POVERTY & INCOME DISTRIBUTION
CONTENTS:
INTRODUCTION & BACKGROUND
"Poverty signifies the inability of people to realise their potential
as human beings" (Ellis, p 77), see, also, Sen,
1997, Human Capital and Human Capability. See, especially, World Bank,
Millennium Development Goals site for current data measuring the
extent of global poverty. Current data suggest that 70% of the world's
poor live in rural areas. Ellis notes (p78) that the effects of
Structural Adjustment Programmes in Africa has been to narrow the gap
between urban and rural incomes per head, but mostly
because of declining incomes in the urban areas.
Poverty signifies a lack of assets
and resources - too many people trying to earn or make a living
from too few resources, or inefficiently mobilised resources.
Not enough land, inadequate education and skills, and poor health are
the key factors in characterising poverty world-wide. "The proportion
of
rural people in poverty rises markedly in locations that are marginal
in terms of agricultural productivity, remote from services, and prone
to natural disasters." (Ellis, p 78).
Ellis notes that a "New poverty agenda" was established in the early
1990s, "a three prong strategy comprising the promotion of
labour-intensive economic growth; access by the poor to social
services; safety nets targeted at those unable to secure a minimally
acceptable survival level of living." (p 79). This has now
progressed to the 8 Millennium
Development Goals, of which Eradication of Extreme Poverty and
Hunger is the number one goal.
POVERTY MEASUREMENT & DIVERSE
LIVELIHOODS
Measured in absolute terms -
numbers falling below a predetermined poverty line, supposed to define
minimum material necessities for healthy survival (and reproduction).
Or in relative terms, as
those falling significantly below some average level of income and well
being, and who may thus be excluded from the customary activities and
services enjoyed by the majority. Clearly, in relative terms, the
poor are always with us - just failing to keep pace with the majority
for some reason.
Ellis notes three somewhat different absolute poverty measures, almost
always based on expenditure rather than income, since the latter data
tend to be more unreliable and inaccurate measures of resource
capacities, and are typically collected at the household level by
survey:
- Headcount Ratio: - the proportion of total
population who are below some given poverty line (such as $1 per day
(the Millennium Development Goal (MDG) target 1; 1a measures poverty
relative to the nationally chosen poverty line), which measures the extent
or incidence
of poverty in a
population.
- Poverty Gap Ratio: -
expresses the total amount of money which would be needed to raise the
poor from their present incomes (y) to the poverty line (z), as a
proportion of the poverty line, and averaged over the total population,
which measures the depth
of poverty. The MDG's definition for Target 2 is: Poverty
gap ratio is the mean distance
separating the
population from the poverty line (with the non-poor being given a
distance of zero), expressed as a percentage of the poverty line.
- Poverty Gap Squared: One
problem with the Poverty Gap ratio is that it ignores the variations in
expenditure (the distribution of income and spending) amongst the poor,
since the Gap is an average. This can be rectified by squaring the
poverty gap, which provides the statistical second moment of the
distribution - its variance, where the first moment is the average.
Squaring individual poverty gaps means that the larger gaps count for
more
than the smaller gaps, and hence the measure captures the severity of poverty in a
population. However, this measure does not (yet) figure in the MDG list
of targets.
A problem associated with measuring poverty by expenditure levels
rather than income (see Ellis, p 84/5 and Chapter 9) is that income
sources tend to be under-researched, yet are clearly critical for any
analysis and understanding (as opposed to measurement) of
poverty. In addition, today's static measure of poverty
incidence, depth or severity tells us little or nothing about the
dynamics - the changes in individual or household poverty levels over
time. What, for instance, happens to our measures of poverty when
family members are sent away, or choose to migrate, to other
locations and activities? What do they tell us about gender
differences in the effects of poverty?
Ellis (p. 85) refers to Chambers (1983) distinction between
poverty types (as an illustration of the aspects which can only
be discovered through more intensive research methods than
conventional household surveys):
- poverty proper:
lack of income and assets (resources);
- physical weakness:
under-nutrition, illness, disability etc.
- isolation: locational or
social marginalisation or exclusion from access to goods and services
- vulnerability: exposure
to risk, stress, and hunger
- powerlessness: lack of
access to social capital - exclusion from political, social and
cultural
structures and networks.
It is, perhaps, obvious that interpretations of measurement of
poverty will depend heavily on what is measured, when it is measured (during
what season), and even on who is actually doing the
measuring (and for what purpose) (p. 87)
Diversification and income distribution
Highly unequal income (and hence poverty) distributions amongst
local populations make policies and strategies to alleviate poverty
especially difficult to implement and deliver - risking the real
possibility that aid and assistance schemes reach the wrong (rich)
people rather than the poor.
Does income diversification help or hinder progress towards more
equitable income distributions? One argument is that it helps, by
allowing households to mobilise and utilise their own resources
(primarily land and labour) more fully and effectively than if they
restrict their efforts to only one activity (such as subsistence
farming). In this case, connectedness,
both geographical and social, is
likely to be important in reducing poverty, as is the development
of a significant non-farm sector. There is a considerable
body of
empirical evidence to support this argument.
On the other hand, perhaps only the richer households (those with more
assets, especially skills and education) are able to diversify
effectively, in which case, diversification may exacerbate poverty
amongst the very poor. There is also some empirical evidence in support
of this hypothesis.
Three major types of relationship
between income (or asset)
levels and the extent of diversification (typically
the
extent of off-farm income sources)
- higher income -> less diversification, as the farm becomes
capable of providing more support as its size increases (especially
observed in rural Asia and Latin America, where land is the critical
asset);
- higher income -> more diversification, which is especially
observed in Africa, where livestock and labour are the critical assets;
- U shaped relationship: high diversity at both low and high
income levels, with little diversity in the median income ranges -
typically relating to the poor landless labourers, and the rich
landowners, with multiple income sources, where there are also
typically very wide differences between the off farm labour earnings of
the poor, landless, people, and the rich landowners (as would be
expected if there are major differences between skills, education
levels, or social, political and cultural networks and connections).
It follows that any attempt to relieve poverty by actions relating to,
e.g. improving agriculture, or improving off-farm work opportunities,
has to take account of the relationships which hold in the particular
instance. Improving agricultural returns will do little to
alleviate poverty if the principle asset is land, since the
(already rich) landowners will reap most of the benefits.
In short, the key is to identify the asset shortages of the very
poor and seek to alleviate these.
Back to 806 Index
Comments or suggestions?