POVERTY

10.5 Investigates the concept of poverty and how it is measured the concept of poverty

Definition
Absolute and Relative poverty
Poverty dimensions
Income (Consumption) poverty
Human development poverty
Measuring poverty
National Poverty Line
International Poverty Line
Multi Dimentional Poverty Index
Relationship between economic growth and poverty
Pro poor economic growth

10.6 Evaluates the measures taken to alleviate poverty in Sri Lanka

Poverty in Sri Lanka

Incidence of poverty
Regional disparities
Causes of poverty
Measures taken to reduce poverty

INTRODUCTION

Poverty is a severe problem in the world. People die because cannot obtain the sufficient food and causes
to mal nutrition and so many diseases. In certain African sub Sahara region annually lots of people die
because of mal nutrition.

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According to the world bank data has suffered from poverty in . Ie out of 4 one is
poor. Therefore in 1990-2015 Millennium development goals agree to reduce the poverty in partially.
This is a challenge of 21st Century.

Poverty is an economic phenomenon which adversely impact in economically and socially.

ECONOMIC IMPACTS OF POVERTY

1. Decline in production efficiency in a society

2. Under utilization of resources
3. Drop in savings and investment level
4. Increases in uneducated and unemployment
5. Decrease in national production and per capita income

SOCIAL IMPACTS OF PO VERTY

1. Social inequality 4. Bribes

2. Ignorance 5. murder
3. Theft

DEFINITIONS OF POVER TY

According to the World Bank Report in 2000 poverty is identified as deprivation in well being

The problem arise here is what is well being and what are the requirements of it

According to Robert Chambers poverty has five faces and these interconnected households hang
on to in poverty. These two faces include
1. Income poverty
This means not having adequate income to maintain the consumption level required to
minimum standard of living
2. Physical weakness
This means the weakness of the working ability and income earning ability because of poor
health condition or mal nutrition

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 3. Vulnerability
This means inability to face the fluctuation due to unexpected events such as flood,
drought, famine, loss of harvest, deaths and diseases
4. Powerlessness
This means the inability of the groups or individuals to whistleblow against the things
which affected their life in the social, economic and political structure. Therefore
individuals and groups have to depend the powerful people to fulfill their needs
5. Isolation
This means physically or socially exclusion. Some people in rural villages at least not
having roads and transportation isolate physically and socially. They have no relationships
with external world.

According to the above various faces of poverty combines poverty is more severe and meet with
deprivation trap is given below.

There are so many faces in poverty but it is easy to measure and understand the income poverty. But the
income poverty not covers the other areas.

According to the Amrthya Zen poverty should understand as deprivation of basic capabilities.

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 He further states the main reason behind the deprivation is the not receipt adequate income and
the low income is considered as main reason for the poverty

DEPRIVATION OF INCOM E OR INCOME POVERTY

Income poverty means the loss of income or consumption. The income poverty has two faces namely

1. Absolute Poverty
2. Relative Poverty

ABSOLUTE POVERTY

Absolute poverty means not having minimum income required to fulfill the basic needs including foods
gives minimum calorie requirements of individual or household.

Poverty discussion mainly considered absolute poverty and this is explained later.

RELATIVE POVERTY

Relative poverty means identifying poor segment by comparison of one part of the populations the social
and economic condition with another part.

According to the definition of World Bank relative poverty means balanced explanation of the income
levels owned by households or individuals comparatively medium income level of a certain country.

This can be measured using following methods.

1. Poverty line considered as a half of the median income and defines as the population lower that
income as poverty
2. Calculate the lowest income earning 40% of population

Therefore in any country in the world has relative poverty. This depends on the nature of income and
resource distribution in a country. According to the income and wealth distribution inequalities there
may two categories of people namely wealthy and poor.

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 DIMENSIONS OF POVERTY

1. Income Poverty/Consumption Poverty

2. Human Poverty

INCOME POVERTY

Income basic Poverty means the inability to earn adequate income to maintain minimum consumption
level including basic requirements of life.

According to the Per Capita Income and Consumption and Nutrition criteria are used to measure.

HUMAN POVERTY

According to the Human Development Report Human poverty is denial of choices and opportunities for
living a tolerable life.

Human Poverty is measured by Human Development Index.

MEASURING POVERTY

Absolute poverty means one individual or group of individuals cannot achieve the minimum welfare level
which identify with reasonable reasons that required to favorable existence of individual or group of
individuals. I.e. when there is no achievement of the minimum level of

consumption level or income level or

shelter, health and education, and humanism needs or
the employment identified with the existing social and economic condition or
property or other rights

There is absolute poverty.

The common measure used to income poverty is the Poverty Incidence. There are two measures
including

1. national poverty incidence

2. international poverty incidence

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 NATIONAL POVERTY INCIDENCE

This measures using a defined poverty line. Ie the minimum consumption level obtained for individuals
to eradicate poor person. Under or higher the poverty line measure the absolute poverty.

Poverty Head Count Index can be calculated by the quantity of poor population below the poverty line as
a % of total population.

Poverty Head Count Index= quantity of poor population below the poverty line

Mid year population

INTERNATIONAL POVERTY INCIDENCE

World bank use a common measure to identify the absolute poverty. In 1993 the World Bank uses
incomes of $1 per day and $2 per day as standards for severe and moderate poverty, respectively
In 2008 consider the purchasing power parity and revise as $ 1.25.

SRI LANKA OFFICIAL POVERTY LINE

Census department states this poverty line. In 2004 stated current official poverty line establish
considering

1. Minimum daily per capita food energy consumption needs and

2. Non food essential consumption needs.

According to the food and other non food consumption requirements considered and according to the
time compare the changes in cost and analyze the changes in poverty. Therefore this is known as
consumption poverty line.

Food consumption line considered the cost of purchasing food with the minimum kilo calorie 2030 per
day. Severe poverty is considered as the people who below the cost of food poverty line.

Furthermore Census department conducted income and expenditure survey in 2002 established a
poverty line and it is accepted until June 2004. In 2002 the value of the official poverty line is Rs.1425.

According to the median values of Colombo Consumer Price Index it is updated in 2006/2007 survey
official poverty line was Rd.2233.

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But Census Department state monthly the poverty line by nationally and district basis.

The gravity of Poverty can be measured by Poverty Gap Index-PGI.

POVERTY GAP INDEX- PGI.

Poverty Gap means the required or deficit money to eradicate consumption poverty by a poor individual.
This calculated by the difference between the monthly consumption expenditure and the value of poverty
line.

The poverty gap of non poor person consider as zero and the poverty gap of all poor and non poor people
presented as percentage(%) of poverty line and the medium value of this percentage is considered as
Poverty Gap Index.

This is a standard measure for the gravity of poverty.

MEASURING HUMAN POVERTY

HUMAN POVERTY INDEX

Human Poverty Index is introduced by the United Nations Development Program in 1997 and consists 5
components included in developing countries namely

1. The percentage of population which expected live until 40 years

2. The percentage of population not have literacy
3. The percentage of population which cannot fulfil basic needs
The percentage of population not having safety water
The percentage of child population less weight below 5 years

4 components included in developed countries namely

1. The percentage of population which expected live until 6 years

2. The percentage of population less having favourable literacy level
3. The percentage of population which below the poverty line
Poverty line defined here as the 50% of median disposable income of households
4. The percentage of population unemployed more than 12 months

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 MULTIDIMENSIONAL POVERTY INDEX (MPI)

The Oxford Poverty and Human Development Initiative (OPHI) of Oxford University and the Human
Development Report Office of the United Nations Development Programme (UNDP) launched in July
2010 a new poverty measure that gives a multidimensional picture of people living in poverty which its
creators say could help target development resources more effectively. The MPI has supplanted the
Human Poverty Index, which had been included in the annual HUMAN DEVELOPMENT REPORTS since
1997. Research findings from the Multidimensional Poverty Index were made available at a policy forum
in London and on line on the website of OPHI.

Like development, poverty is multidimensional but this is traditionally ignored by headline figures.
The Multidimensional Poverty Index (MPI), published for the first time in the 2010 Report, complements
money-based measures by considering multiple deprivations and their overlap. The index identifies
deprivations across the same three dimensions as the HDI and shows the number of people who are
multidimensionally poor (suffering deprivations in 33% of weighted indicators) and the number of
deprivations with which poor households typically contend. It can be deconstructed by region, ethnicity
and other groupings as well as by dimension, making it an apt tool for policymakers.

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About 1.7 billion people in the 109 countries covered by the MPIa third of their population live in
multidimensional poverty that is, with at least 33 percent of the indicators reflecting acute deprivation
in health, education and standard of living. This exceeds the estimated 1.3 billion people in those
countries who live on $1.25 a day or less (though it is below the share who live on $2 or less).

ANALYZING TRENDS IN SRI LANKAN ECONOMY

When poverty can evaluated in Sri Lanka use the data of Census data..

TRENDS OF THE POVERTY INDEX (1990-2007)

Index related to poverty 1990/91 1995/96 2002 2006/2007 2010

Head Count Poverty Index(%)
Sri Lanka 26.1 28.8 22.7 15.2
Urban 16.3 14.0 7.9 6.7
Regional 29.5 30.9 24.7 15.7
Estate 20.5 38.4 30.0 32.0
Head Count Poverty Index by Provincial
basis(%)
Western 19.1 16.3 10.8 8.2
Central 30.7 36.2 25.1 22.3
Southern 30.2 32.6 27.8 13.8
Wayamba 25.8 27.7 27.3 14.6
North Central 24.5 24.7 21.5 14.2
Uva 31.9 46.7 37.2 27.0
Sabaragamuwa 31.0 41.7 33.6 24.2

This data not included the north and eastern provinces because the conflicts at that time. This shows
1990-2006/07 poverty has dropped significantly. According to Household and Consumer Survey shows
that in . National Poverty Index has dropped to ..

Specially drop of regional and rural poverty can be observed. in Sri Lanka 80% of population consists the
regional population and compared to 2002 in 2006/07 it has dropped by 36% .

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But in this period estate sector which us 5.5% of population poverty has increased by 2%.there out of
three one person is deprived from poverty.

Past two decades the continuous drop in urban sector shows in the western province which 60% of
population reside.

Above table shows that the poverty population in all provinces has significantly drop in 2006/07
compared to 2002.

Southern province and Wayamba province shows a 50% drop in poverty.

In 1990/910 Uva Province was the province with higher poverty and compared to 1995/96 the poverty
has dropped in 2006/07.

Central province and Sabaragamuwa province shows a significant reduction in povery in 2006/07
compared to year 1995/96

But in 2006/07 Uva, Sabaragamuwa and Central Provinces percentage of poor population exceeds 22%
and it is relatively high value compared to other provinces.

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 BEHAVIOR OF POVERTY GAP INDEX

Poverty Gap Index of sectors and provinces and the deficit income amount (2006/07)

Sector/Province Poverty Gap Index% Monthly deficit income amount

Total Average
Rs million Rs Million
Sri Lanka 3.1 1257 448
Sectors
Urban 1.3 78 423
Regional 3.2 1041 452
Estate 6.2 138 434

Provinces
Western 1.5 192 408
Central 4.6 267 466
Southern 2.6 145 430
Eastern 2.1 43 425
Wayamba 2.9 149 435
North Central 2.8 74 440
Uva 6.2 177 511
Sabaragamuwa 4.9 210 451

Here the estate Poverty Gap Index is higher than the regional sector. In 2006/07 to eradicate poverty of
estate person his monthly expenditure must increased by Rs.434 and it is lesser than the person in
regional sector required to Rs.452.

To eradicate all island poverty Rs.million 1257 collected monthly or with the alternative programs of
poverty eradication one household income or expenditure according to the 2006/07 prices has increased
by Rs.448.

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 DIETARY ENERGY CONSUMPTION

This can be used to compare the standard of living in a society.

The minimum dietary energy depends on

Gender Region they resides

Age Climatic condition
Physical activities Regional type

According to the Medical Research Institute nutritional base of official poverty line prescribed as kilo
Calorie 2030.

DIETARY ENERGY CONSUMPTION-2006/07

Sector/Province Avearge Daily Dietary Energy Consumption % Population below the

Non poor Population Poor Population dietary energy
kilo calorie kilo calorie consumption kilo calorie
2030
Sri Lanka 2194 1690 50.7
Sectors
Urban 1949 1316 65.0
Regional 2222 1686 49.2
Estate 2626 1984 32.7
Provinces
Western 2022 1471 59.7
Central 2325 1808 45.5
Southern 2228 1669 47.5
Eastern 2242 1686 45.2
Wayamba 2254 1574 48.7
North Central 2300 1745 46.9
Uva 2406 1886 38.4
Sabaragamuwa 2267 1734 50.7

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According to the above data average poor in Sri Lanka uses dietary energy kilo calorie 1696 wheras non
poor person uses kilo calorie 2194.

In Sri Lanka 50.7% has consumed lower than the kilo calorie 2030.

The specific feature is the low poverty recorded in urban sector and western provinvce shows
consumption less than kilo calorie 2030. Ie 65% of urban population daily per capita energy consumption
is below kilo calorie 2030.

THE REASONS FOR THE POVERTY

According to the Research and Studies conducted by World Bank three reasons has identified for the
poverty.

1. Regional Level Characteristics

This considers
- A place where often face with natural disasters such as flood or
- A place isolate geographically with other areas
- Quality status of government
- Property right and the legal structure strengthen it
2. Community Level Characteristics
This considers
- Sufficient infrastructure such as roads, electricity and water is provided
- Education and health is favourably supplied
- Facilities for the market entry
- The nature of social relationships
3. Household and Individual Characteristics
This considers
- Community scientific features such as
1. Size of household
2. Age structure
3. Dependency rate
4. Gender of household owner

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 - Economic features such as
1. Employment status
2. No of hours worked
3. Ownership of property
- Social features such as
1. Health and nutrition level
2. Education service
3. Quality of shelter

THE MAIN REASONS BEH IND THE SRI LANKAN P OVERTY

1. Low economic growth and the benefits of growth is not flow to low income people
2. Low productivity in domestic agriculture and agriculture growth is stable
3. Regional disparities
4. The infrastructure facilities are low in the regional sector and not sufficient market facilities for
the farmers
5. The poverty eradication programs are not target poor
6. The low level of education of the poor individuals and households and the education is not based
skills
7. Macro income instability(inflation)
8. The inherent features of individuals or households
- The families with more children has more poverty
- The low social networks and isolate people reflects more poverty
- The low level of property ownership with heritage is reason for povety
- Cultural feature such as household violation , liquor addiction cause to poverty
- Disability and elderly persons face poverty

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 THE APPROPRIATE POL ICIES FOR REDUCE POVERTY

World Bank identify the following policies in reduction of poverty. They are

1. Fostering opportunities
2. Facilitating Empowerment
3. Income security

FOSTERING OPPORTUNITIES

Following policies can be identified

1. Appropriate policies for encourage private investment

Minimize risk for the investors
Strengthen financial system
Business environment with transparency
Stable financial and government policies
Special program for encouraging micro level businessmen or small businessmen
2. Open up economy for international markets
It is important efficiency of infrastructure and institutional factors to strengthen domestic supply.
3. Provide ability to own and use human,.physical , natural and financial assets
It is important to maintain the government investment in education.
4. Prevent the discrimination based on gender, regional wise or caste or society wise
5. Provide infrastructure and technology for the poor areas

FACILITATING EMPOWERMENT

Following policies can be identified

1. By strengthening mass media and expand the information obtaining ability

2. Provide legal aids for poor citizens and facilitate the opportunity to enter the legal system
3. Strengthen the liability of the supervision of the efficiency of government administration
- Budget information presented without delay
- Prepare corruption index
- Conduct surveys related to private business environment

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 - Inquiry from the public related to the quality of government public services

INCOME SECURITY

Following policies can be identified

1. Minimize the risks through Micro insurance schemes., transfer payments , participation of
government public works
2. Prepare national level programs to face effectively to the disasters
3. Prepare programs to minimize civil conflicts
4. Take actions to solve health problems such as Maleia,

THE APPROPRIATE POLICIES FOR REDUCE POVE RTY IN SRI LANAKA

1. Prepare redistribution of assets to favorable for the poor

2. Develop economic and social infrastructure in rural areas
3. Strengthen human capital by increasing the quality of education provided for poor
4. Provide new technology and strengthen market for agriculture and develop it
5. Develop the industries based on agriculture
6. Create social protection network to look after unemployed, disable and old people
7. Incrase in investment in industrial sector and strengthen the growth process.

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