Mr. Stephan Samuell Statistical Assistant II Central Statistics Office Day 8: 9 November 2011 Day 8: 9 November 2011
Defining Poverty � Poverty is pronounced deprivation in well ‐ being, and comprises many dimensions. � It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. � Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, d ti t l t d it ti inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life. ‐ World Bank
Instruments for Poverty Instruments for Poverty Measurement � The Poverty Line • A poverty line is a monetary measure of the minimum consumption of goods and services that a household should obtain in order to ensure that its basic needs should obtain in order to ensure that its basic needs are met adequately. • The poverty line, therefore, represents a minimum The poverty line, therefore, represents a minimum budget that a household should spend, over a defined time period, if it is to fulfill its basic food and non ‐ f food requirements. d i
Instruments for Poverty Measurement � Indigence Line g • Minimum Food Basket (MFB): A basket of goods selected in such a way as to maximize one’s nutritional l d h ’ l needs at the lowest possible cost is referred to as the minimum food basket. � The Indigence Line: also called the food poverty line is defined as the cost of the Minimum Food Basket. d fi d h f h Mi i F d B k • Households below the indigence line are considered critically poor or indigent. The indigence line represents a lower limit p g g p of poverty and is the critical poverty line.
Types of Poverty Lines yp y � Absolute Poverty • Absolute poverty measures the number of people living below a certain income threshold or the number of households unable to t i i th h ld th b f h h ld bl t afford certain basic goods and services. � Relative Poverty • Relative poverty measures the extent to which a household's financial resources falls below an average income threshold for the economy. the economy. � Subjective Poverty • Basic needs are defined according to people’s perceptions of their own well ‐ being ll b i • The rationale for examining subjective poverty is that people’s own knowledge of their financial situation should be given some credit.
Poverty Line : Resources � The poverty line uses economic resources as a welfare indicator – either income or consumption. � C Consumption i E Expenditure di i is expenditure di on consumer goods and services acquired for the satisfaction of wants and needs of households and satisfaction of wants and needs of households and individuals: Through direct monetary purchases in the market. g y p 1. Through barter, income in kind 2. From production within the household (own account 3. production)
Poverty Line : Units of Analysis Poverty Line : Units of Analysis � The main unit of interest : Individuals ‐ we want to know what percentage of persons are poor k h f � A lot of information is captured at the level of the household � A lot of information is captured at the level of the household � A household : comprises one or more persons living p p g together, who occupy the whole or part of a dwelling unit and share at least one of the daily meals. � The households are identified as poor or non ‐ poor. Thus, poor individuals , are persons living in a poor household. poo d dua s , a e pe so s g a poo ouse o d.
Poverty Line : Equivalence Scales Poverty Line : Equivalence Scales � The common approach when dealing with income/expenditure and poverty lines is to express them in income/expenditure and poverty lines is to express them in ‘per capita’ terms � However, this implies that the cost of satisfying each household member’s needs are the same – this is not true! � Households differ in composition and size ‐ thus consumption by itself is quite misleading with respect to the consumption by itself is quite misleading with respect to the welfare of individuals � To combat this difference in in household composition – households are ‘normalized’ using equivalence scales h h ld ‘ li d’ i i l l � Such a scale measures the number of adult males the household is deemed to be equivalent to – essentially q y bringing all households to a ‘leveled playing field’
Adult Equivalence Scale d l l l Age Male Female < 1 .270 .270 1 to 3 to 3 .468 .468 .436 .436 4 to 6 .606 .547 7 to 9 .697 .614 10 to 14 .825 8 .695 6 15 to 18 .915 .737 19 to 29 1.00 .741 30 to 60 .966 .727 61 + .773 .618
The Cost of Basic Needs Method The Cost of Basic Needs Method � The Poverty Line is comprised of two components, specifically a Food Component (or Indigence Line ) and a Non Food F d C t ( I di Li ) d N F d component. � Basic needs for survival, one would commonly identify : y y Food, Clothing and Shelter . • Individuals must eat to survive • Have some sort of basic clothing and • Have some sort of basic clothing and • Occupy some shelter to protect them from the elements � Therefore, in essence, the poverty line is an attempt to determine the minimum food requirement necessary for healthy healthy living living in in addition addition to to minimum minimum non ‐ food non food requirements.
Computing the Food Component Computing the Food Component � The Caribbean Food and Nutrition Institute (CFNI) provided the CSO with a Food Nutrient ‐ Cost program, called FOODPROG � This This particular particular program program employs employs mathematical mathematical linear linear programming techniques ‐ designed to calculate the cost of a Minimum Food Basket � FOODPROG contains a database of food items predetermined by the CFNI ‐ requires the user to input data prices for said food items � Consumer Price Index (CPI) was consulted and a list of items corresponding to the FOODPROG database was obtained p g
Computing the Food Component Computing the Food Component � Average food prices were calculated for the food items in fifteen (15) administrative areas geographically spread across Trinidad and Tobago � HBS was carried out during May 2008 – April 2009, we HBS was carried out during May 2008 April 2009, we essentially had a list of food items containing only 2008/2009 weights and prices. � Using the average food prices for all these areas as well as the U i h f d i f ll h ll h various area weights , a national weighted average price for each food item was achieved. � These were the final prices entered into the FOODPROG software which would produce a basket of food items ‐ required by an adult; to achieve a diet of 2400 kcal per day at required by an adult; to achieve a diet of 2400 kcal per day at the most minimum cost.
Computing the Food Component :Minimum Food Basket Composition
Computing the Food Component Computing the Food Component � Daily minimum food basket costs $ 8.22 TT dollars. � The monthly Indigence Line is: $ 8.22 * 31 = $ 255 TT dollars Th thl I di Li i $ 8 * $ TT d ll � Food component = Food Poverty Line : Calculated! Food component Food Poverty Line : Calculated!
C Computing the Non ‐ Food Component i h N F d C � Unlike with Food PL, there are no clear parameters to help answer ‘how much is enough?’ with respect to non ‐ food items items � Common approach : the non food component is defined as expenditure of non ‐ food items within the framework of some reference group (RG) f (RG) Typical reference groups : • 1. Poorest 2 quintiles of data based on HPCAP/Total Expenditure q p Subset of HBS data set whose total Income/expenditure = FPL 2. Subset of HBS dataset whose total food expenditure = FPL 3.
Computing the Non ‐ Food Component � Non ‐ Food component is derived from manipulation of po e t s de ed o a pu at o o o ood co the HBS data and can be calculated using several approaches: � The CSO has embarked upon 2 approaches : 1. Average Non ‐ Food Expenditure of the poorest 40% of sample Reciprocal of Food Share Method 2.
Non ‐ Food Component: Ave. Non ‐ Food Expenditure Approach � Sort dataset on HPCAP or Total Expenditure � Rank data into the various quintiles � Rank data into the various quintiles • 1 st quintile being the ‘poorest’ and the 5 th quintile representing the ‘wealthiest’ � We require poorest 40% ‐ that is ‐ quintiles 1 & 2 � Via SPSS ‘select if’ commands exclude quintiles 3,4 and 5 – so that we obtain our required poorest 40% reference group that we obtain our required poorest 40% reference group. � We perform further analysis using this subset of the original data!
Non ‐ Food Component: Ave. Non ‐ Food Expenditure Approach � Now the HBS has an original sample 7090 households o t e S as a o g a sa p e 7090 ouse o ds � Thus each quintile consists of 7090/5 : 1418 households � We aggregate the variables corresponding to ‘Total Non ‐ Food Expenditure’ and ‘Adult Equivalence Value’ for the 2836 households in the 40% data subset. � To find the average non ‐ food expenditure: we divide Total Non Food E penditure/ Total Adult Equi alence Total Non ‐ Food Expenditure/ Total Adult Equivalence � This value is added to the indigence line to obtain the poverty line poverty line.
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