Tuesday, 10 August 2010

Enriching our poverty measures

One of the most widely recognised Millennium Development Goals (MDG) is halving the proportion of people living on less than $1 per day. And yet, how many of us have actually taken time to think about what that could mean, to live on less than $1 a day? Indeed, for most people in the developed world, this represents such a miniscule sum as to be almost meaningless. How can we better understand what life is actually like for the world’s poor?

A new international poverty measure – the Multidimensional Poverty Index (MPI) – devised by the Oxford Poverty and Human Development Initiative (OPHI) and the UNDP Human Development Report, goes some way to addressing this problem. A person may not be considered poor according to the traditional monetary threshold and yet still have woefully inadequate access to schooling, food, healthcare, electricity, water or decent housing.

The MPI takes these different dimensions into account, and finds significant differences between the income-poor population and the population facing wider deprivations. For example, in Ethiopia, only 39% of the population is counted as being income-poor using the $1.25-a-day measure (the $1 figure was revised to account for inflation), yet 90% of the population are “multi-dimensionally” deprived according to the MPI.

As the MPI directly measures the hardships experienced by individual households, it can give a much more nuanced picture of patterns within countries. In Kenya, the overall poverty rates for the Kikuyu and Embu ethnic groups are similar; however the experience of poverty for the two groups is quite different. The Kikuyu suffer from higher rates of child mortality and malnutrition, whereas the Embu are more likely to face insufficient access to electricity, cooking fuel and adequate sanitation.

From a policy perspective, this kind of detail is crucial to be able to identify the challenges faced by different groups and to design effective solutions accordingly.

There are obvious links between lacking income and being deprived in a wider sense, and monetary measures of poverty remain very useful. However, poverty is a complex and multifaceted phenomenon – a reality that is sometimes obscured by income statistics. The availability of international comparable data of the breadth and depth of detail provided by the MPI can hopefully result in more informed policy and tangible change in the lives of poor people.
Of course, poverty is not just a problem for the developing world and the need for more comprehensive measures of household living conditions is increasingly being recognised in OECD countries too. The Stiglitz-Sen-Fitoussi Commission made recommendations in this vein last year, and surveys such as the EU Survey on Income and Living Conditions are starting to give a richer picture of poverty and social exclusion. The OECD publication Growing Unequal provides an analysis of non-income poverty indicators in OECD countries.

These developments are important because how we define and measure a problem dictates how we respond to it. By using a narrow definition of poverty, we risk ignoring large groups of disadvantaged people and implementing ineffective policy. Better data can provide a powerful (and much-needed) advantage in the fight against poverty.

This post was contributed by Kate Scrivens of the OECD’s Statistics Directorate and was released on the OECD insights blog. Kate is working on a project researching indicators of household vulnerability and resilience in OECD countries.

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