Monitoring the evolution of income poverty and real incomes over time

This paper brings together two approaches to the monitoring of household living standards: the macro-economic (national accounts) analysis of aggregates and the social indicators based on household microdata (European Union Statistics on Income and Living Conditions [EU-SILC]). Both are essential. The national accounts are necessary to provide an overall perspective; the distributional data in EU-SILC are necessary to measure income poverty. The progress, or lack of progress, in reducing income poverty has to be seen in relation to what is happening to the level of real incomes. We begin with the EU-SILC-based headline at-risk-of-poverty indicator, and then consider its relation to the level of household real income as presented in the national accounts. Moving step by step, we seek to identify the reasons for differences between EU-SILC and national accounts measures of real incomes. From this, we make a number of recommendations about possible improvements in the underlying data and in the construction of the social indicators. The substantive results help illuminate the differing experience of the pre-crisis period 2005 to 2008 and the subsequent three year period 2008 to 2011 (income reference years).