Homelessness and poverty in rich countries

The standard used by the World Bank to measure extreme poverty in low-income countries is not very informative in the context of high-income countries. Yet, as a simple observation of the reality of homelessness suggests, there are people in rich countries living in situations of deprivation that are comparable to extreme poverty in low-income countries.

How common is homelessness in rich countries, and how does it relate to poverty?

For obvious reasons, homeless people are hard to include in income and consumption surveys, which means that it is hard to estimate the prevalence of homelessness, as well as to establish meaningful statistical comparisons between those who are poor – as traditionally measured by consumption or income – and those who are homeless.

Despite the inherent difficulties, some studies have tried to shed light on these issues, by collecting information through specially-designed surveys and instruments. Here we discuss the evidence from these studies.

How common is homelessness in rich countries?

Toro et al. (2007)¹ randomly sampled and interviewed people by telephone in five different high-income countries, asking them about their experiences with homelessness. Specifically, they asked them if they had ever had an episode of literal homelessness in their life (where ‘literal homelessness’ means sleeping on the street or in a shelter facility).

The visualization below shows their findings. Despite the obvious limitations with the data (telephone surveys are likely to exclude those who are homeless in the long run), we can see that homelessness is a significant issue in all these countries. In the U.K., about 1 out of 13 adults report having slept at least once on the streets or in a shelter in their lifetime.

Distinguishing between poverty and homelessness

How do the ‘literal homeless’ compare to the ‘extreme poor’ who are not homeless? This is naturally a difficult question to answer. But again, researchers have tried to answer it by matching and comparing groups of individuals who fall under different categories of vulnerability.

Toro et al. (1995),² for example, sampled 144 adults in the U.S., from sites such as soup kitchens that offer shelter facilities for some of the patrons, as well as shelters that offer food to poor individuals who have housing elsewhere, and constructed three roughly comparable groups: the currently homeless, the previously (but not currently) homeless, and the never-homeless but poor.

Despite the small sample sizes, they find that the never-homeless poor individuals were significantly more likely to be receiving public benefits, were less likely to have a diagnosed mental disorder or problems with substance abuse, and showed lower levels of self-rated psychological distress.

A number of other studies from the U.S. provide similar evidence, suggesting that those who are homelessness (in the sense that they are roofless or sleep in shelter facilities) tend to be a particularly vulnerable subgroup of individuals within the poor.³

Of course, the data is far from perfect (small samples, potential sources of bias coming from sampling methods, etc.); but the key message here is that (i) homelessness and extreme poverty in rich countries are closely related, and (ii) you can get a sense of the magnitude of the problem by simply asking around. In a way, it seems surprising that we do not have a better idea of how high homelessness rates are among the poor in rich countries.

Understanding the link between homelessness and poverty in rich countries is important, precisely because it highlights some of the difficulties that we face when attempting to measure welfare via incomes and consumption.

As Atkinson (2016)⁴ recently pointed out in a report for the World Bank, the issue is that the qualitative nature of incomes and consumption, as well as the implicit degree of agency, should be taken into account when measuring poverty. To establish whether the homeless in rich countries are ‘extreme poor’, as measured relative to the International Poverty Line, we need to ask ourselves some difficult questions. Should income from begging, or food from a soup kitchen, be regarded as equal in value to a welfare check? Is money received from selling plasma (as described by Edin and Shaefer 2015⁵) equivalent to a paycheck?

These difficult questions underscore the importance of tracking deprivation across multiple dimensions of well-being, including both standard and non-standard economic indicators. This is our approach at Our World in Data.