Sunday, June 22, 2008

Walking the poverty line

Being poor can be characterized in many ways. One can be poor in the economic sense, or one can be poor in moral or spiritual terms. Undeniably, a horrific image of poverty could be a picture of a homeless person sleeping on a city street crowded with glass and steel-clad skyscrapers, or of unclothed and unfed children, or thousands of displaced men and women in countries ravaged by war, their emaciated arms stretched upward begging for food or water. For these people, to be poor is to be absolutely poor.

Some years ago, the World Bank came up with a measure of poverty in relation to purchasing power parity (PPP). Economists at the Bank drew the poverty line at “a dollar a day,” or more precisely, $1.08 at 1993 PPP. This meant that a person is poor if he or she consumes less than an American spending $1.08 per day in 1993. In light of the declining power of the U.S. dollar, this bank standard of poverty line obviously needs to be adjusted. Of course, government policy makers have developed their own poverty lines, which really matter more than a global destitution standard adopted by the World Bank apparently as a campaign tool rather than to guide policy.

Measuring the poverty line is both difficult and problematic. Not all countries define it in the same way. In 1963, the United States adopted “Mollie’s Measure,” named after Mollie Orshansky of the U.S. Social Security Administration who designed a simple formula to measure material deprivation using data from the late 1950s. The formula calculated the minimum cost to feed a family then multiplied it by three. Orshansky used the cost of a nutritionally adequate diet as the basis for a cost-of-living estimate, adjusted according to family size and composition. On average, she estimated that families spent about a third of their income on food.

But there are several flaws in Orshansky’s formula. For one, food is now only about one-seventh of household expenses, not a third. The formula also did not allow for a host of other variables such as cost differences among regions, the fact that more people commute longer distances, or that more people live with nonrelatives, sharing expenses and income, or taxes or all sorts of cash and noncash government assistance.

Today, many U.S. economists are suggesting that the poverty line should be revised to provide a better picture of who is actually poor. Due to politics (what else to blame), the U.S. remains trapped in the quagmire of the current yardstick that does not reflect modern conditions. There are those who advocate adjustments that raise the poverty line, while others prefer ways that lower it. Many experts have given up, others even concluding that the official measure is set in stone.

Since 1992, in Canada, a new alternative to measure the poverty line in terms of meeting a family’s basic needs was proposed as an alternative to the prevailing relative poverty lines, like Statistics Canada’s Low Income Cut-off (LICO), that compare how some well off Canadians are relative to others. Basic needs poverty lines are intended to measure the number and proportion of Canadians who cannot afford the basic necessities of life, such as food, clothing, shelter and other household essentials. The new approach accepts that basic needs poverty is a problem, i.e., people cannot afford the basic necessities of life without resorting to borrowing or getting assistance from family and friends or do without.

In the Philippines, a new income threshold has been adopted after discarding the Orshansky approach of the U.S. The new index covers only basic needs like food, clothing, shelter and transportation. It does not include spending for recreation. The National Statistics Coordination Board recently announced that a family of five with a total monthly income of less than P10, 000 (U.S. $244) is considered poor. In 2006, the same family is considered poor if its household income is no more than P8,569 per month. Close to 40 per cent of the population, or 2 out of 5 Filipinos, live below the poverty line.

But the measurement of poverty on the basis of adequate coverage of basic needs is also an imperfect device. Under such definition, it is also possible that more than 50 per cent of the country’s population may be classified as poor even though its economy is relatively better than the poorest countries in the world. This is so because the use of such indicators to measure poverty may obscure the true size and the real dynamics of poverty.

The harsh reality is that the number of families or people in the world today who are poor is alarmingly increasing. Wars, natural disasters, unequal distribution of wealth, high rates of unemployment and uneven regional economic development are pushing down more and more people to an abysmal pit of poverty and hopelessness. This is not only true in the poorest areas of the world as poverty also manifests itself among marginal communities in prosperous urban North America, particularly among the increasing number of children, youth and single mothers struggling to survive on measly government dole-outs.

Despite all the statistical parameters and terminologies designed to accurately measure material destitution, the bottom line in any process of defining poverty still hurts. There will always be real people who are absolutely poor, and they surely stick out from the computation.

Real poverty cannot be ignored. What matters is the effort to eliminate poverty, and its constitutive element, inequality. And if such effort were left alone to distant and disaffected policymakers who have no real understanding of what being poor is, without involving the poor in their own development, chances are that the same failures of the past will persist or very minimal success will only be gained.

Better yet, let this remind us of the cynic in the late U.S. president Ronald Reagan, who once said, “We declared war on poverty, and poverty won.”

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