan-Whitehead, Europe’s disappearing middle class? Evidence from the world of work (pp. 112–159). Edward Elgar.

  • Kuypers, S., Marx, I., & Verbist, G. (2015). Joint patterns of income and wealth inequality in Belgium. Report prepared for the National Bank of Belgium.

  • Marx, I., Nolan, B., & Olivera, J. (2015). The welfare state and antipoverty policy in rich countries. In A. Atkinson & F. Bourguignon (Eds.), Handbook of income distribution (pp. 2063–2139). Amsterdam: Elsevier.

    Google Scholar 

  • McKernan, S.-M., Ratcliffe, C., & Williams Shanks, T. (2012). Is poverty incompatible with asset accumulation? In P. N. Jefferson (Ed.), The Oxford handbook of the economics of poverty (pp. 463–493). Oxford: Oxford University Press.

    Google Scholar 

  • McKernan, S.-M., & Sherraden, M. (2008). Asset building and low income families. Washington D.C.: The Urban Institute Press.

    Google Scholar 

  • Nolan, B., & Whelan, C. T. (2011). Poverty and deprivation in Europe. Oxford: Oxford University Press.

    Book  Google Scholar 

  • OECD. (2013a). OECD guidelines for micro statistics on household wealth. Paris: OECD Publishing.

    Book  Google Scholar 

  • OECD. (2013b). OECD framework for statistics on the distribution of household income, consumption and wealth. Paris: OECD Publishing.

    Book  Google Scholar 

  • Piketty, T. (2014). Capital in the twenty-first century. Harvard: Harvard University Press.

    Book  Google Scholar 

  • Sefton, J., van de Ven, J., & Weale, M. (2008). Means-testing retirement benefits: Fostering equity or discouraging savings? The Economic Journal, 118(528), 556–590.

    Article  Google Scholar 

  • Sherraden, M. W. (1991). Assets and the poor: A new American welfare policy. New York: M.E. Sharpe Inc.

    Google Scholar 

  • Sherraden, M. (2001). Asset-building policy and programs for the poor. In T. Shapiro, & E. Wolff, Assets for the poor. The benefits of spreading asset ownership (pp. 302–323). New York: Russel Sage Foundation.

  • Skopek, N., Kolb, K., Buchholz, S., & Blossfeld, H. P. (2012). Income rich—asset poor? The composition of wealth and the meaning of different wealth components in a European comparison. Berliner Journal für Soziologie, 22(2), 163–187.

    Article  Google Scholar 

  • Van den Bosch, K. (1998). Poverty and assets in Belgium. Review of Income and Wealth, 44(2), 215–228.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Sarah Kuypers.

Additional information

The authors gratefully acknowledge financing from BELSPO for the CRESUS project (BR/121/A5/CRESUS). We would like to thank participants of the CSP Seminar, the 2014 Spring Meeting of the ISA RC28, the 2014 FISS Conference and the 2015 SASE Conference for their helpful comments and suggestions on earlier drafts of this paper. Remaining errors are all ours.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Kuypers, S., Marx, I. The Truly Vulnerable: Integrating Wealth into the Measurement of Poverty and Social Policy Effectiveness. Soc Indic Res 142, 131–147 (2019). https://doi.org/10.1007/s11205-018-1911-6

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11205-018-1911-6

Keywords

JEL Classification

Navigation