A short note on POVERTY

[ I ] What is Poverty ?

Laster R. Brown in his book ‘World Without Boarders’(1972) writes :

“Poverty is unfortunately an economic abstraction.

It is a human condition.

It is a despair, pain and longing.

It is the despair of the father of seven children, who did not get

employment.

Poverty is the longing of hat boy standing outside the school and is unable to

study, because his parents do have money to buy books for him.

Poverty is the grief of parents watching their three year child dying, because

they cannot afford any medical care.”

[ II ] Types of Poverty

In general, there are two very broad definitions of poverty :

Absolute Poverty :

Absolute poverty can be measured in terms of the basic needs a person MUST

HAVE in order to survive adequately in modern society.

Relative Poverty :

Relative poverty is a comparative analysis of resources available to one person in

contrast to another person in a society or in a country.

For example, a gap between one group and another; e.g. between the ‘Rich’ (top

20%) and the ‘Poor’ (bottom 20%).

This can also be viewed as the Income Gap between ‘Male-

Female’, ‘Rural-Urban’, ‘Formal-Informal sector’ etc.

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 A short note on POVERTY
[ I I I ] Measurement of Poverty

( i ) UNDP’s Measure of Poverty:

UNDP Measures of Poverty

Measure Components

 Human Development Index Life expectancy at birth, adult literacy,

(HDI) educational enrolment, GDP per capita

 Gender (related) Development Same as above, and based for gender

Index (GDI)

 Gender Empowerment Measure Women Seats in parliament, female

(GEM) administrators and managers, female
professional and technical workers, etc.

 Human Poverty Index (HPI -1) People not expected to survive to 40,
(for Developing countries) illiteracy, access to safe water, and other
health services, underweight children

 Human Poverty Index (HPI -2) People not expected to survive to 60,
(for Developed countries) functional illiteracy, population below
mean income, long term unemployment

( ii ) Head Count Ratio (HCR):

The Head Count Index measures the proportion of the population that is poor. It

is equal to Total Number of Poor divided bt Total Population. However, it does

not indicate How Poor the Poor are ?

As per the World Bank, in India (in 2013) 59.2% of population was below
2 dollar a day. In China it was 18.6% ; in UK and USA these were 1.4% to 1.7%.

( iii ) Poverty Gap Index:

The poverty gap index (P1) measures the extent to which individuals fall below

the poverty line (the poverty gaps) as a proportion of the poverty line.

However, this measure does not reflect changes in inequality among the poor.

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 A short note on POVERTY

The poverty gap index (PGI) is calculated as,

where,   is the total population ;   is the total population of poor who are living at
or below the poverty line ;  is the poverty line ; and   is the income of the poor
individual  . In this calculation, individuals whose income is above the poverty line
have a zero-gap.

( iv ) Squared Poverty Gap (“Poverty Severity”) Index :

The Squared Poverty Gap (“Poverty Severity”) Index (P2) is the average of the

squares of the poverty gaps, in relation to the poverty line.

It is the Foster-Greer-Thorbecke ( FGT ) poverty measure and is written as:

α
Pα = 1/N ∑ (Gi /Z)

where:
‘N’ is the size of the sample, ‘z’ is the poverty line, ‘Gi’ is the poverty gap and ‘α’ is
a parameter. When ‘α’ is larger, it makes the position of Pα as more poor.

( v ) Sen’s Index :

Amartya Sen (1976) proposed an index that combines the effects of the number of
poor, the depth of their poverty, and the distribution of poverty within the group.
The index is given by:

q
S = HI + ( 1 – I ) Gp
Q +1

Where, q = number of poor persons, and Gp is Gini coefficient for income inequality

among poor.

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 A short note on POVERTY

( vi ) Sen – Shorrocks – Thon Index :

P P
PSST = P0 P1 ( 1 + G )

where,
P0 is the headcount index, P1P is the poverty gap index for the poor only, and GP is

the Gini index for the poverty gaps for the whole population.

[ V ] Some Important Views :

• D.D. Kosambi:
“It is more important to shape history than to write it. Likewise, it is more

important to eliminate (alleviate) poverty than to measure it.”

• Dandekar and Rath:

In his book ‘Poverty in India’, he considered both the ‘Employment’ and

‘Unemployment’ aspects important to measure poverty.

• Amrtya Sen:
According to Amartya Sen, the “Entitlements” for employment, income,

education and health, increase “Capabilities” and by which poverty can be

eliminated.

Beware of Poverty

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