• POVERTY AND POVERTY ALLEVIATION

POVERTY
DEFINITION OF TERMS
 Is an income level below some minimum level necessary to meet basic
needs. This minimum level is usually called the “poverty line”. What is
necessary to satisfy basic needs varies across time and societies.

 Therefore, poverty lines vary in time and place, and each country uses lines
which are appropriate to its level of development, societal norms and values.
Historically, poverty has been related to income,
which remains at the core of the concept today.

• However, “income” is itself no less problematic a

concept than “poverty”; it too has to be carefully and
precisely elaborated.
• Other resources such as assets, income in kind and
subsidies to public services and employment should
be imputed to arrive at a comprehensive but
accurate measure of income.
 The United Nation definition:

Basically, Poverty is a denial of choices and

opportunities, a violation of human dignity. It means lack
of basic capacity to participate effectively in society.
It means not having enough to feed and cloth a family,
not having a school or clinic to go to, not having the land
on which to grow one’s food or a job to earn one’s living,
not having access to credit.
Insecurity, powerlessness and exclusion of individuals,
households and communities. Susceptibility to violence,
and it often implies living on marginal or fragile
environments, without access to clean water or
sanitation.
World Summit on Social Development held in
Copenhagen(1995);

Poverty is a condition characterized by severe

deprivation of basic human needs, including food, safe
drinking water, sanitation facilities, health, shelter,
education and information.
It depends not only on income but also on access to
services.
It includes:-
 a lack of income and productive resources to ensure
sustainable livelihoods;
hunger and malnutrition;
ill health;
limited or lack of access to education and other basic
services;
increased morbidity and mortality from illness;
homelessness and inadequate housing; unsafe
environments and social discrimination and
exclusion.
To better understand the nature of poverty, several related
poverty concepts are employed including;

• Human poverty:- The lack of essential human

capabilities, notably literacy and nutrition.
Income poverty:-The lack of sufficient income to meet
minimum consumption needs.

• Absolute poverty:-The degree of poverty below which the

minimal requirements for survival are not being met.

• Poverty line :- Poverty lines are generally defined as the per-

capita monetary requirements an individual needs to afford
the purchase of a basic bundle of goods and services.
Absolute poverty lines :- are anchored in the standard of
what households should be able to consume so that they
are not deprived.

 APL are fixed in time and space, while relative poverty

lines can vary.
• Often, these absolute poverty lines start with a nutritional basket
considered minimal for the healthy survival of a typical family, either
externally set or derived from household surveys.
• Relative poverty lines :- arbitrarily set the line in relation to the average
expenditure (bundle of goods) or income in a country, for example, the line is
derived as 60% of the country’s average value.
 Terms used to describe poverty

 Income or consumption poverty

 Human (under)development
 Social exclusion
 Ill-being
 (Lack of) capability and functioning
 Vulnerability
 Livelihood unsustainability
 Lack of basic needs
 Relative deprivation
 MAIN TYPES OF POVERTY

Public and Private

Public poverty- Inability of community
and/or state to provide adequate universal
access to basic social services to its
citizens.
Economic stability and sustained economic growth are prerequisites for
reduction in public poverty.
Private Poverty :-Inability of an individual or household to access those basic
social goods considered valuable in a specific society.
Types of private poverty
o Absolute poverty

o Food Poverty

o Transient poverty

o Chronic poverty

o Resource/Capabilities Poverty
• Relative Deprivation is another aspect of poverty.
Every person needs money for basic needs i.e. food, clothing and shelter.
However, people also need other "necessities"- items and activities to lead
a life, that is considered the norm.
• When a person is unable to afford an item such as a warm coat or new
clothes, they are experiencing relative deprivation.
 • Combined Income-Deprivation Measure:
This is a combination of having a lower than average income and being
unable to buy necessities such as new clothes.

• It is called "consistent poverty“ and is the type of poverty that the

government officially recognises.
 Composite Poverty Indicators

Allows for a broader explanation and measurement of poverty because they

take into account factors not directly related to a family's income or larger
economic forces such as a country's gross domestic product (GDP; a country's
total income and economic output)..
• Although GDP is often used to measure a nation's standard of living (the
availability of goods and services to a country's citizens), many experts
contend that it is not an adequate way to explain poverty because it
measures only the consumption of material goods.
Using composite poverty indicators allows those who study and track
poverty to consider factors other than income and possessions, instead
examining a person's overall quality of life.
• Other commonly used composite poverty indicators are;
The Human Suffering Index (HSI) ranks the levels of suffering
experienced by poor people in the areas of life expectancy;
calorie intake;
supply of clean water;
 child immunization;
• enrollment in secondary school;
• per capita gross domestic product; inflation rate;

• access to communications systems; technological development;

• civil rights;
• and political freedoms.
The Physical Quality of Life Index (PQLI) combines measurements of life
expectancy, infant mortality, and literacy rates.
Poverty Indicators &
assessment
• Human Development Index (HDI)
• Human Poverty Index (HPI)
• Aggregate Poverty Indicators:
The Human Development Index (HDI)

Is a measure of the quality of people’s lives in the form of human

development.
An attempt to quantify the social dimensional of the development process.
life literacy Expectancy.
Adult Literacy Rates.
Gross Enrolment ratio.
GDP per Capita.
 Human Poverty Index

Is an attempt to quantify the human dimension of poverty.

It a composite index based on three essential aspects of human deprivation:
The index incorporates the following poverty indicators:

• Probability at birth of not reaching age 40;

• Adult literacy rate;
• Percentage of people without access to safe water
• Percentage of under/overweight children under the age of 5
Disaggregated Poverty Indicators.
• Poor living conditions and others characterize the living conditions.
• Chronic poor living environment
Poverty and welfare indicators in TZ

• Through Participatory Poverty Assessment (PPA) exercise conducted in

1998 in Tz, poverty and welfare monitoring indicators were developed.
• Food security
• Nutritional status

• Income and production

• Environment

• Education
• Health service

• Water and sanitation

• Health status

• Housing
• Household&family relations

• Transport & communication

• Energy
CAUSES OF POVERTY
The Causes of Poverty

There is enough in the world to supply the

needs of every person,
so why does poverty exist?

Why do YOU think poverty exists?

•Causes of third world poverty
 Trade

Third world countries lose out through unfair

trade agreements, lack of technology and
investment, and rapidly changing prices for their
goods.
Work and globalisation
Better communications and transport have led to
a “globalised” economy. Companies look for low-
cost countries to invest in.
This can mean that, though there are jobs, they
are low-paid.
War or conflict.
When a country is at war (including civil war) basic
services like education are disrupted.

People leave their homes as refugees.

Crops are destroyed.
Debt
3rd WC have to pay interest on their debts.
They cannot afford to spend enough on basic
services like health and education; nor on things like
transport or communications that might attract investment.
Land
If you have land you can grow your own food.
But many people in the Third World have had
their land taken over by large businesses, often
to grow crops for export.
Health
Affordable or free health care is necessary for development.
In poor countries the percentage of children who die under the age of five
is much higher than in rich countries.
 HIV/AIDS is having a devastating effect on the Third World.
• HIV is now the single greatest threat to future economic development in
Africa.

• AIDS kills adults in the prime of their working and parenting lives,
decimates the work force, fractures and impoverishes families, orphans
millions...
Food and education
•Affordable, secure food supplies are vital.
•Malnutrition causes severe health problems, and
can also affect education.
•Without education it is difficult to escape from poverty.
• This becomes a vicious circle – people who
live in poverty cannot afford to send their
children to school.
• Gender
• When we measure poverty we find differences between the level
experienced by men or boys, and women or girls.
• Women may be disadvantaged through lack of
access to education; in some countries they are
not allowed to own or inherit land; they are less
well paid than men.
• Environment
A child born in an industrialised country will add more to pollution over his
or her lifetime than 30-50 children born in the Third World.

• However, 3 rd
World child is likely to experience the
consequences of pollution in a much more devastating way.
• For example, annual carbon dioxide emissions have quadrupled in the
last 50 years.

• This contributes to global warming, leading to devastating changes in

weather patterns.

• .
 Major causes of poverty in Africa.
 Insufficient Fiscal and monetary policies which do not promote
economic growth.

 Insufficient support to the leading economic sectors.

 Use of low level technology, which encumbers high production .
 Poor industrialization, which limits production and employment
 Poor gender division of labour at HH level, especially in rural areas
 Poor work output at the individual level, household and community levels
 Diseases, including HIV/AIDS and others.
 Having big families hence dependents
• External factors
National debt
Unequal exchange in International trade which limiting
the ability of developing countries to break out of the
poverty cycle
The burden of refugees, which increases pressure on
natural resources.
 Discussion Assignment
Discuss at least five ways of reducing poverty in developing countries like
Tanzania by giving vivid examples
 Poverty Measurements
Used by the World Bank
Incidence of poverty:

 The percentage of a country's population that

cannot afford basic necessities (a "basket of
goods and services").
• This is also known as living below the poverty line—an income level
below which a person is unable to meet basic needs
Depth of poverty:

• How far below the poverty line the poor

population lives;

• also called the poverty gap.

Poverty severity:

 Measures how poor the poor are.

In other words, poverty severity (squared
poverty gap) measures how far below the
poverty line individuals and households are, with more
consequence given to those at the very bottom.
UNDP measures of poverty
Measures Component
Human Development index Life expectancy at birth, adult
literacy, educational enrolment,
GDP per capita

As above, adjusted for gender

differences
Gender-related development
Gender empowerment
measure
 Seats in parliament held by women,
female administrators & managers,
professional and technical workers,
women’s share of earned income.
Human Poverty Index • People not expected to survive to 40,
(developing countries) illiteracy, access to safe water, health
services, underweight children
• People not expected to survive to 60,
Human Poverty Index functional illiteracy, population below
mean income, long term
(developed countries) unemployment
MEASUREMENT OF
POVERTY
 Poverty measures can be grouped into 4 major
categories:

Economic:
Social:
Demographic:
Vulnerability:
Economic:

Mainly monetary indicators of household well-

being, particularly food and non-food
consumption or expenditure and income.
 Social:

 Other non-monetary indicators of household

well-being such
as;
 quality and access to education,

 health,

 other basic services,

 nutrition and social capital.

Demographic:

 These indicators focus on the gender and age

structure of households, as well as household

size
Vulnerability:

 Focus on the level of household exposure to

shocks that can affect poverty status, such as;

 environmental endowment and hazard,

 physical insecurity,

 political change and

 the diversification and riskiness of alternative livelihood strategies.

 Measuring poverty using non-monetary
indicators

Basic and social needs

The min values of indicators of social welfare are identified, and people
getting less of needs than minimum amounts are considered poor.
 Monetary indicators

Poverty can be determined in absolute or relative terms.

Poverty lines are mostly used in RP measurements.

.
A Poverty line is income expenditure or expenditure level needed to
support an adult level at subsistence level of basic needs.

Poverty comparisons across the globe are based on a PV line of US $ 1

per capita/day
* PV lines differ in different countries and continents.
US $ 1 per capita/day PV line is too high 4 Developing countries
compared to developed ones particularly the industrial ones.

The latter use a PV line of about US $ 15.

 POVERTY LINE
DETERMINATION
3 approaches to construct a poverty line;

Cost of Basic needs method

Food energy
Food share method
Cost of Basic needs method

A PV calculation is based on the cost needed to

obtain a basic diet for the main age, gender &
activity group and the multiplying that cost by a
factor to provide for further necessities.
• E. g.
In Tz where poor spend abt 71% of their
income on food;
- A factor of 100/71 i.e. 1.41, is multiplied by the
income needed for food among the poor to get
PV line
Food Energy

By this method, the PV line is set at the

consumption expenditure level at which an adult
person’s average dietary energy intake is exactly
sufficient to meet dietary food energy
requirement.
Food Share

The PV line is derived from the cost of a

consumption plan needed to acquire just
sufficient nutrients.
(If this happens 2b a third of total consumption, the poverty line is set at
three times the cost)
Advantages of using PV lines
-Changes in the well being positions of the poor
can be traced & the extent of poverty reduction
can be measured.
-
Disadvantages.
-Some essential social poverty indicators such as
access to education and health care may not be
reflected in the poverty lines.

-
• PV lines, if not well-determined and adjusted to
local situations, may not reflect the actual std
of living.
 Measuring Absolute poverty using
Monetary indicators

• The absolute poverty concepts focuses on the

well being of the poor, in isolation from the welfare
of the entire society.
It is measured as follows:
Headcount ratio or index (H)
Poverty gap (income short fall) (I)
Poverty severity index (squared poverty gap index- important for policy
decisions
 Headcount index(P0)

• Definition:
• Simply measures the proportion of the population/HH that is counted as
poor.
Np
• P0= N
• where Np is the number of poor and N is the total population (or sample).
• If 60 people are poor in a survey that samples 300 people, then P0 = 60/300 =
0.2 = 20%.
The headcount index is the proportion of the population for whom
consumption (or other measures of living standard) is less than the
poverty line.

The head count ration is expressed as % giving the incidence of

poverty.
:

1 q

Formula P 0=  I ( yi  z)
N i 1

• Where;
• I(.) is an indicator function that takes on a value of 1 if the bracketed
expression is true, and 0
• otherwise.
• So if expenditure (yi) is less than the poverty line (z), then I(.) equals to 1 and
the household would be counted as poor.
• Np is the total number of the poor.
• Advantage;
simple to construct
easy to understand.
• Useful in testing the effectiveness of the policies for poverty alleviation by
finding the changes in the numbers or % of people or HHs below PV line
• Disadvantages

The headcount index ignores differences in well-being between different poor

households.

It assumes all poor are in the same situation.

• The headcount index does not take the intensity of poverty into
account - insensitive to differences in the depth of poverty of the poor.
An example: assume the line is 125. The headcount index is the
same for both countries, although poverty is greater in Country A.

Expenditure for each individual in country Headcount

Country A 100 100 150 150 50%
Country B 124 124 150 150 50%
Over time, the index does not change if individuals below the poverty
line become poorer or richer, as long as they remain below the line
• In terms of policy,
A transfer to a very poor household would probably leave the headcount
index unchanged (if poor remains below the line) even though poverty has
overall lessened.
The easiest way to reduce the headcount index is to target benefits to
people just below the poverty line, because they are the ones who are
cheapest to move across the line.

 Policies based on the headcount index might be sub-optimal.

Overall, the headcount index remains the most popular poverty
measure.
In order to ensure rigorous analysis, however, it is important to carry out
sensitivity analysis (for instance, by calculating the measure for different
poverty lines)
 Poverty gap (PG) or Depth Index(P1)

Definition:

The poverty gap is the average, over all people, of the gaps between poor
people’s living standards and the poverty line.
• It indicates the average extent to which individuals fall below the
poverty line (if they do).
• The poverty gap index expresses the poverty gap as a percentage of
the poverty line.
Measures the extent to which individuals fall below the poverty line (the poverty
gaps) as a proportion of the poverty line.
The sum of these poverty gaps gives the minimum cost of eliminating
poverty, if transfers were perfectly targeted.

The measure does not reflect changes in inequality among the poor.
• Formal Definition:
The poverty gap (PG) is defined as average difference between poor
households’ expenditure and the poverty line.
The gap is considered to be zero for everyone else.
-Using the same notation as before,

N
1 Gi

Formula PG=
( )
N i 1 z
• Advantages
The PG can be interpreted as the average shortfall of poor people.
They show how much would have to be transferred to the poor to bring their
expenditure up to the poverty line, and present it as an average (PG)
The PG are the “minimum” cost for eliminating poverty with transfers
(the cost to eliminate poverty with perfect targeting of the poor and no
targeting costs or distortion effects)
The poverty gap has the virtue that it does not imply that there is a
discontinuity (“jump”) at the poverty line.
• Disadvantage
The PG do not capture differences in the severity of poverty amongst the
poor and ignore “inequality among the poor”.
• Example (poverty line = 125).
• A and B have the same PG and PGI, although it can be argued that
poverty is worse in B, because of an extremely poor member.

Expenditure for each individual in country PG PGI

Country A 100 100 150 150 12.5 10%

Country B 80 120 150 150 12.5 10%

It does not show the distribution of income the poor.

-Conclusion: The PG complement the headcount index, but might not be

sufficient. (need for sensitivity analysis)
Measurements of income distribution among the
poor

• Poverty alleviation efforts are mainly targeted at helping the poor.

• Measurements of income distribution is needed to determine inequality
among the poor with a view to reduce poverty without increasing inequality.
• This is widely done using Lorenz Curve and Gini coefficient.
 Measuring relative poverty using monetary
indicators

• The Relative poverty concept focuses on the well-being, e.g. income or

expenditure of poorest X% of the population vis-à-vis the incomes of the
other members of the population.
• In this approach, no poverty line is used, instead the following
alternative approaches is used:
a. The average income specific % of the population

Average income of the poorest X% say 10%, 20% or 40% of the

population is found.

People whose incomes are less than the above income are taken to be
poor.
b. Comparing income with a predetermined % of the mean income
The mean income of a population is determined
The % (say 40%, 50% or 75%) of the above mean reflecting is
estimated.
People whose income are less than the % are taken to be poor
• Advantages of using relative poverty approach
Measures of absolute poverty useful information on the degree of
inequality since they compare incomes of all members of a population.
• Relative poverty approach is politically and socially appealing since is
considered in the whole society and data obtained are worth using in
promoting community-based development
Disadvantages
Do not reflect the well being of those who are poor; a relatively poor
person may be very rich in absolute terms and vice versa.

Improvement in relative poverty may be realized even in some cases

where absolute poverty may have increased.
Using relative poverty approach, elimination of poverty is impossible
since even if all the people are rich those with less wealth than others
will be said to be poor.
 DISTRIBUTION OF POVERTY IN THE
WORLD

• Both rich and poor countries and people are relatively poor.
• Inequality is very high in the world, for example the average income of the
richest 20 countries is 37 times the average income of the poorest 20%
countries in the world(Worl Bank, 2000:3).
•
• In the year 2000, the world had 6,067million people (that is 6.067 billion) and
about 1.2 billion, which is 20% of them were poor living on less than US$ 1
per capita per day.
• They were distributed as follows:
Region # of the poor in Billions Percent
South Asia 0.52 43.5
Sub-Saharah Africa 0.29 24.3
East Asia Pacific 0.28 23.2
Latin America & Caribbean 0.08 6.5
Europe and Central Asia 0.02 2.0
Middle East and North Africa 0.01 0.5
TOTAL 1.20 100.0
 Feminization of Poverty

• Is an idea that dates back to the 1970s. It was popularized at the start
of the 1990s, not least in research by United Nation agencies.
• The concept has various meanings, some of
which are not entirely consistent with its implicit
notion of change.
 Definition

• feminization of poverty is a change in poverty

levels that is biased against women or female-
headed households.
It requires disaggregating data of indicators of
well being showing the levels of the indicators
btn men and women.
Several indicators do suggest feminization of
poverty including;
Work in low wage jobs
Earn less than men for the same work
Gain smaller share of the household income
Responsible for family basic needs
Be unpaid
 Facts that women are poorer than men

• According to ILO, this fact is substantiated by the following statistics;

70% of 1.2 billion people living in poverty are females.
Estimates over a 20 years period found in the increase in number of
poor rural women in 41 developing countries to be 17% higher than
the increase in men
There are twice as many women as men among the World’s 900 million
illiterates.

Iron deficiency anemia affects double the number of women compared

to men.
Protein-energy malnutrition is significantly higher in women in South
Asia, where almost half of the world’s undernourished people reside.

On average, women are paid 30-40% less than men for comparable
work
• Half a million women die unnecessarily from pregnancy-related
complications each year, the causes exacerbate by issue of poverty and
remoteness.

• In developing countries, only a tiny of fraction of women hold real

economic/ political power.
 Reasons for being poor

Access to land
• Land remains the most productive resource for the livelihood
of rural poor populations in the majority of developing
countries.

• However women tend to have insecure land rights as

compared to men.
ii. Access to capital and credit:
Generally they have less income than men, most of the time are
considered by some financial institutions to be not credit worth since
they lack valuable assets, which are normally needed as collaterals.
 iii. Access to technology, training and
extension services:
The development of technological innovations is largely in areas relevant
to men’s activities, while the improvement of productivity in women’s
activities at home and production lags behind
iv. Access to wage employment opportunities:

Women's domestic responsibilities and the social

perception that the are the primary concern pose
a major constraint to the their entry into the
wage labour market.
V. Limited social protection:
Self-employed women and unpaid family workers do not enjoy the
benefits of occupational safety standards, social security and maternal
and health care which are limited to the wage labour sector.
 Vi. Negotiating capacity and political
representation:
Poor women workers tend to be weakly represented at any level of political
structures, and almost any type of formal organizations such as trade
unions and cooperatives.

The public sphere is traditionally regarded as men’s domain

Vii. High age dependency ratio:

• In most cases female-headed household have more dependants,

especially young grand children, and lack secondary income earners
because most of them are widows
 Poverty distribution in Rural and Urban
areas

• More poverty is found in rural areas than in urban areas. For instance in
Tanzania, the rural poor are about 60% while the urban are about 39%.

• This is due to the following reasons why rural people tend to be poor:
Poor social services like education, health, water and sanitation.
Fewer employment opportunities
Shortage of capital investment for agriculture which is their main
economic activity.
Poor infrastructure, notably rural roads which increases transport
costs and cause other various difficulties in accessing markets for rural
people’s products
High prices of goods from town and low prices
of agricultural products results into unequal
exchange, thereby impoverish rural people.
• Vulnerability to micro-economic shocks and
plans, such as taxation and transitory food
security hits harder rural people than urban ones.