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Did you know that consumer spending is increasingly seen as a more adequate indi-cator of poverty than income?

October, 2017

However, the approach is not entirely new. As early as the nineteenth century, Ernst Engel (1857) was able to establish a link between the level of income and the distribution of expenditures on various consumer goods: the higher the share of expenditure on food, the poorer the household. Hermann Schwabe (1868) was able to establish a similar relationship for housing expenditure. Consumption as an independent factor of social differentiation next to employment was already discussed in the early years of social stratification research. Pierre Bourdieu (1982), for example, mentions the consumption and leisure sphere as a decisive factor for the reproduction of class structures. While consumption is regularly used in lifestyle studies, the approach of using consumption expenditure as a wealth indicator has not been pursued too often, at least not for Germany. In the international context, there are several empirical studies, which use consumption expenditure to measure poverty and inequality and which explain why consumption expenditure is the more adequate wealth indicator compared to income. The fact that this topic is so little noticed in Germany is largely due to the fact that there was a long lack of meaningful and representative data bases. However, by providing the income and consumption survey, a detailed official statistics on the revenues and expenditure of over 60,000 households in Germany, the data infrastructure has improved significantly for the scientific community.

On this basis Katharina Hörstermann – together with Prof. Dr. Hans-Jürgen Andreß – investigated differences between an income- and an consumption-based analysis of poverty and inequality. The results of the DFG-funded study are broadly consistent with those from international research: based on consumption the level of poverty and inequality is below the corresponding levels based on income. Moreover, the populations of income and consumption poor only partly intersect, with the coincidence increasing over time. The consumption poor differ from the income poor, especially with regard to their assets: The percentage of home owners is high and correspondingly their debt ratio.