Waylaid Dialectic

January 20, 2011

Counting the Poor so that the Poor Count

Filed under: Poverty — terence @ 4:45 pm
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Over at the Guardian’s Development Blog Andrew Chambers has an interesting post taking a tilt at the poverty measures associated with MDG 1.

Given that someone’s raised poverty measurement and the MDGs, and seeing as I’m possibly the last person on Earth who actually likes the Goals, I can’t resist the opportunity to clear up a few common misconceptions about poverty measurement and the MDGs. (To be clear, not all of these are in Mr Chambers’ post).

First, to get the MDGs off the hook, it’s worth noting the oft-forgotten point made in a footnote under the official list of MDG indicators: “For monitoring country poverty trends, indicators based on national poverty lines should be used, where available.” So, when we talk about poverty and the MDGs in Middle Income Countries, we’re already meant to be referring to national poverty lines which, ought, one would hope, be higher in those countries than US$1/day PPP.

Second, World Bank global poverty figures, from which the MDG indicator was derived, are quantified in purchasing power parity dollars. Which means that comparisons like — “However, by sifting through rubbish bins she is able to collect enough recyclable material to make more than 200 baht (£4) a day” — aren’t really correct.

When the World Bank talks about a poverty line of $2.50 a day (to use the line most commonly referred to by the Bank these days), what they mean is: living off less each day than you could have purchased with $2.50 in the United States in 2005. Think about it for a moment. Could you live off $2.50 a day in the US? It’s an incredibly low figure. Ludicrously low.

It is also — to make my third point — a more or less arbitrary line, simply calculated by averaging the poverty lines of those developing countries that have poverty lines. It doesn’t bear any direct relation to nutritional or health requirements. On the other hand, given that about half the World’s population live under that line (and many millions of people still live under the $1 a day line), such measures are still useful. They’re still quite good ways of quantifying the amount of acute material deprivation in the World. The mistake people make, I think, is to assume that once someone’s over that $2.50 a day bump they’re out of poverty. As Chambers’ post illustrates, this isn’t the case. In terms of an improvement Lant Pritchett makes a convincing case for a spectrum of poverty lines. With poverty persisting until at least $10 a day. This is a much better way to think about poverty — something that people move out in increments; not something they depart in one big hop.

Fourth, where possible (in about 2/3rds of their data), the World Bank use consumption data in their poverty figures. Which means that those global poverty numbers you hear already take into account what people ‘earn’ outside the cash economy.

Fifth, where possible, the World Bank uses data in their global poverty figures. Where it’s not possible they impute the numbers. Also, poverty data, even thought it might seem otherwise, is not super reliable, with final figures dependent on all manner of collection issues and calculations. Some people argue that global poverty figures ought to be much higher than those the World Bank produces, other that they ought to be much lower.

So what does all this mean at the end of the day? Basically, that the art of poverty measurement is very much an art. Final figures hinge on methodological and philosophical choices (more on this in my next post). But even given these uncertainties, once you understand the basics, one point becomes inescapable: a tragically high portion of our planet’s population live off remarkably little. So little that, as crazy as it may seem, a $1/day PPP purchasing power parity poverty line remains a relevant, albeit insufficient, measure for quantifying global poverty.

 

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2 Comments

  1. “When the World Bank talks about a poverty line of $2.50 a day (to use the line most commonly referred to by the Bank these days), what they mean is: living off less each day than you could have purchased with $2.50 in the United States in 2005. Think about it for a moment. Could you live off $2.50 a day in the US? It’s an incredibly low figure. Ludicrously low.”

    This is contentious, but all this suggests it that our PPP measures aren’t very good (that there isn’t really a comparable basket to use for weighting incomes, especially when that basket changes so dramatically across societies and income levels), so in reality, someone leaving on $2.50 a day in Malawi is *really poor*, but not ludicrously poor in the way someone living on $2.50 a day in the US might be.

    Comment by Matt — January 20, 2011 @ 11:50 pm

  2. Hi there Matt,

    It’s true that PPP calculations aren’t great. But that might, just as likely cut the other way (i.e. underestimating poverty (see, for example, the Pogge and Reddy critique of the WB numbers).

    I think the real reason why someone on 2.50 a day would be worse off in the US than in Malawi is that, in a static sense, your better in some ways being poor in a country where lots of people are poor, than in one where few people are poor. This is particularly the case with housing: in the US there are no squatter settlements where people can live and not pay rent etc. And if anyone tried to set one up it would get removed. This isn’t the case in most cities in Africa. And so acom, which is a huge chunk of most people’s budgets in most developed countries is less of an issue (in a pure cost sense), in the developing world.

    Or, at least, that’s how it seems to me, after a couple of minutes mulling it over.

    Happy, as always, to be corrected…

    Comment by terence — January 21, 2011 @ 4:29 pm


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