'The Poor Doesn't Exist!'

Contrary to what the title might suggest, this article does not seek to question the existence of poverty. Instead, its purpose is to reconceptualize poverty to better reflect its dynamic nature. It challenges the notion of a fixed group of individuals labeled as 'the poor' and, in doing so, highlights the limitations of poverty targeting—the use of policy instruments to allocate resources to those identified below a designated national poverty line.

By Kia Taryn Howson

For nearly 25 years, the global number of people living in extreme poverty—defined as living on less than $2.15 per person per day—has been decreasing (Lakner et al., 2022). Additionally, international organizations like the World Bank report that the percentage of the population in extreme poverty is now below 9 percent in more than half of the world’s countries (World Bank, 2022).

On the surface, this is a promising trend. However, the emphasis on "the poor" and the specific focus on sub-categories like the "extreme poor" reveal a tendency among policymakers and international organizations to reassure us that global extreme poverty is declining. This focus often overlooks the reality that a significant portion of the world's population still faces unacceptably high levels of deprivation and insecurity.

Source: Development Initiatives based on

World Bank PovcalNet and IMF World Economic Outlook

If we raise the threshold to just $5.50 per day, we find that the majority of the population in low- and middle-income countries live below the official poverty line, which still represents a very poor standard of living. For instance, using this threshold, South Sudan's poverty rate is 98.44%. Increasing the threshold further to $10 per day raises the poverty rate to 99.7% of the population in 2022 (World Bank, 2022). This demonstrates that current international poverty lines significantly obscure the true extent of global poverty.

Poverty reduction has long been recognized as the implicit objective of development policy, and national poverty assessments have been used on a routine basis to inform policy discussions on poverty alleviation in numerous low-middle income countries. These poverty assessments have drawn on cross-sectional household surveys to provide a detailed profile of the poor, and to document the incidence of poverty in various segments of the population.

Many conditional cash transfer programs (CCT’s) use proxy means testing (PMT) as their targeting methodology to predict household income.

It does so by measuring specific proxies that are supposed to have some correlation to poverty, such as asset ownership, housing, and demographic characteristics (Kidd, 2012).

Proxies are derived from national household surveys where statistical methods are used to determine the relationships between observable household characteristics and consumption. However, proxies are a relatively weak explanation of consumption. At its most basic level, a PMT does not measure quality, quantity or depreciation of assets. Household surveys measuring income also do not capture the irregularity of income in the informal labour market, which is highly vulnerable to seasonal variation.

PMT’s can be subject to political interference which can influence program area selection. For example, Mexico’s Oportunidades program carried out household surveys for all households in eligible communities to determine eligibility once a threshold had been established. However, some geographical areas were not targeted because enumerators had their own political agenda (Adato et al. (2000:9). Household surveys are also generally conducted only every 3-5 years, and do not necessarily track the same households.

Establishing a threshold means that, if a household earns just one cent more than a household classified as poor, they do not qualify for the cash transfer. Those living above the population, albeit by just a few cents, is comprised of individuals still have a very low standard of living, referred to as “the missing middle”

The missing middle comprises of around 60% of citizens in developing countries but is overlooked in global development goals and discussions of social protection.

Moreover, the established national poverty threshold is arbitrary. In 2019, the Indonesia Government celebrated the steady reduction of poverty from rom 11.13 per cent (2015) to 9.22 per cent (2019) based on the government's official poverty line of 233,740 rupiah per capita per month, which is less than $28 dollars (United Nations, 2021).

In the same year, Germany had recorded a poverty rate of 15.8 per cent (World Data Atlas, 2020). But how is it possible, for Germany, a high-income country with a GDP per capita of $50 to have a higher poverty rate than Indonesia, a low middle income country with a GDP per capita of $4?

Well, the two countries use different poverty lines – Germany is a relative poverty line and Indonesia has a basic needs poverty line – both

defined in different ways and are therefore not comparable. Moreover, if we increase the threshold to the more appropriate poverty line for middle-income countries of international US $2 PPP per day, we find that just under 50% of Indonesia’s population live in poverty (Knox-Vyadmanov, 2016). It is therefore clear that setting a poverty threshold can underestimate the real level of poverty; Indonesia might have a self-proclaimed poverty rate of 9.22%, but can people really live on $1 a day and not be considered poor?

Poverty is also a dynamic, stochastic phenomenon: the poor today is not necessarily poor tomorrow. The current poverty level of a household may not necessarily be a good guide to the household’s expected poverty in the future. Because the survey data can only depict a snapshot of that moment in time, it fails to take into consideration the high degree of “churning” that occurs in low-middle income countries. That is, the frequency of people moving in and out of poverty on a regular basis. Non-poor households who face a high probability of a large adverse shock such as Covid-19, may, on experiencing the shock, become poor tomorrow.

What does this mean for combatting poverty?

For thinking about appropriate forward-looking anti-poverty interventions (i.e., interventions that aim to go beyond the alleviation of current poverty to prevent or reduce future poverty), the critical need then is to go beyond a cataloguing of who is currently poor and who is not, to an assessment of households’ vulnerability to poverty.

In recent years, there has been an increasing recognition that social security plays a critical role in addressing global poverty, primarily through the expansion of social protection floors to guarantee income security and access to basic services throughout an individual’s lifecycle (Knox-Vyadmanov, 2016). Founded on a rights-based approach, the Social Protection Floor encourages countries to aim towards a universal standard of social protection coverage and generally will include a variety of social transfers to tackle major lifecycle and labour market contingencies, such as child benefits, unemployment support, pensions, and disability benefits (ibid).

There are, however, some powerful forces that are opposed to the ambition of a social protection floor. These actors argue that social protection is only for the poor and vulnerable and that anyone who is above the national poverty line should not be eligible for a scheme (Kidd et al, 2019).

If 99% of Nigerians are poorer than the poorest 5% of Americans, should social protection schemes really only target the poorest households in Nigeria if the majority of the population is living in poverty? Such binary classifications of poor and not poor propagates the moral judgement that the level of income above the threshold is morally acceptable, despite it failing to meet even the poorest in the United States.

The methodology by which poverty lines are produced raises important questions about the accuracy and reliability of the picture they present of the level, composition and trends of global poverty. This means that poverty targeting in low- and middle-income countries cannot be undertaken with any degree of accuracy, and result in high exclusion errors. For example, Guatemala’s Mi Bono Seguro scheme, which uses a proxy means-test had an exclusion error of 96 percent among intended recipients (Kidd et al., 2019).

Conclusion

Using poverty measurements to determine whether an individual's right to social protection gets fulfilled or does not get fulfilled, is, as demonstrated, highly problematic. Advocates of poverty-targeted schemes would argue that what we really need is a better system: a safety net that accurately and dynamically catches people the moment they fall below a particular threshold. But there are simply not enough resources for this task.

A better, more effective and more sustainable approach to poverty reduction is the construction of comprehensive social security systems. Although challenging, building social protection floors shaped by the architecture of the lifecycle is already being explored by countries such as Uganda, Timor-Leste and Bolivia. This is by no means a call to abolish any attempt to measure poverty. The establishment of poverty lines, particularly on a global scale, help to publicise discourse around poverty issues and poverty reduction, keeping it at the forefront of the national and international political agenda. But accurately targeting the poor is a futile task and cannot capture the full scale of poverty and vulnerability permeating the world today.

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