Adjusting estimates of poverty for the cost of disability

This study explores the economic impact of disability on households. Disabled people face a double economic penalty though lower average disposable income and higher average expenditure needs. Conventional measures of living standards do not reflect the latter. We employ two separate methods to estimate a range of disability-adjusted ‘at risk of poverty’ (AROP) rates for Ireland. We employ first the Standard of Living method (SoL) using the Survey of Income and Living Conditions (SILC) dataset for Ireland. Based on two indicators of SoL – a composite material deprivation indicator and a self-assessed financial difficulty indicator – we update findings on the cost of disability in Ireland and explore the differential impact across household composition and age groups. Secondly, we introduce a novel application of the Almost Ideal Demand System (AIDS) method to directly estimate disability-adjusted equivalence scales, based on the Household Budget Survey (HBS) dataset for Ireland. These two methods allow us to estimate a range of disability-adjusted at risk of poverty (AROP) and poverty gap rates for Ireland. We estimate that the cost of disability is 52-59 per cent of the disposable income of households with disabled members, and that this cost varies with the severity of disability. Deriving a disability-adjusted equivalence scale, we estimate that the weight for a disabled additional adult should be 9 per cent higher than the weight for a non-disabled additional adult. Estimating AROP rates, we find that these increase substantially when the cost of disability is accounted for.