How should a post-2015 agreement measure poverty? Vote for your preferred methodology

June 21, 2013

     By Duncan Green     

The blog’s been insufficiently techie of late, so step forward ODI’s Emma Samman with a piece + poll on measurement. Maybe the start of a ‘Friday geek ‘ series?Emma S Headshot

Some one in five people today still cannot provide for their most basic needs, progress on Millennium Development Goal (MDG) 1 (to halve extreme poverty and hunger) notwithstanding. The High-Level Panel report affirms that ‘eradicating extreme poverty from the face of the earth by 2030’ should be at the core of a post-2015 agreement: ‘This is something that leaders have promised time and again throughout history. Today it can actually be done.’ The World Bank has endorsed this viewpoint, as have David Cameron, Barack Obama and The Economist, alongside several NGOs.

But is the goal ambitious enough – in terms of who it targets, and how? We’re exploring these issues as part of Development Progress, a four year project that aims to explore what’s working in development and why. We asked several experts to make proposals as to how to measure poverty in a post-2015 agreement. Their contributions show some consensus, but also several areas of contention.

The definition of poverty

Who, among the following, would you consider to be poor?

  • A rural smallholder in Tanzania who earns $0.75 a day selling his produce, and cannot provide enough food, clothing and medicine for his family.
  • A woman living in London’s Tower Hamlets who earns the minimum wage, putting her slightly above the poverty line, but who feeds her children via a food bank, for which the family is stigmatised.
  • A young man living in New Delhi with earnings that put him comfortably above the Indian poverty line but below the US poverty line.
  • A slum dweller in San Salvador who has an income slightly above the poverty line, but is illiterate and lives in condemned housing in a violent neighbourhood.

Measuring poverty cartoonOur contributors agree that a poverty measure must identify people who cannot fulfil their basic needs defined globally, i.e. absolute deprivation. Several contributions – Martin Ravallion, Stephan Klasen and Lant Pritchett – make clear that poverty is relative as well as absolute, and that a societal reference point is needed. People should be able to live not only free from starvation and disease, but in accordance with social norms – what Adam Smith labelled centuries ago the ability to appear in public without shame.

For Ravallion and Klasen the appropriate reference point is the society in which a person lives, while for Pritchett, it should also be global. Pritchett seeks to capture absolute poverty in rich and poor countries alike by proposing multiple poverty lines, including a $1.25 a day measure – attuned to the world’s poorest countries – and a $12.50 a day measure, attuned to the richest. A plurality of measures would also deflect criticism that current poverty lines exclude a large number of people who, if not actually destitute, might be hovering precariously around that line.

Sabina Alkire’s proposal is rooted in absolute deprivation. Indeed, her multidimensional MPI 2.0, an updated MPI, is the only measure that combines the poverty ‘headcount’ – i.e. the share of people that are poor in several dimensions – with the ‘depth’ of deprivation – the number of deprivations, on average, that poor people experience.

Amanda Lenhardt argues that, regardless of the measure, there is a need to capture the circumstances of particular groups by monitoring ‘below the averages’ – e.g. the bottom quintile, decile or ventile of the population and different social groups.

One major strand of debate arises between advocates of an income poverty measure (Ravallion, Pritchett, Klasen) and those of a complementary multidimensional ‘MPI 2.0’ index (Alkire). Pointing to little correlation between measures of extreme income poverty and other types of deprivation, Alkire argues for also focusing directly on multiple dimensions of illbeing – for instance, the lack of adequate housing, improved sanitation, education, and, in extreme cases, the likelihood of survival. Klasen argues that such a measure may not be needed, as deprivations in education, health and other dimensions of wellbeing will be captured in an MDG ‘dashboard’. The debate would appear to hinge on how important it is to identify those people who are experiencing numerous deprivations at the same time.

How to construct an income poverty measure?

The $1.25 measure, on which the MDG target is based, is the average poverty line among the world’s 15 poorest countries, denominated in internationalmeasuring poverty 2 dollars using Purchasing Power Parity (PPP), an adjustment designed to compare purchasing power across countries and over time. One dollar (PPP) in Madagascar should, in principle, have the same value as one dollar in Indonesia. Ravallion’s ‘weakly relative’ poverty lines are derived from national poverty lines converted into international (PPP) prices, and Pritchett’s $12.50 line is also in international dollars.

But some argue that PPP conversions don’t work very well, causing uncertainties about how many poor people there are and where they live. Part of the problem lies in how international exchange rates are computed: the common denominator is a basket of goods including items that don’t feature highly in the lives of extremely poor people (e.g., wine from France’s Bordeaux region). Methodological updates and the need to project prices ‘backwards’ are also issues. Stephan Klasen advocates, in place of PPP measures, working toward ‘internationally coordinated national poverty measurement’, based on the basic needs of the poor.

None of these issues are easy to address, which might well be why the experts still haven’t cracked it. Some are technical questions to do with valuation and exchange rates, and monitoring. But others are much more fundamental questions about what we consider to be just societies.

Isn’t how we define poverty too important to be left to technical experts? After all, it gets to the heart of who we consider to be excluded, how we try to tackle deprivation, and how ambitious a new global framework should be.

Now it’s your turn…

Which of these poverty measures do you prefer as the basis for a post-2015 agreement?

  • $1.25 a day poverty line alongside a ‘weakly relative’ measure
  • National poverty lines constructed in an internationally consistent manner
  • Multiple poverty lines: $1.25 a day, national, $12.50 a day
  • Share of the bottom quintile, decile and ventile of the income distribution relative to the average
  • Multidimensional Poverty Index (MPI 2.0)

And as a special favour, you’re allowed to vote for more than one option (max of 3)

June 21, 2013
Duncan Green