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Poverty and Inequality

Dr. Md. Zakir Hossain


Associate Professor

The concept of well-being and poverty


According to the World Bank (2000), poverty is pronounced deprivation in wellbeing.
One approach is to think of ones well-being as the command over commodities
in general, so people are better off if they have a greater command over
resources. In this view, the main focus is on whether households or individuals
have enough resources to meet their needs. Typically poverty is then measured
by comparing an individuals income or consumption with some defined
threshold below which they are considered to be poor.
A second approach to well-being (and hence poverty) is to ask whether people
are able to obtain a specific type of consumption good: do they have enough
food? Or shelter? Or health care? Or education? In this view the analyst would
need to go beyond the more traditional monetary measures of poverty:
nutritional poverty might be measured by examining whether children are
stunted or wasted; and educational poverty might be measured by asking
whether someone is illiterate, or by the amount of formal schooling they have
received.

The concept of well-being and poverty


The broadest approach to well-being (and poverty) is the one articulated by
Amartya Sen (1987), who argues that well-being comes from a capability to
function in society. Thus poverty arises when people lack key capabilities, and so
have inadequate income or education, or poor health, or insecurity, or low self
confidence, or a sense of powerlessness, or the absence of rights such as
freedom of speech.

Poverty is related to, but distinct from, inequality and vulnerability. Inequality
focuses on the distribution of attributes, such as income or consumption, across
the whole population. In the context of poverty analysis, inequality requires
examination if one believes that the welfare of an individual depends on their
economic position relative to others in society.
Vulnerability is defined as the risk of falling into poverty in the future, even if the
person is not necessarily poor now; it is often associated with the effects of
shocks such as a drought, a drop in farm prices, or a financial crisis.
Vulnerability is a key dimension of well-being since it affects individuals behavior
(in terms of investment, production patterns, and coping strategies) and the
perceptions of their own situations.

Why measure poverty?


There are four reasons to measure poverty.
First, to keep the poor on the agenda; if poverty were not measured, it
would be easy to forget the poor.
Second, one needs to be able to identify the poor if one is to be able
to target interventions that aim to reduce or alleviate poverty.
Third, to monitor and evaluate projects and policy interventions that are
geared towards the poor.
And finally, to evaluate the effectiveness of institutions whose goal
is to help the poor.

Absolute and relative poverty


Absolute poverty is perceived as subsistence below the minimum
requirements for physical well-being, generally based on a quantitative proxy
indicator such as income or calories, but sometimes taking into account a
broader package of goods and services.
The relatively poor are those whose income or consumption level is below a
particular fraction of the national average. Relative poverty encourages an
analytical focus on income inequality trends.
As the poverty lines defined by national statistical offices in developing
countries generally refer to absolute poverty, a large part of CPRC quantitative
research will focus primarily on absolute poverty. In countries where
researchers distinguish between the poor and the ultrapoor by examining
the depth of deprivation, then two (or more) absolute poverty lines may be
used. At the same time, data and concepts drawn from other regions in
particular transition economies and the developed countries of the North
will require researcher engagement with notions of relative poverty.

Absolute and relative poverty


Adopting a multi-dimensional understanding of poverty introduces
further possibilities for relativity. The amount of education needed to
avoid falling into poverty is likely to increase over time, other things being
equal. Exposure to more varied or more industrial risks is likely to require
increased health expenditure to maintain the same level of health.
As Sen (1999:89) notes, relative deprivation in terms of incomes can
yield absolute deprivation in terms of capabilities, depending on a
persons ability to convert income into well-being, which is in turn based
on, for example, health status, age, gender, and differences in social or
ecological environment

Subjective poverty assessments


The subjective approach to understanding and measuring poverty argues that
poverty and ill-being must be defined by the poor or by communities with
significant numbers of poor people.
The ideas behind these studies originated out of work by NGOs on participatory
rural appraisal (Chambers 1994) which were developed into participatory
poverty assessments (Robb 1999) that sought to understand the multidimensional, interlocking nature of poverty in ways useful to policy making.
The Voices of the Poor (VOTP) series (Narayan et al., 1999, 2000), based on work
in a total of fifty-eight countries in the developing and transitional world, have
provided a rich picture of both the differences and similarities of poor peoples
experiences around the world. Through detailing and analysing the poors
descriptions of material and psychological well- and ill-being; powerlessness,
vulnerability and coping strategies; relationships with state and civil society
institutions; and gender relations and social fragmentation at the household and
community level

Very poor/Poorest............
The poorest are those who are on the bottom rung (or rungs), in all (or some), of
any of these systems of characterising the poor.

Multidimensional deprivation
The emerging consensus seems to be that extreme poverty is best represented
by some combination of low purchasing power, limited capabilities, a high
degree of vulnerability and a sense of powerlessness (Islam, 2001: 9).
Commonly, the poorest experience several forms of disadvantage at the same
time: these combinations keep them in poverty and block off opportunities for
escape, sometimes across generations. Multiple deprivations interact and
overlap cumulatively to deepen the poverty of the poorest to keep them in
poverty over longer periods of time. Multiple deprivations, especially of key
capabilities such as health and education, but also including low material
assets and social or political marginality, limit the claims that the poorest are
able to make within economic, social and political spheres, and therefore
combine to keep them poor.

Very poor/Poorest............
Multidimensional deprivation
Neither policymakers and poverty analysts, nor the poor themselves, give all
forms of deprivation equal weighting. Clark and Qizilbash (2002) define a
core dimension as a dimension of poverty that is part of all admissible
specifications of poverty, and operationalise it as any dimension of poverty
identified by at least 95 percent of Respondents.
In South Africa, 12 core dimensions were identified by people living in poor
communities: clean water, health, access to health care, housing, jobs,
education, freedom, nutrition, safety, self-worth and respect, survival and
religion.

Poverty depth or severity


This is the approach to identifying the poorest with which policymakers (and
poverty analysts) will be most familiar. Severely poor, very poor, ultra-poor,
hardcore poor, poorest of the poor, extremely poor, destitute, indigent
each refers to poverty depth, or the shortfall below an absolute poverty
line, usually based on the expenditure required to ensure food consumption
adequate for survival (food poverty line).
Those below the poverty line tend to spend a large proportion of their
earnings on food, often without meeting minimum energy and nutrient
requirements. This has a compounding effect on individual and household
physical and mental ill health, debt and inability to work or study. Low
energy leaves people, notably children, particularly susceptible to disease.
Even a relatively short period of deprivation in childhood can harm child
nutrition, health, education and aspirations, with serious repercussions for
the long-term wellbeing of both the child and her/his own children.

Poverty depth or severity


Incidence of severe poverty can also be measured as the proportion of
people who fall below a certain percentage (i.e. 80 percent) of the
standard (i.e. food + non-food requirements) national or sub-national
poverty line; an international poverty line, such as US$1/day; a
certain percentage (i.e. 50 percent) of the average minimum wage; or in the
bottom expenditure decile.
Poverty is multidimensional and, as such, the depth of poverty also can
be measured in terms of a range of (non-money-metric) indicators. Severe
malnutrition among children is often used as a proxy for severe poverty, and
Islam (2001) suggests that a similar approach can be used to assess severity
on other capability indicators (e.g. education, health, housing, productive
assets).

Poverty persistence
The Chronic Poverty Research Centre (CPRC) argues that the duration of
periods spent in poverty is as important as poverty depth and
multidimensionality for identifying the poorest and understanding their
experience of poverty and, as such, is a third meta dimension of
poverty.
Chronic poverty is also known as persistent, long-lasting, long-term and, in
its most extreme and intractable form, intergenerational poverty. While the
distinguishing feature of chronic poverty is its extended duration, the exact
length of time that needs to elapse is, as with the level chosen for a poverty
line, somewhat arbitrary. Intuitively, the chronically poor are those who
remain poor for all or much of their lives, pass on poverty to subsequent
generations or die a preventable poverty-related death (Hulme and
Shepherd, 2003).

Poverty persistence
There are three arguments that can be used to support this crude five year
criterion. Five years is perceived as a significant period of time, in an
individuals lifecourse, in most cultures.
There is often a five-year gap between data collection points when panel
data are created so that in practical terms the study of the duration of
poverty will often be based on a five-year period (for example, see Carter &
May, 1999, for South Africa and Baulch & Masset, this issue, for Vietnam).
Finally, some empirical materials indicate that people who stay poor for five
years or more have a high probability of remaining poor for the rest of
their lives (see Corcoran, 1995; Yaqub, 2000). If this is the case, the
likelihood of IGT would also be high and the five-year criterion would
permit the identification of the most intense forms of chronic poverty

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