Who is actually poor? and What Poverty really means?

 

 

Measuring and defining Poverty

 

 

Defining Poverty means to describe the state of one who lacks a certain amount of material possessions or money. In the early 20^th century, some authors, like Rowntree distinguished between primary poverty, those who lacking in income and secondary poverty, those who had enough income but spent it elsewhere

The Absolute poverty or destitution refers to the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education. On the contrary, Relative poverty is defined contextually as economic inequality in the location or society in which people live.

Relative poverty is the "most useful measure for ascertaining poverty rates in wealthy developed nations". Relative poverty measure is used by the United Nations Development Program (UNDP), the United Nations Children’s Fund (UNICEF), the Organisation for Economic Co-operation and Development (OECD) and Canadian poverty researchers. In the European Union, the "relative poverty measure is the most prominent and most–quoted of the EU social inclusion indicators. Relative poverty reflects better the cost of social inclusion and equality of opportunity in a specific time and space. Measuring the dimension of Poverty allows International Organisation to allocate resources to different areas in order to reduce the factors of Poverty.

 

From the Human poverty Index to Multidimensional Poverty Index

Measuring poverty or evaluating inequalities are most common challenges for International Organisation, such as World Bank, International Labor organisation, etc. One of the major in “Poverty Measurement’s debate” is to describe the multiple dimensions of poverty. Today, one of the main instrument of measurement is based on United Nations Development Programme that measures poverty using the Human poverty Index (HPI)

The Human Poverty Index (HPI) was an indication of the standard of living in a country, developed by the United Nations (UN) to complement the Human Development Index (HDI) and was first reported as part of the Human Development Report in 1997.

The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development. It was created by the Pakistani economist Mahbub ul Haq and the Indian economist Amartya Sen in 1990 and was published by the United Nations Development Programme.

In the 2010 Human Development Report a further Inequality-adjusted Human Development Index (IHDI) was introduced. While the simple HDI remains useful, it stated that "the IHDI is the actual level of human development (accounting for inequality)" and "the HDI can be viewed as an index of "potential" human development (or the maximum IHDI that could be achieved if there were no inequality)".

 

Recently, the Oxford Poverty & Human Development Initiative published on the Global multidimensional Poverty Index in 2014. The Multidimensional Poverty Index (MPI) was developed in 2010 by Oxford Poverty & Human Development Initiative and the United Nations Development Programme and uses different factors to determine poverty beyond income-based lists. It replaced the previous Human Poverty Index. In fact, the HPI lacked two important factors: it is not differentiating degrees of poverty within a country because it counted countries as one whole mass. It is unable to locate the worst pockets. The second major problem with the HPI is that it only consideres income and what so-called Poverty line, without considering other indicators like Health and Education.

The poverty threshold, or poverty line, is the minimum level of income deemed adequate in a particular country. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries. The common international poverty line has in the past been roughly $1 a day in 2008, the World Bank came out with a revised figure of $1.25 at 2005 purchasing-power parity (PPP). Determining the poverty line is usually done by finding the total cost of all the essential resources that an average human adult consumes in one year. The largest of these expenses is typically the rent required to live in an apartment, so historically, economists have paid particular attention to the real estate market and housing prices as a strong poverty line affector. Individual factors are often used to account for various circumstances, such as whether one is a parent, elderly, a child, married, etc. The poverty threshold may be adjusted annually.

 

The MPI is a more acute and more multidimensional index for measuring poverty. It shows the number of people who are multidimensionally poor (suffering deprivations in 33.33% of weighted indicators) and the number of deprivations with which poor households typically contend. It reflects deprivations in very rudimentary services and core human functioning for people across 104 countries. Although deeply constrained by data limitations, MPI reveals a different pattern of poverty than income poverty, as it illuminates a different set of deprivations

To measure the multiple dimensions of Poverty, the Oxford index uses the same three dimensions as the Human Development Index: health, education, and standard of living. These are measured using ten indicators.

Education

·         Years of schooling: deprived if no household member has completed five years of schooling

·         Child school attendance: deprived if any school-aged child is not attending school up to class 8

 

Health

·         Child mortality: deprived if any child has died in the family

·         Nutrition: deprived if any adult or child for whom there is nutritional information is malnourished

 

Standard of Living

·         Electricity: deprived if the household has no electricity

·         Sanitation: deprived if the household’s sanitation facility is not improved (according to MDG guidelines), or it is improved but shared with other households

·         Drinking water: deprived if the household does not have access to safe drinking water (according to MDG guidelines) or safe drinking water is more than a 30-minute walk from home roundtrip

·         Floor: deprived if the household has a dirt, sand or dung floor

·         Cooking fuel: deprived if the household cooks with dung, wood or charcoal

·         Assets ownership: deprived if the household does not own more than one radio, TV, telephone, bike, motorbike or refrigerator and does not own a car or truck

A person is considered poor if they are deprived in at least 33.33% of the weighted indicators. The intensity of poverty denotes the proportion of indicators in which they are deprived.

 

Key indicators from 2013 Global Multidimensional Poverty Report

For instance, taking into account all those indicators, the 2013 report on Multidimensional Poverty reported that today, a total of 1.6 billion people are living in multidimensional poverty; more than 30% of the people living in the 108 countries analysed.

• Of these 1.6 billion people, 52% live in South Asia, and 29% in Sub-Saharan Africa. Most MPI poor people - 71% - live in Middle Income Countries

• The country with the highest percentage of MPI poor people is still Niger; 2012 data from Niger shows 89.3% of its population are multidimensionally poor

• Of the 1.6 billion identified as MPI poor, 85% live in rural areas; significantly higher than income poverty estimates of 70-75%

• Of 34 countries for which we have time-series data, 30 - covering 98% of the MPI poor people across all 34 - had statistically significant reductions in multidimensional poverty

• The countries that reduced MPI and destitution most in absolute terms were mostly Low Income Countries and Least Developed Countries

• Nepal made the fastest progress, showing a fall in the percentage of the population who were MPI poor from 65% to 44% in a five-year period (2006-2011)

• Nearly all countries that reduced MPI poverty also reduced inequality among the poor

• Across the 49 countries analysed so far, half of all MPI poor people are destitute; over 638 million people • India is home to 343.5 million destitute people – 28.5% of its population is destitute. Overall in South Asia, over 420 million people are destitute

• In Niger, 68.8% of the population is destitute – the highest share of any country.

(Global Multidimensional Poverty Report, 2013)

 

Counting the multidimensional poverty measurement with the AF method

Counting approaches to multidimensional poverty measurement: the AF method Multidimensional poverty measures that are based on people’s own deprivation profiles can, at a glance, provide an integrated view of the situation. The most widely used multidimensional poverty measures since the 1970s have been what are called ‘counting approaches.’

Most applications of counting measures tend to report a head- count ratio. While this is very easy to understand and communicate, it does not provide an incentive to reduce the deprivations of the poorest of the poor. Nor can it be broken down by dimension to show how people are poor.

The Multidimensional Poverty Index is to reflect the intensity of Poverty, by considering the number of deprivations that each person faces at the same time. It offers an essential complement to income poverty indices because it measures and compares deprivations directly, without the need for PPPs (Purchasing Power Parity rates). It can be broken down by social group and geographical area to reveal poverty patterns within countries, and can also be used to track changes in poverty over time. The Global MPI was developed in 2010 by the Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Programme for UNDP’s Human Development Reports (Alkire and Santos 2010).

 

Alkire and Foster Method

In 2007, OPHI Director Sabina Alkire and Professor James Foster created a new method for measuring multidimensional poverty (referred to as AF for Alkire Foster). It uses a count-ing approach to identifying ‘who is poor’ by considering the range of deprivations they suffer, and combines this with the Foster-Greer-Thorbecke (FGT) methodology that is the most widely used  class of income poverty measures. The resulting measure aggregates information to reflect societal poverty in a way that is robust, can be broken down by regions and groups and, importantly, can be broken down by dimension and indicator to show how people are poor.

The Global MPI was created using a method developed by Sabina Alkire, OPHI Director, and James Foster, OPHI Research Associate and Professor of Economics and International Affairs at George Washington University (2011). The Alkire Foster method is flexible and can be used with different dimensions, indicators, weights and cutoffs to create measures specific to different societies and context

The MPI is the product of two components:

• Incidence: the percentage of people who are poor (or the headcount ratio, H);

• Intensity: the average share of indicators in which poor people are deprived (A). So: MPI = H x A

 

12 steps to calculate multidimensional Poverty

Using the Alkire Foster method An AF M0 measure can be intuitively constructed in 12 steps.

The first 6 steps are common to many multidimensional poverty measures; the remainder are specific to the AF counting method.

Step 1 Choose the purpose of the measure, and identify the institutional framework

Step 2 Choose a unit of analysis (e.g. a person, household, or community)

Step 3 Choose dimensions (e.g. education, health, living standards)

Step 4 Choose indicators for each dimension (e.g. years of schooling, body mass index)

Step 5 Set deprivation cutoffs for each indicator

Step 6 Set and apply weights for each indicator

Step 7 Sum the share of weighted deprivations for each person (or other unit of analysis)

Step 8 Set and apply the poverty cutoff (i.e. the percentage of weighted indicators a person must be deprived in to be considered poor)

Step 9 Calculate the percentage of people identified as poor (the headcount ratio) (i.e. divide the number of poor people by the total number of people)

Step 10 Calculate the intensity of poverty (i.e. add up all poor people’s share of weighted deprivations and divide by the number of poor people)

Step 11 Calculate the adjusted headcount ratio (M0 or the MPI = H x A)

Step 12 Calculate the consistent indices: censored headcount ratios for each indicator, percentage contributions of each indicator to overall poverty, standard errors, etc.

 

To go further: http://www.ophi.org.uk/