Poverty is the deprivation of food, shelter, moneyand clothing when people can’t satisfy their basicneeds. Poverty can be understood simply as alack of money or more broadly in terms ofbarriers to everyday human life.
According to Mobile Orshansky who developed the poverty measurements used by the U.S. government, “ Poor is to be deprived of those goods, services and pleasures which others around us take for granted.” According to David Kurten , Poverty also involve social disintegration and environmental degradation which he describe as forming the threefold human crisis in the world today.
Poverty is the other economic problem facing most of the nations in the world. There is no unique definition of poverty. This is based on the national definition as well as the international standards of US $1/day/person and US $2/day/person. Lately poverty definition is changed to US $4/day/person.
Types Of Poverty(1) Absolute Poverty : (Destitution) It refers to the state of severe deprivation of basic human needs.(2) Relative Poverty : It is defined contextually as Economic inequality in location or society in which people live.
Lorenz curve In economics ,the Lorenz curve is a graphical representation of the cumulative distribution function of the empirical probability distribution of wealth; it is a graph showing the proportion of the distribution assumed by the bottom y% of the values.
It is often used to represent income distribution, where it shows for the bottom x% of households, what percentage y% of the total income they have. The percentage of households is plotted on the x- axis, the percentage of income on the y-axis. It can also be used to show distribution of assets. In such use, many economists consider it to be a measure of social inequality. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution.
Greater the curvature of Lorenz line, greater will bethe relative degree of inequality.
The concept is useful in describing inequality among the size of individuals in ecology, and in studies of biodiversity, where cumulative proportion of species is plotted against cumulative proportion of individuals. It is also useful in business modeling. E.g. In consumer finance, to measure the actual delinquency Y% of the X% of people with worst predicted risk scores.
Facts And Figures The world bank estimated that ,1) Around 1.29 billion people were in absolute poverty in 2008.2) About 400 million people in absolute poverty in India and 173 million people in china.3) Sub-saharan Africa at 47% had the highest incidence rate of absolute poverty in 2008.4) Between 1990 and 2010, about 663 million people moved above the absolute poverty level.
5) Every year 11 million children living in poverty die before their 5th birthday.6) 1.02 billion people go to bed hungry every night.
The World bank’s “Voice of the poor” , based on research with over 20,000 poor people in 23 countries, identifies a range of factors which poor people identify as part of poverty are : (1) Precious livelihoods (2) Excluded location (3) Physical limitation
(4) Gender relationship(5) Lack of security(6) Problems in social relationship(7) Weak community organization(8) Limited capabilities
Poverty line The poverty threshold or poverty line is the minimum level of income deemed adequate in a given country. In practice, like the definition of poverty, the official or common understanding of the poverty line is significantly higher in developed countries than in developing countries. The common international poverty line has in the past been roughly $1 a day. In 2008, the World Bank came out with a revised figure of $1.25 at 2005 purchasing-power parity (PPP).
Determining the poverty line is usually done by finding the total cost of all the essential resources that an average human adult consumes in one year. The largest of these expenses is typically the rent required to live in an apartment, so historically, economists have paid particular attention to the real estate market and housing prices as a strong poverty line affector.
Gini coefficient The Gini coefficient is usually defined mathematically based on the Lorenz curve , which plots the proportion of the total income of the population (y axis) that is cumulatively earned by the bottom x% of the population. The line at 45 degrees thus represents perfect equality of incomes.
Gini Coefficient & Aggregatemeasures of inequality
The Gini coefficient can then be thought of as the ratio of the area that lies between the line of equality and the Lorenz curve over the total area under the line of equality .
The Gini coefficient can theoretically range from 0 to 1; it is sometimes expressed as a percentage ranging between 0 and 100. In practice, both extreme values are not quite reached. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality.
Characteristics of Poverty Effects of poverty also be causes and creating a “Poverty cycle” operating across multiple levels, individual, national, global. (1) Health : one third of deaths are due to poverty related causes. . Those living in poverty suffer from life expectancy. According to the World Health Organization, hunger and malnutrition are the single gravest threats to the worlds public health and malnutrition is by far the biggest contributor to child mortality , present in half of all cases.
Almost 90% of maternal deaths during childbirth occur in Asia and sub-Saharan Africa, compared to less than 1% in the developed world.
(2) Hunger : Rises in the living cost making poor people less able to afford items. Poor people spend most of the portion of their budget on to food than richer person.
(3) Education : Poor children are suffering from hunger, irritability,headache,viral infection, colds. It is safe to state that children who live at or below the poverty level will have far less success educationally than children who live above the poverty line.• Poor children have a great deal less healthcare and this ultimately results in many absences from the academic year.• Additionally, poor children are much more likely to suffer from hunger, fatigue, irritability, headaches, ear infections, flu, and colds. These illnesses could potentially restrict a child or students focus and concentration.
(4) Housing : Poverty increases the risk of homelessness. Slum-dwellers, who make up a third of the worlds urban population, live in a poverty no better, if not worse, than rural people, who are the traditional focus of the poverty in the developing world , according to a report by the United Nations. There are over 100 million street children worldwide.
(5) Violence : According to the reports, many women become victims of trafficking. The most common form of which is Prostitution as a mean of survival and economic desperation.• Deterioration of living conditions can often compel children to abandon school in order to contribute family income.E.g. Slavery and Human trafficking.
• E.g. In Zimbabwe, no. of girls are turning to prostitution for food to survive because of increasing poverty.
Measures of povertyThere are Various measures of the extent of poverty . The head count index. The poverty gap index. The squared poverty gap (poverty severity) index.
Head count index• The most widely used measure is the headcount index.• It simply measures the proportion of the population that is counted as poor. Head count index = No. of poor /Total no. of population
Weaknesses• It does not take the intensity of poverty into account.• Survey does not indicate how poor the poor are, and hence does not change if people below the poverty line become poorer.• The poverty estimates should be calculated for individuals and not the households.
Significance The most common method of measuring and reporting poverty is the headcount ratio, given as the percentage of population that is below the poverty line. One of the undesirable features of the headcount ratio is that it ignores the depth of poverty; if the poor becomes poorer, the headcount index does not change. Poverty gap index provides a clearer perspective on the depth of poverty.
Poverty gap index Poverty gap index is a measure of the intensity of poverty. It is defined as the average poverty gap in the population as a proportion of the poverty line. The poverty gap index is an improvement over the poverty measure headcount ratio which simply counts all the people below a poverty line, in a given population, and considers them equally poor. Poverty gap index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line.
Calculation Poverty gap index (PGI) is calculated as, where is the total population of poor who are living at or below the poverty line and is the income of the poor household .• In this calculation, all households whose income is above the poverty line are not considered, because PGI is a measure of depth of poverty below the poverty line .
By definition, poverty gap index is a percentage between 0 and 100%. Sometimes it is reported as a fraction, between 0 and 1. A theoretical value of zero implies that all the extremely poor people are exactly at the poverty line. A theoretical value of 100% implies all the extremely poor people have zero income. In some literature, poverty gap index is reported as while headcount ratio is reported as .
Squared poverty gap index Squared poverty gap index, also known poverty severity index or , is related to poverty gap index. It is calculated by averaging the square the poverty gap ratio. By squaring each poverty gap data, the measure puts more weight the further a poor persons observed income falls below the poverty line. The squared poverty gap index is one form of a weighted sum of poverty gaps, with the weight proportionate to the poverty gap.
Sen index, sometimes referred to , is related to poverty gap index (PGI).It is calculated as follows: Where H is the headcount ratio and Gz is the income Gini coefficient of only the people below the poverty line.
Poverty Reduction Increasing supply of basic needs. Increasing supply of food and other goods. Increasing supply of healthcare and education, water and energy utilities. Removing constraints on govt. services Reversing brain drains. Controlling overpopulation. Increasing personal income.