Poverty Measures

How do we measure poverty?

Who are the poor?

What determines poverty?

Poverty Measures and Nutrition
• “Public action to combat hunger has to take note of the causal links
and of the gaps in those links”, Dreze and Sen (1991, Hunger and Public
Action).

• Poverty at the individual and/or household level

represents a serious constraint on economic activity.

• A lack of economic opportunities feeds into poverty.

• These lack of opportunities can be reenforced by

income inequality.
Poverty Measures and Nutrition

Income inequality though represents one (very important)

component of economic inequality defined by Ray (1998,
p.p170) as:

“…the fundamental disparity that permits one individual certain

material choices, while denying another individual those very
same choices.” (emphasis added).

What Ray is really saying is that those factors that determine

material choices are of importance here such household wealth,
income.
Poverty Measures and Nutrition

How do we measure poverty?

Poverty can be both absolute and relative. See Martin Ravallion, (1994)
Poverty Comparisons.

Absolute Poverty: Those people who do not have adequate nutritional

intake per day, or do not have adequate shelter or clothing in order to survive
are deemed to be in absolute poverty.

Is traditionally measured by introducing largely ad hoc poverty lines. E.g. the

World Bank reports the number of people in countries below a $1 or $2 a day
as a proportion of the total population.

Better but more expensive method is to calculate nutritionally based poverty

lines – World Health Organisation.
 Poverty Measures and Nutrition

Chronic Poverty – those who never get out of

absolute poverty.
Poverty Measures and Nutrition
Relative Poverty: The relative position of some
economic unit (e.g. individual, household, racial group)
compared to another economic unit. A person can be
relatively poor but not absolutely poor – has to do with
distribution of income in a country.

E.g. Economic growth will generally result in a reduction of

absolute poverty but will only change relative poverty if there is a
change in distribution of income. (Woolard and Leibbrandt, 2001,
pp. 47).
Poverty Measures and Nutrition
Absolute Poverty Lines

Poverty line measures signal to researchers where poverty is and becomes the first
place to start in analyzing poverty in a certain country, within a certain economic
group etc…..

Examples of Poverty Lines:

(1) $1 a day and $2 a day lines that the World Bank and United Nations
Development Programme (UNDP) use.

(2) Calories per capita or per household - Calorie supply per capita is amount of
food available for consumption, measured in kilocalories per capita per day. This
figure is reached by dividing the total available food supply for human consumption
by the population.

Both measures are absolute in that people can be lifted out of poverty if they can
increase income or calories and poverty can be eradicated.
Poverty Measures and Nutrition

Relative Poverty Lines

Calculate a poverty line that is based on the income level of the

population. Relative poverty cannot be eradicated unless
income inequality is addressed.

(1) Standard percentage of people earnings below 50% of the

median or mean wage: can vary the 50% figure down to 10%
or 25%.

Note: If income increases for all then relative poverty will still
be apparent since you will always have some who fall below
50% of the new (higher) median income level.
Poverty Measures and Nutrition
Who are the Poor?

The poor of any country share similar characteristics.

In developing countries the poor tend to be Black, female,

young, rural, unskilled and perhaps semi-skilled (this is
determined by the nature of economic growth, trade
liberalization policy, subsidies etc…).

The factors that determine who is poor include socio-economic

institutions, e.g. Indian caste system, apartheid, racism (still in
Malaysia).
Poverty Measures and Nutrition
What Determines Poverty?

Research indicates that the quality and quantity of education, urban-rural

location, racial group, gender, health and employment status all impact
on whether somebody is poor or not.

Other factors include socio-economic factors, the historical legacy of a

country, social customs, property rights, economic dependence, political
system/affiliations etc. This is where much debate lies.

There is a large, positive correlation between unemployment and poverty.

However the direction of causality is not straightforward.

Poverty Measures and Nutrition
How does individual poverty impact on the individual’s
participation in the labour market?

Given poverty does exist in a country there are several ways this
can impact on participants’ behaviour in the labour market.

(1) Liebenstein (1963) first made the direct link between

poverty in the form of being under-nourished and productivity
in the labour market. He found that if a person was under-
nourished then this impacted negatively on productivity and
assuming a wage labour market would mean a low wage, with
MRP=W. Hence poverty can result in a negative nutritional
impact on the worker which can result in lower productivity.
Poverty Measures and Nutrition
• It is unclear what the minimal calorie intake is and what
the appropriate nutritional levels for workers should be
in developing or indeed any country.

• There is an issue here involving the type of job

somebody has (is it highly physical, and therefore
requires far higher levels of foods) – see Strauss and
Thomas (1988).

• What is NOT beyond doubt is that poverty can result

in a lack of food, which can impact negatively on
productivity and output that can be self-perpetuating.
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(2) Poverty can result in potential workers not being able to actively take
part in the wage labour market because (1) physically cannot go where the
jobs are (2) the opportunity cost of searching for work is too high (e.g. not
able to subsistence farm and therefore could increase the risk of hunger).

(3) Poverty within a household or within a community means less means by

which to invest in (1) human capital and (2) physical capital. This means
little chance of escaping poverty and indeed could result in a poverty trap
emerging.

(4) Ray (1998, pp.273) postulates that access to food is the same as access
to income and if one of these factors is owned by an individual, he/she is
likely NOT to be caught in a poverty trap.

(5) As well as the physical side effects of being poor and lacking nutrition,
there are also negative mental impacts that are related to increasing the
likelihood of depression, mental apathy, and de-motivation.
Poverty Measures and Nutrition
What should be emerging for the reader is the causal duality of poverty and
employment.

“Not only do labour markets generate income and therefore create the principal potential
source of nutrition and good health, but good nutrition in turn affects the capacity of the body
to perform tasks that generate income” Ray (1998, pp.274).

The nature of the labour market, in particular the level of unemployment, has
a large impact on the relationship between poverty and employment and
hence the poverty trap.

If a country suffers from poverty and high unemployment (e.g. South Africa)
then there is massive ‘slack’ in the labour market, meaning demand is low and
supply is high for (certain kinds of?) labour.