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Measuring poverty below the averages

Date: 
3 June 2013
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Amanda (@amanda_lenhardt) is a Research Officer at ODI's Development Progress. She specialises on rural livelihoods, agricultural development, and measuring multidimensional poverty and inequality.

This is the fifth in a series of blogs that debate how a post-2015 framework ought to measure poverty - find out more.

Among the achievements of the Millennium Development Goals (MDGs), the halving of extreme poverty has been celebrated as the great success. The target of reducing the number of people living on less than $1.25 a day is expected to be reached globally, if not surpassed, by 2015. We cannot take this figure at face value though: this progress has not been evenly distributed, and China’s success boosts the average of overall global poverty reduction. But these discrepancies aside, it is reasonably accepted that income poverty is declining, at least to some degree, in all major regions of the world.

At the national level - the standard focal point for most measures of poverty - the picture is slightly less clear, but overall we tend to see a positive trend. The classic conception of nationally distributed poverty is distorted however by the fact that it is no longer concentrated in low-income countries, the class of countries conventionally singled out for high rates of impoverishment. A number of high-poverty countries have graduated to middle-income status, which means it is less easy to capture poverty by measures of average income or consumption.

The changing dynamics of inequality, both across and within countries (see Milanovic, 2012 for an overview), further complicates our view of poverty. Aggregate measures of poverty such as average consumption rates and poverty head-count statistics, while instructive of absolute poverty levels, fail to capture uneven distributions of income or uneven progress on non-income dimensions of poverty.

The distortions caused by aggregate measures of poverty have led us back to the drawing-board, asking: what exactly do we want to measure with poverty statistics? But a more important question is: what will we use these poverty statistics for? If intended as a tool for national policy-makers to make informed decisions about strategies to reduce poverty within their societies, then it makes sense to look beyond national averages towards poverty rates among particular groups and at different income levels.

Narrowing the lens of poverty measurement to the sub-national-level is challenging, not least because the data is often lacking to do so, but if we wish to address the barriers facing the remaining 50 per cent of the world’s poor who have not yet been raised out of extreme poverty, then this is where the measurement of poverty can be most effective.

There are three useful ways to look below the averages, two of which are reasonably straightforward and can be achieved with the statistics already at hand, and one of which will require more effort to measure given its context-specificity. These measures are presented here as complements to, rather than replacements for, existing aggregate measures of absolute poverty, since both types of measures are instructive for the setting of national and international priorities.

1. The share of the poorest quintile in national consumption. This measure can be found in the MDG framework already, though it has not been used. An extension of this would be to look further below the poorest quintile, to consider the bottom 10 per cent and 5 per cent’s share of national consumption. These measures capture two important elements of poverty.

• They draw out the distributional aspects of income at a national level, thereby highlighting inequalities in income shares held by different segments of the population. We might consider this a measure of relative poverty. Poverty and inequality are not mutually exclusive, and the added appeal of this simple measure is that it can be used to examine both.

They allow for a disaggregation of the population into income groups relevant for policy-makers in their design of strategies to address the structures that keep people impoverished.

In a recent blog focusing on the inequality dimensions of these poverty measures, we drew upon the case of Brazil to show how aggregation can distort our view of poverty and inequality trends. Poverty and inequality have both declined over the past 20 years by most accounts, but the income share held by the bottom decile in Brazil has increased only marginally and from a very low point.

This perspective draws our attention to situations of poverty that are likely to persist amidst wider gains in income growth. The case of Brazil points to the need for retaining absolute measures of poverty, as these are still useful in explaining the country’s laudable achievements in overall poverty reduction over the past 20 years, but also the need to include measures accounting for the distribution of progress alongside them.

Disaggregated income distributions in Brazil 1981-2009

(Lenhardt & Shepherd, 2013)

2.  A comparison of the outcomes of these disaggregated income groups on indicators of human development such as education, health, hunger and employment. We have shown that recent gains in education access, another highly celebrated outcome of the MDGs, have not been evenly distributed within countries when comparing across different income levels. This research showed that the poorest women were indeed reporting more years of education in the 2000s than in the 1990s, but their progress lagged behind gains made by the median income group. Progress was also slower in indicators of early marriage, women’s empowerment and child mortality.

Tracking gains across the multiple dimensions of poverty among different income groups will allow policy-makers to ensure that the policies and programmes they have introduced to tackle these issues are indeed reaching the people in greatest need of them.

3. The horizontal dimensions of inequality which result in higher rates of impoverishment among particular segments of society including ethnic minorities, spatially disadvantaged communities and disempowered women. Marginalised groups, as identified within country contexts, could be disaggregated from national poverty statistics and their group averages on income and human-development outcomes compared to the national average or median for those indicators.

In combination with absolute measures, these three simple disaggregations would highlight those segments of a given society that are most disadvantaged and would allow policy-makers to track progress on poverty reduction among those more likely to face social, political and institutional barriers to broader poverty-reduction efforts.

Other contributions to our debate on measuing poverty come from Martin Ravallion on two goals for fighting poverty, Lant Pritchett on the case for a high global poverty line, Stephan Klasen's argument for internationally coordinated national poverty measurement and Sabina Alkire's proposal for a multidimensional poverty index post-2015.