Measuring the Poverty Penalty in the UK

In: Purdam , K 2017 , ' Measuring the Poverty Penalty in the UK ' Significance , vol August , pp. 34-38 .

Abstract

The morning after the UK's June election, while Prime Minister Theresa May was doubtless ruing the decision to gamble her slim parliamentary majority, and Labour leader Jeremy Corbyn was revelling in his party's increased vote share, the political commentariat was busy working out what could be learned from the way people had voted. The consensus, by and large, was that many people were tired of the politics of austerity, the cuts to public spending, reductions in certain benefits, rising costs of living and wage growth lagging behind inflation. But people on low incomes have another reason to feel worse off: the "poverty penalty". This penalty, also called the "poverty premium", can take different forms, including: being sold products which are of inferior quality, being priced out of the market and not being able to access certain products, and facing higher costs for the same goods and services. The argument that the "poor pay more" is well known: it was examined in the 1960s by Caplovitz in the USA,2 it has been researched previously in developing countries and, in the UK, a number of recent studies have sought to quantify the additional costs faced by people with limited financial resources. However, despite this, official data on poverty do not take account of the poverty penalty – meaning that people may be financially worse off in practice than is reflected in the figures.