Last year, the poverty line was raised from $ 1,25 to $ 1,9 a day, but what does the measure really say about poverty? Social aspects, such as access to education and health, also affect the well-being of households. How we choose to measure poverty is very much a political issue, writes development economist Annie Sturesson.
In November last year, the number of poor people in the world tripled overnight. It was the World Bank that adjusted the international poverty line from $ 1,25 a day to $ 1,9 a day. The fact that the international poverty line is $ 1,9 means that all people around the world who live on less than SEK 16 a day are considered to live in extreme income poverty. But what does the income poverty measure really say about poverty? What is measured and what is omitted?
The number of people living in income poverty is regularly measured with the help of household surveys in almost all countries in the world. The statistics are easily accessible and comparable, which means that income poverty is often used to compare poverty over time and space, both within a country and between countries. Income poverty is also the most well-known measure of poverty.
Technical adjustment redraws the poverty map
The first international poverty line was calculated by the World Bank in 1990, when it was $ 1. The border was based on the average of national poverty lines in a dozen of the world's poorest countries and was then used as a yardstick for the first millennium goal of halving poverty.
The limit for extreme income poverty is calculated so that it corresponds to the same purchasing power in all countries. To reflect actual purchasing power, the limit needs to be adjusted regularly due to inflation. The World Bank's raising of the border is thus primarily a technical procedure, but it still affects who is considered poor, and where the world's poor are considered to be.
With the new poverty line of $ 1,9 a day, for example, Africa's share of the world's poor fell from 73 to 46 percent. At the same time, the proportion of the world poor increased in countries such as India, Pakistan and Bangladesh. The new poverty line makes it clear that even though the very poorest still live in Africa, poverty is still a global phenomenon.
Easily accessible but one-sided statistics
A weakness with income poverty as a measure is that access to updated and reliable statistics is a problem in many developing countries. Another weakness is that the measure does not take into account basic social aspects that affect a household's well-being, such as access to education and health.
Cambodia has been praised for its successful fight against poverty. Between 2004 and 2011, income poverty in the country decreased from every second household to every tenth household. Most people who got out of poverty, however, were just below the poverty line and have only minimally improved their life situation. According to the World Bank, a reduction in households' daily income by $ 0,30 per day would lead to 40 percent of the population falling back into extreme poverty.
According to the income poverty measure, one is either poor or non-poor, but poverty is not a static condition. Many households move back and forth across the poverty line. Households that have succeeded in raising their income can easily fall back into poverty, for example if the harvest goes wrong or a family member falls ill or loses their job.
Increased consumption hides negative trends
A basic assumption for income poverty is that increased consumption leads to reduced poverty and a more tolerable life, but the a household finances its increased consumption also plays a role. In many developing countries, a worrying connection is seen between increased household consumption and increased borrowing. Households that use borrowed money for investments often improve their means of subsistence, but loans for consumption risk leading to a negative debt spiral.
In Cambodia, more than half of the poorest households have taken out loans, either microcredit or informal loans, which are higher than their total annual income. More than half of the loans went to expenses such as food, medicine and religious events. Many households are forced to cut down on food costs or take their children out of school to repay high-interest loans. To understand the vulnerability of households, it is therefore not enough to look at consumption levels.
Not just a matter of income
The limitations of the income poverty measure have been well known for a long time. Nobel laureate Amartya Sen argued as early as the 1980s that it was not just economic conditions that played a role in poverty. The living conditions of the poor are determined by their freedoms and opportunities to take advantage of them. Amartya Sen's thinking contributed to the UN developing the Human Development Index (HDI) in the 1990s, a measure of poverty that weighs on health and education. A more recent addition is the Multidimensional Poverty Index (MPI), which is based on 10 indicators for measuring a household's well-being and standard of living.
The multidimensional view of poverty is central to the UN's global goals for sustainable development. The first goal is: "Eradicate poverty in all its forms, everywhere." It is, to say the least, an ambitious and important goal, but also difficult to measure. In 2016, the UN will work with international organizations and national statistical institutes - including Statistics Sweden - to develop indicators for the 169 sub-targets. In June this year, a report is expected from a poverty commission appointed by the World Bank on various alternatives for measuring poverty. Work is also underway within Sida to update the authority's understanding of, and definition of, multidimensional poverty.
Income poverty is a still current measure for estimating the prevalence of poverty and overall trends, but to understand the complexity of poverty, an income-based measure is not enough. How we choose to measure poverty is largely a political issue. What we put into the concept of poverty and what indicators we use to measure it affect what policies and strategies are developed to eradicate poverty. The dynamic nature of poverty is an important starting point for contributing to a more lasting and long-term reduction in poverty.